Equity investors embraced a global recovery theme in May and extended the current rally into its third consecutive month. Continued evidence that the rate of economic decline is slowing seemed to embolden further risk taking as funds moved away from government bonds and into stocks and commodities.
Hope springs eternal every April as gardens sprout, baseball starts and the first quarter's corporate results are announced. 2009 was no exception, but we'll discuss green shoots and muddy cleats some other time. Corporate earnings did capture investor attention however; as the number of companies...
Although modern investors fared better than the Bard's Caesar, March 2009 had
some treachery of its own. News that AIG would again require more Treasury assistance
sparked an early month sell off that took the S&P 500 to a new bear-market
low of 676 on March 9th. Failure of last November's low of 750 to "hold" brewed
investor angst with equities trading at less than one half of their October 2007 record
highs.
sell the news? certainly describes February's equity markets as investors eagerly bought stocks in anticipation of each proposed policy of the new Obama Administration only to sell them in disappointment when the details (or lack of them) became known. The oft delayed and revised Treasury plan to again rescue banks, the stimulus plan to boost our economy and the proposed deficit-funded budget all failed to engender market confidence.
Investors expecting a post-inauguration bounce in equity markets were sorely
disappointed in January. After continuing the December rally into the initial trading days
of the New Year equity markets turned decidedly negative as economic and corporate
data confirmed the depth of our current recession.
Santa did bring his yearend rally but this year it was just in time for New Year's Eve. Equity markets wrestled throughout the month with the revelation of a $50 billion Ponzi scheme, the decision by the Federal Reserve to reduce short-term rates to virtually zero, continued choruses of "bailout blues" from automakers and proof that U.S. consumers have sharply curtailed their consumption.
Even the most stout-hearted investor rejoiced when November drew to a close. Uncertainty reigned throughout the month as investors fretted about the election outcome and the transition to a new administration against a backdrop of evidence of continued economic weakness.
It seems to be a cruel irony that the last trading day of the worst month for equities in two decades fell on Halloween. October has long been dubbed "the cruelest month" given the propensity for market crashes, 1929, 1987 and 1997 for example, to occur within these thirty one days.
It wasn't nature's hurricanes impacting the Texas shores that dominated September headlines. Rather, it was man-made financial hurricanes impacting the shores of the Potomac and Hudson Rivers, followed by landfall on the Atlantic Coast of Europe, which garnered media attention with double digit losses in most equity markets.
Those crazy, hazy, lazy days of summer ... at least crazy and hazy describe the investment markets in August. The Dow Industrials
crossed the 11,500 line no less than six times during the month as it gyrated between the July close of 11,378 and inter-month high of 11,715 only to close at 11,544 at month end for a 1.5% gain. As noted on the following chart other
With seventeen of July's twenty-two trading days completed equity markets seem to have recovered from their earlier low levels. The combination of the 'moments of truth' that come in the form of quarterly corporate financial reporting, the failure of Indy-Mac Bank and the imagined lack of confidence related to our government sponsored
mortgage insurers rekindled the credit crisis with investor fears returning to mid-March level when the Fed orchestrated the Bear-Stearns intervention.
Equity prices entered 'Bear Market' territory as both the Dow Industrials and the S&P 500 declined 20% below their respective record levels set last fall. Some better
than expected results from major banks, action in Washington to support Freddie Mac and Fannie Mae and a 14% decline in crude oil prices seems to have restored some investor courage to allow stock prices to recover to their present levels.
It is beyond the scope of this writing, or our capabilities, to predict the month end numbers but ...
Equity bulls wrestled with the reality of inflation in June; when the month ended inflation
won. The relentless march of energy prices to new records was reflected in a double
digit increase in May's Producer Price Index (PPI) which was reported in early June.