Ninth

Stocks soar, the Fed pulls out all the stops!

Posted on by George Mahfouz

I know we keep talking about the Federal Reserve, but on Thursday Ben Bernanke announced the mother of all stimulus programs. The new stimulus package includes $4o billion a month to be injected into the economy  and a promise that it won’t stop until the unemployment picture dramatically turns around. Never before has a central bank made such a large extended commitment and then tie it to the jobs market.

On the heels of this announcement, stocks soared with the Dow Jones Industrial Average (chart) finishing the week up 2.15% and is now up year to date 11.26%. The Nasdaq (chart) closed the week up 1.52% and year to date is up a staggering 22.22%. The S&P 500 (chart) on the week marched 1.94% higher and so far this year is up 16.55%,  and last but not least, the Russell 2000 (chart) small-cap index closed up 2.66% and is tracking a year to date gain of 16.71%

Yes I triple confirmed the above statistics and there are no typos. Now the multi-million dollar question is  “is this bull market out of breath?” It’s only natural to think that this tape is overdone and is well overdue due for a healthy 5% or even 10% pullback? This may especially ring true with the most recent middle east tensions, the upcoming third quarter earnings reporting season and of course the U.S. presidential elections all on the horizon. That said, with the Federal Reserves unprecedented commitment to truly do whatever it takes to get this economy and now the unemployment picture completely turned around, I would think that any pullbacks would provide excellent entry points. Whatever you choose to do, make sure to always consult with a professional investment advisor.

Have a great weekend 🙂

~George

Nasdaq at 12 year highs, up over 20% year to date…

Posted on by George Mahfouz

Now who said we are in the dog days of summer? Stocks once again took off this week after the European Central Bank promised to buy the debt of struggling countries in the eurozone. For the week, the Dow Jones Industrial Average (chart) closed up 1.65%, the S&P 500 (chart) +2.23%, the Russell 2000 (chart) +3.72% and the tech heavy Nasdaq (chart) closed the week at fresh 12 year highs finishing up 2.26%. What a run this has been so far this year with staggering double digit gains for most of the major averages. Congratulations to all of the bulls out there!

The million dollar question now is; “is it time for some profit taking?” The short answer, yes! Always make sure to consult with your professional financial advisor when considering taking action, but I would think he or she would agree that it would be a good idea to take some off the table. The bulls case is that as long as the governments from around the world continue to expand their balance sheets, the markets should continue to go higher. All you have to do is look at the performance of the key indices so far this year and it’s easy to see the power of the central banks. The bears case is stocks are trading at multiples not seen in years and that earnings estimates are way too high and need to come down. No matter what the case is, and in my humble opinion, taking some profits after such an unprecedented run would be the responsible thing to do. Good luck to all.

Have a great weekend 🙂

~George