Stocks

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

Rare August gains for key indices…

Posted on by George Mahfouz

The four most followed indexes produced unlikely gains for the month of August. Typically the dog days of summer is seasonally weak for equities, but not this year. For the month of August, the Dow Jones Industrial Average (chart) closed up 0.63%, the Nasdaq (chart) +4.34%, the S&P 500 (chart) +1.98% and the small-cap Russell 2000 (chart) finished the month up 3.2%.

Stocks once again benefited by the Fed promising to take further steps to help boost the economy if needed. Speaking in Jackson Hole, Wyoming, Ben Bernanke reiterated his concern over the state of the economy and that the central bank is prepared to act if warranted. So how will this mantra play out for the month of September?

September is typically one of the weakest months of the year for equities, however, could this month buck the trend just like August did? We should find out in short order with the release of the unemployment report next Friday. Talk about market and political implications! If the job market continues to deteriorate, you better believe this will become even more of a focal point as the election approaches. A further decay in the unemployment picture should also give the fed confirmation to further stimulate the economy. If this scenario plays out, one could surmise that the markets would continue to lift and that Mitt and Ann Romney may be soon moving to Pennsylvania Avenue.

I hope everyone has a safe and enjoyable Labor Day weekend 🙂

~George

Stocks lower on the week…

Posted on by George Mahfouz

Despite a rally on Friday, the benchmark indexes finished the week in the red. The Dow Jones Industrial Average (chart) fell 0.88%, the Nasdaq (chart) -0.22%, the S&P 500 (chart) -0.50% and the Russell 2000 (chart) -1.31%. The market action this week broke a six week stretch of gains.

What helped fuel the market on Friday was Ben Bernanke’s comment in a letter that the Fed has more room to add yet even more stimulus if the economy needs it. Is it me or are we all a little exhausted by the same regurgitation of the Fed coming to the rescue of the economy and the markets? What’s clear is investors are are seemingly and exclusively looking to invest in stocks and bonds based on what the central banks will or will not do. To me this platform has now become overkill and I am going to be very cautious on the long side of things going forward. That said, if you have been short the market based on economic and corporate fundamentals, theoretically you have been on the right side of the trade, however, chances are your short thesis has hurt your portfolio because of the accommodative banking policies from around the world.

In my humble opinion this cannot go on forever and I certainly do not want to be long the market when the policymakers say “that’s enough!” Good luck to all.

Have a great weekend 🙂

~George