After a very scary October, November was relatively calm. Our portfolios mostly saw small gains. Economic data continues to improve overall, with GDP, jobs reports, and recent housing data improving. When reviewing the current value of different stock market indexes, we continue to see a large divergence. The S&P 500 (500 stocks) and DOW (30 stocks) continue a slow but steady uptrend, while the Russell 2000 (2,000 stocks) continues to lag. While it’s encouraging to see the largest companies in America doing well, it is concerning to see smaller companies struggling.
There continues to be various primary indicators and research that tell us the market is overvalued. There are also lessor indicators that we take into consideration. For instance, this is longest period of time in the stock market without a 10% draw down in nearly 90 years. Also, the market has never gone an entire year without four down days in a row (Source: app.Hedgeye.com). These are “off the wall” stats, but they are still worth consideration.
However, there are certain areas of the stock market that still have “more room to run” in the near term in our opinion. We still believe that this is a time for caution, but December is typically a strong month for stocks, so we’re looking to dip our toes into the areas that we feel most confident about.
Bonds continue to be an area of concern, as interest rates have been inching up, causing pain for many conservative bond investors. In many of our portfolios we have the ability in invest in bond funds that have the potential to profit regardless of which way interest rates are headed. It’s times like these that we’re glad we have so many tools in our toolbox.
If you have any questions please give us a call. Please feel free to share this market commentary with family, friends, and business colleagues.
INTERESTING NOTES
Cranberries? – The Department of Agriculture says it’s buying $55 million worth of cranberries to reduce a huge market surplus and falling prices; the cranberries will be donated to food banks and other low-income programs. The agency is facing pressure from the Congressional Cranberry Caucus, an actual organization that was formerly co-chaired by John Kerry – MarketWatch, November 26, 2014
When does it end? – The current bull market is the longest continuous bull market without a 10% correction since the crash of 1929 – MarketWatch, October 6, 2014
Apple of my eye – iPhone sales add an estimated one-quarter to one-third of a percentage point to the annualized growth rate of the United States’ GDP. – The New York Times, October 26, 2014
Black Friday – Historian Nancy Koehn claims that factory managers started calling the day after Thanksgiving “black Friday” because so many workers would call in sick, as if everyone had the black plague. It wasn’t until the 1970s and ’80s that retailers began to emphasize the connection between the day after Thanksgiving and the start of the holiday shopping season.” – The Atlantic, November 27, 2014
Copper Bug – A single buyer has snapped up more than half the copper held in London Metal Exchange warehouses – enough to build 1,700 Statues of Liberty.– The Wall Street Journal, November 7, 2014
Children Living Longer – For the first time, both boys and girls born today can expect to live to at least 90 years of age. Longer lifespans are estimated to add roughly 7% to the amount corporate pensions must set aside. – Time, October 28, 2014
Car Accidents – Crash dummies are getting fatter to address the fact that obese people are 78% more likely to die in a car crash. Dummies currently are modeled on a person weighing 167 pounds; a new prototype weighs 273 pounds. – CNN, October 23, 2014
The Rising Cost of College – Nearly half of all college graduates now say they would have considered not going to college had they known the impact student loans would have on their lives. – Marketwatch, November 20, 2014