Markets Rally While Congress Goes On Holiday
It was the first good week for the stock market since September. With Congress in recess for the Thanksgiving Holiday, there was not the “Fiscal Cliff” overhanging the markets and stocks responded favorably. Entering the week the markets were also as technically oversold as they had been in six months so a bounce was to be expected any time.
The S&P 500 recorded a gain of 2.4% for the week ending Wednesday, November 21st. The markets are closed for Thanksgiving and are open for 3 1/2 hours on Friday which is usually a quiet day with very little trading.
In the Photo Section is a chart of S&P 500 which closed at 1,391 - The S&P 500 has now gained 10% this year.
(See Chart of The S&P 500 in The Photo Section)
After 10 weeks of losses that totaled 25%, Apple (AAPL) bounced almost 10% from it’s lows of last week of $505 and closed at $561. Facebook (FB) has shown remarkable strength considering 800 million shares became unlocked and eligible to be sold last week yet Facebook is higher by 10% at $24.31. However, older technology (think companies tied to the personal computer) continues to get hammered as Intel for example is trading at levels of “value” not ever seen as it closed at $19.36.
With the return of Congress from their Holidays next week we again expect the “Fiscal Cliff” to become the main macro driver of market action for the next 3-5 weeks.
Announcement – This Saturday & Sunday – Complimentary Seminar for “The Fiscal Cliff & It’s Impact on You”.
Because of the significant impact that the Fiscal Cliff will be having on nearly everyone, Reliance Investment Management has prepared a seminar titled “The Fiscal Cliff & it’s Impact on You”.
The seminar will be held this weekend in three locations. We invite you to attend. At the end of the 90 minute session you will have an excellent understanding of the impact that the Fiscal Cliff will have on you. The new legislative proposals found in the Fiscal Cliff will have affect your wage income, social security taxes, dividend and capital gain taxes, estate taxes, retirement income, marriage penalties, child care taxes and much more.
We will also present investment ideas that can capitalize on all these changes in the tax laws. We will also comment on the types of investments that could be harmed.
We will be presenting The Fiscal Cliff & It’s Impact On You seminar at the following locations and times. Admission is free. Guests are welcome.
Sammamish Public Library Saturday November 24th 10:30 a.m. – 12:00 p.m.
Issaquah Public Library Saturday November 24th 2:00 p.m. – 3:30 p.m.
Mercer Island Public Library 1:30 p.m. - 3:00 p.m.
We are certain that you will find the information presented in this free seminar very relevant to you and your family financial well being and the 90 minutes of time well spent.
Thanksgiving Holiday Special Chart
Have you been feeling that the cost of your Thanksgiving & Holiday meals are a lot higher than it used to be? Well your feelings are right.
We have a chart of the cost of Consumer Price Index for Food only for the past 10 years. The cost of your Thanksgiving and other Holiday meals have increased by 31% over the past 10 years.
In the Photo Section is a chart of the Consumer Price Index for Food Only for the past 10 years.
(See The 10 Year Chart of the CPI Cost of Food Only in The Photo Section)
As noted in the chart, the cost of food is at all time highs while the economy is still sluggish. Also the last recession barely slowed this continual increase in the cost of food over the past decade. Therefore, it is reasonable to forecast that as the economy continues to improve, the cost of food will continue to increase – and more than likely at a faster rate.
Holiday Retail Sales Forecast
Our projections are that this will be the best Holiday Season as far as retail sales go in at least 5 years. The reasoning for this projection is the following:
- Consumer Confidence is at five year highs.
- Unemployment is the lowest in four years.
- People’s debt levels are at their lowest level in five years.
- The Retail Industry has announced the highest number of temporary workers in 5 years.
- Housing prices have started to appreciate again after 5 years of declines
If this forecast ends up being accurate then the best deals will be this weekend. Retailers will be less inclined to discount as much as they have in the past as December 25th approaches if the initial holiday sales are strong on a year over year basis.
Closing Thoughts
With the recovery in housing, the economy is poised to finally add jobs in significant numbers in 2013. However, Congress lack of effort in solving the Fiscal Cliff and other budgetary issues is making bigger businesses reluctant to expand hiring in the near term future. Congress timing for not attending to it’s fiscal duty cannot be worse.
Heading into the Holiday season the economy for many people is in it’s best condition in five years. However for the millions of people who are unemployed or under-employed, life remains a serious challenge. Right now the number of people receiving food stamps and visiting food banks are at all time highs. There are 47 million Americans receiving some type of Federal Food aid. So many people are still struggling to make ends meet.
This weeks PBS show “Frontline” did an excellent job of putting a human face on the current rough economic conditions for millions of children in the USA - and the emotional toll it is taking on these children and their parents.
I am enclosing a link to this weeks Frontline program “Poor Kids” here. The program helped me to realize that I was not doing enough “giving” in past Holiday seasons so I am committing to redouble my efforts in this and future Holiday seasons.
So if you have the opportunity this Holiday weekend then consider watching this weeks PBS Frontline Program “Poor Kids – Frontline Explores the Economic Crises as it’s rarely seen – through the eyes of children”.
And if you are available this busy weekend, at one of the complimentary Fiscal Cliff seminars this Saturday & Sunday.
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John Patrick Bray, CPA, is President of Bellevue-based Reliance Investment Management LLC a Registered Investment Advisor Firm.
This communication reflects the opinions of Reliance Investment Management LLC and is being provided for informational purposes only and is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security referenced herein or investment advice. It is being provided to you on the condition that it will not form the primary basis for any investment decision. We recommend that you consult with your investment advisor before the purchase or sale of any securities. The information contained herein is of the date referenced and Reliance Investment Management LLC does not undertake an obligation to update such information. Reliance Investment Management LLC has obtained all market prices, data and other information from sources believed to be reliable although its accuracy or completeness cannot be guaranteed. Such information is subject to change without notice. The securities mentioned herein may not be suitable for all investors.
