ZLBT Chats

Monday, January 3, 2011

U.S. Equities Look Upbeat For The New Year
But A Late Q1 Pullback Anticipated

Good night, 2010. Farewell, "flash crash." Good riddance, vuvuzelas. However, some of the headlines of the old year will continue to resonate in the new. Unemployment remains high. European debt issues haven't gone away. Talking heads are still debating the effectiveness -- and wisdom -- of QE2. Most of us will see slightly larger paychecks in 2011, thanks to the tax cut extension engineered by President Obama. And despite a rocky summer, the stock market is apparently on track to continue its amazing 21-month rally off of the March 2009 low.

The final week of 2010 didn't offer even a hint of the drama we saw earlier in the year (apologies to those of you buried by Sunday's blizzard). Instead, we saw the usual low-volume holiday lull, with the market coasting into the end of the year on its own momentum.

Last Friday (0f 2010) was slow. The Dow inched ahead by 0.07%. For the week, the Dow was virtually flat, advancing only 0.04%, plateauing after a steady 5.2% march upward for December.

Stick a fork in it: The year 2010 is done. The verdict? "Not too shabby." All three major market indexes registered double-digit annual gains, settling near annual highs. Looking ahead, we remain bullish on U.S. equities but must also concedes the case for a pullback at the beginning of the year.
Wall Street’s theme going into 2011 is how bullish everyone seems to be on the economy, but that optimism should be tempered by the knowledge that housing, lending and jobs have yet to recover.
Yet, the new year is likely to be better “for earnings, balance sheets and growth, which will likely translate into higher home prices, more loans and an increase in employment,”

Looking Back on 2010

SPX is up more than 10%, but it took all year to get there

The S&P 500 Index was similarly torpid for the week, settling in the black by only 0.07%, but registering a 6.5% win for the month. Those of us who follow the market closely can usually spew forth the current price of all the major stock indexes on demand. Not nearly as many are attuned to the gains or losses for these indexes over important time frames, but this additional information can actually be quite valuable. For example, the S&P 500 Index (SPX) has gained 11.46% year-to-date.

The Nasdaq Composite, on the other hand, slipped 0.5% in the final week of the year, but gained 6.2% for the month.

The final tally for the year: The Nasdaq Composite led the charge with an impressive 17% surge, followed by the S&P 500 Index, which advanced 13%, while the Dow brought up the rear, at 11%. Still, not too shabby, indeed.

EXPERT QUOTES (analysts, economists, staticians, strategists ... blah blah blah)

"I predict deep into the year the Fed, through mental telepathy or a hidden word woven through a statement, will transmit the idea that it will start tightening rates by .0000001 of a percent during the year."

"U.S. markets will rally as the president moves more to the middle and businesses realize they have two years to prove friendlier policies work for everyone. Plus history is on side of market see 1984, 1952, 1920 and 1893."

"I think that 2011 will be a relatively tame year compared to what we have seen since 2007. There is plenty of fear out there. From a second dip in housing and European contagion to a self-imposed, government-run slow down of the Chinese economy and states in fiscal crisis. Much could go wrong, but I have the sneaky suspicion we will be talking about many of these same fears a year from now. The U.S. stock markets will experience a gradual ascent by year end as fears continue to subsidise.

"I have trouble predicting what's going to happen later today, but I will say that 2011 feels like it will finally be the year of economic recovery."

"Experts I talk to say we will see Dow 12000 before Dow 10000"

"A growing pool of evidence points to much higher economic growth and even higher stock prices next year. The causes go well beyond low interest rates, higher capital levels at banks or even the latest pickup in retail sales. It's always risky to predict economic gains with the community-organizer-in-chief still in the White House and businesses grappling with his "signature achievement," ObamaCare."

"Having put half of my dough into stocks for the first time since the 2008 crash, I feel pretty confident about 2011. I would say we could go up another 15% or more by the end of 2011."

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