The 2010 Wrap Up
Jan 2, 2011
Posted by Jody Eisenman | Filed under Uncategorized
After months of ups and downs, the stock market ended 2010 with moderate gains. The Dow rose 11% for the year, and the S and P 500 was up a bit more. However, the real story was the month of December. During these 22 trading days, there were only two where either the Dow and S and P did not close higher than the previous day. Admittedly, volume was light, and got even lighter during the last trading week of the year. In a year that was beset with continued high unemployment rates, rising interest rates and Euro debt problems, investors preferred to focus on QE2. As two money managers told me, “If the government is going to print money, we are buying stocks”.
What’s next for 2011? The consensus of most big firms is that the market will continue to rise. This may very well be true, but I feel there are still several lingering problems that could hinder further advances. For one thing, I don’t see tremendous economic improvement if one out of every ten Americans is still out of work. In addition, the Euro debt problems have not gone away. However, in a perverse way, these debt problems have actually helped the US. Every Euro country that has issues has led to a flight to quality, which means a stronger dollar and a stronger stock market. Even the rise in interest rates was interpreted in a positive way; the bulls maintained that a weaker bond market meant more people would have an interest in stocks. There is some truth to this, as PIMCO’s Total Return Fund (the largest mutual fund out there) is considering moving some funds into equities for the first time since 2007. On the other hand, markets generally do not move straight up without some sort of pullback. I think this will happen shortly, but the longer we go without one may mean that when it finally happens, it could be more severe than anyone anticipates. Good luck trading and investing in 2011!
