OUR BLOG HAS MOVED

Good afternoon friends and followers,

We have some exciting news.  OFF THE WALL- A Monument Wealth Management Blog has moved to a new address. 

Click here to visit and subscribe to our new RSS Feed to receive the most up-to-date information from the Monument Wealth Management Team!

To manually subscribe via RSS, the new address is: http://monumentwealthmanagement.com/?option=com_wordpress&Itemid=160

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Quick Post-Holiday Weekend Recap

It is the Monday after Christmas, so we will be putting out a quick recap of last week.  However, we do have a few nuggets of information to pass along…

The equity markets were winners last week.  Even though it was mostly light trading volume on a shortened week, U.S. stocks continued their winning ways for the month.  On Thursday, the Dow Jones Industrial Average hit its highest close since August 28, 2008 along with the S&P 500’s highest close since September 8, 2008. Additionally, the Nasdaq hit a three-year closing high.  As of right now, all three indices are poised for double-digit gains for the year.  That’s a far cry from where we were 18 months ago… or heck, even this summer when all the talk was about a double dip recession.

The equity markets we track in this report were all up for the week.  The Dow Jones Industrial Average (DJIA) gained 0.71% last week to finish at 11,573, the S&P 500 Index gained 1.03% to end at 1,257 and the Nasdaq Composite Index rose 0.86% to finish at 2,666.

We are still have a positive outlook on the equity markets and are over-weight the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

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Shortened Recap for the Week

Hey, it is the Monday before Christmas; it’s really hard to find a movie quote that relates to, “I’m way behind on my shopping.”  We know most people are still wrapping up the year this week while feeling a bit like the holidays crept up on them.  We can relate.  However, we do have a few nuggets to pass along.

First, enjoy your Holiday Season and have a great week…and good luck with your shopping.

The equity markets were winners again last week.  We saw some news that business sentiment increased and there was some good news out of Washington on the final extension of the Bush tax rates, something the markets were glad to see.  Everyone likes clarity, including Mr. Wall Street.

The equity markets we track in this report were all up for the week.  The Dow Jones Industrial Average (DJIA) gained 0.72% last week to finish at 11,492, the S&P 500 Index gained 0.28% to end at 1,244, and the Nasdaq Composite Index rose 0.21% to finish at 2,643.  The Russell 2000, which measures smaller capitalization stocks, rose 0.35% to finish the week at 780.

We are still have a positive outlook on the equity markets and are over-weight the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions. 

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

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“Oh, Eddie… If I woke up tomorrow with my head sewn to the carpet, I wouldn’t be more surprised than I am now…” -Chevy Chase as Clark Griswold, reacting to his Cousin Eddie (played by Randy Quaid) showing up unexpectedly at Christmas in the movie Christmas Vacation, 1989

All of the major equity indices, with the exception of the Dow Jones Industrial Average (DJIA), hit new highs for the year last week as the news broke of a tax deal that everyone, including us, have been expecting and waiting on.

I begin with this headline I read over the weekend – “Everyone’s Bullish and That’s Bearish”. 

Ugh.

Does anyone remember a headline that said – “Everyone’s Bearish and That’s Bullish”?

I don’t.  Anyone surprised?  Clark?  Eddie?

The equity markets we track in this report were all up for the week.  The Dow Jones Industrial Average (DJIA) gained 0.25% last week to finish at 11,410, the S&P 500 Index gained 2.28% to end at 1,240, and the Nasdaq Composite Index rose 1.78% to finish at 2,638.  The Russell 2000, which measures smaller capitalization stocks, rose 2.70% to finish the week at 777.

The excitement last week was mostly centered on the news that an agreement was reached between President Obama and the Republican leadership over the extension of the Bush-era tax rates. This was good for the equity markets because it extended the current marginal tax rates for all tax brackets, provided an extension of unemployment benefits for 13 months, cut payroll taxes and lowered the rates on estate taxes – the last part being a shock and surprise to everyone.  Let’s call it an unexpected ‘kicker.’

The real benefit comes from the fact that disposable income is now forecast to be higher across all households.  We hope that this continues the ‘trifecta’ of increased consumer spending, household debt reduction and throwing a little money into the old saving account.

There was some solid evidence last week which showed that U.S. growth is rebounding.   We thought the most important piece of news outside of taxes was that unemployment claims declined. Additionally, we saw our favorite economist, Ed Hyman of ISI Group, raise his 4Q GDP number up from +2.0% to +3.0%…that’s a big move.  He cited the 2% payroll tax cut as a major component of economic stimulus.

It’s also nice to see a cloud of uncertainty removed.  The fact is, businesses hate uncertainty and with elections behind us, QE2 being executed, and some signs of a pro-growth agenda coming out of Washington, things are looking up…and the market seems to agree.  Additionally, it’s nice to see my daily readings free of references to the “double-dip” that permeated so much of the news back in the summer.

We are still have a positive outlook on the equity markets and are over-weight the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.   

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

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“I will be watching you Focker…” -Robert DeNiro, playing Jack Byrnes in Meet the Parents, 2000

Even with Friday’s jobs report, showing that only 39,000 new workers were added to the job force in November, the market was up last week.

The equity markets we track in this report all had an exceptionally good week. The Dow Jones Industrial Average (DJIA) gained 2.62% last week to finish at 11,382, the S&P 500 Index gained 2.97% to end at 1,225, and the Nasdaq Composite Index rose 2.24% to finish at 2,591. The Russell 2000, which measures smaller capitalization stocks, and has posted positive returns 4 out of the last 5 weeks, rose 3.2% to finish the week at 756.

We are entering the season where we see an assortment of 2011 market forecast reports coming out of various research shops, however, only a few provide great insight. We look forward to reading the LPL Financial 2011 market outlook this week as we think it has become one of the most readable, accurate and insightful pieces put out by any research shop, due in part to their independent perspective.  In looking over a few of the outlook reports so far, the most remarkable thing we’ve is that no one has a catastrophic or overly negative outlook on the markets or the economy.

Sure there are some pictures being painted that outline the risks and the possibilities of bad news, but it’s refreshing to see how far we’ve come from some of the negativity that encompassed so many reports coming out a year ago. It’s hard to believe that we have seen corporations printing better than expected earnings for seven straight months after some of the reports we have read over the past year.

We still have a positive outlook on the equity markets and are over-weight the small and mid cap space and the technology sector. We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.

**Standard Compliance Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

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“You could’ve killed me slugging me in the gut like that. That’s how Houdini died, you know…” -John Candy, Planes, Trains, and Automobiles, 1987

It would not be Thanksgiving without a re-visit of this classic movie portraying Steve Martin and John Candy trying to do everything they can to get home for the holiday.  If the movie were remade today, there is no doubt that there would be a hysterical scene involving full body scans by the TSA.

However, it was not the TSA that provided the punches to the gut last Tuesday and Friday that caused the S&P 500 and Dow Jones Industrial Average sell off last week…

Last week’s poor showing in the equity markets were a function of the Ireland debt bailout and fears that Spain and Portugal are not far behind.  Additionally, 170 rounds of 155mm North Korean artillery shot into South Korea caused even more tension in that already tense area and rippled across the financial markets.  Finally, it’s never a good thing when the FBI gains traction in an investigation of insider trading…

The equity markets we track in this report were mixed for the week.  The Dow Jones Industrial Average (DJIA) lost 1.00% last week to finish at 11,092, the S&P 500 Index lost 0.86% to end at 1,189, but the Nasdaq Composite Index rose 0.65% to finish at 2,535.  The Russell 2000, which measures smaller capitalization stocks, rose 1.16% to finish the week at 732.73.

Tuesday and Friday last week were the toughest days for the DJIA, with losses of 142 points and 95 points respectively offsetting a big day on Wednesday when the Dow surged 151 points.  Hopefully we will find out Friday was a poor day in the markets because everyone was out shopping.

Most of the economic news that was released last week was positive.  Consumer spending for September was released and it showed that spending has surpassed the reading’s last peak set back in 2007 and October’s reading increased as well.  We saw an increase in hours worked and an increase in wages as well – a welcome sign for those worried about deflation.  Q3 GDP was adjusted up from the initial report of 2.0% to 2.5%.  Finally jobless claims fell by 34,000 to a level of 407,000 – this is the lowest number of Americans filing for new unemployment benefits since June of 2008 (pre-Lehman collapse) and much better than most economists were predicting.  Continued reports of around the 400,000 range will signal that hiring (labor markets) may be accelerating

Last year we wrote about the relationship between Black Friday (does anyone really need an explanation of what this is after all the news!?) and the stock market.  Remember, it is the performance of the stock market leading up to the holiday season that has the most impact over retail sales, not the other way around.  The outcome of retails sales from last weekend have little if anything to do with telling us how the market will do through the end of the year.

We are still positive about the equity markets as well as over-allocations to the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss.

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“Don’t write this down, but I find Milton probably as boring as you find Milton.” -Professor Jennings, Animal House, 1978

There was a lot of action last week but by the end, the equity markets were basically flat… which some people would say is boring.  However, it was nice to see good earnings from some tech companies as well as the news that Nike decided to raise their dividend. 

We also saw some good news in the labor markets, consumer spending, manufacturing and exports – all which has led many to believe that Q3 GDP could be revised up to around 2.7%.  That’s nice – certainly better then revised down! Oh, and there was that big car company IPO too.

Of course this is the week that leads up to “Black Friday” and the new emerging, “Cyber Monday,” which will set the tone for early estimates on the holiday retail sales.

In all, we like the good Q3 earnings and we like dividends.

The equity markets, while still positive, were mostly flat for the week.  The Dow Jones Industrial Average (DJIA) rose 0.10% last week to finish at 11,204, the S&P 500 Index rose 0.04% to end at 1,200 and the Nasdaq Composite Index was flat to finish at 2,518.  The Russell 2000, which measures smaller capitalization stocks, rose 0.71%% to finish the week at 724.36.

Q3 earnings are just about finished, with just a few companies left to report.  Barring any massive surprises, it looks like just 56% of companies in the S&P 500 beat top-line (revenue) forecasts and 75% beat their bottom-line (net income or earnings per share). 

The former was weaker than we would have liked to see for the quarter (we have been saying for most of the year that it was important for us to see good revenue growth since cost cutting could not go on forever).  However, 56% of the companies beat the expectations for revenue, so it’s not like it was a terrible quarter for revenue – it’s just that we would have liked to have seen it be 75% like the earnings number.

The earnings number was solid though, with the technology sector boasting the best results of all 10 S&P 500 sectors in terms of the highest percentage of companies to beat their earnings expectations.

A few weeks ago we wrote about the stock market becoming the stimulus our country needs to get back on our feet.  Perhaps we are starting to see signs of the market rally translating into business confidence.  We liked the big IPO last week as well as some merger news and a lot of corporate bonds being sold as well.

Enjoy your Thanksgiving this week.  Call us for help or if you have any questions.   

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss. The fast price swings of commodities will result in significant volatility in an investor’s holdings.

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“We’ve got some good news, and we’ve got some bad news.” – The Hangover, 2009

Last week was quieter in the news than the previous one, now that the election results are all tabulated and the Fed has announced its plan for QE2.

The good news is that consumer sentiment and jobless claims data last week both showed improvement, and the National Commission on Fiscal Responsibility and Reform has published its draft proposals to reduce the Budget Deficit.  The bad news, however, is that there is still more work to be done on all three fronts.

The Dow Jones Industrial Average (DJIA) dropped 2.20% last week to finish at 11,193, the S&P 500 Index fell 2.17% to end at 1,199 and the Nasdaq Composite Index lost 2.36% to finish at 2,518.  The Russell 2000, which measures smaller capitalization stocks, fell 2.35% to finish the week at 719.27.

First, the good news. The Reuter’s / University of Michigan Consumer sentiment index improved again last week to hit a 5 month high of 69.3.  On the job front, initial Jobless Claims decreased to 435,000, falling to the same level as two weeks ago, with the four-week average at its lowest point since mid-September.  Additionally, the Draft Budget Deficit Reduction Plan released last week by the National Commission on Fiscal Responsibility and Reform was a step in the direction of addressing the enormous U.S. National Debt.  Also, surprisingly, data released last week showed a year-over-year decrease in the Budget Deficit of 20.73% or 35.93 billion.

On the other hand, there was also some bad news.  While the consumer sentiment numbers are improving, they are rising from one of the lowest levels seen in the past 30 years.  Clearly the U.S. consumer is getting more comfortable, but still has a long way to go.  The initial Jobless Claims numbers are an improvement, but also started at a lower revised level from the previous month. Finally, the proposals on deficit reduction have a long road to travel.  If a super-majority (14 of 18 members) of the commission supports a plan, then the current Senate leadership has committed to take up the issue on the Senate Floor for debate.  These steps are only the beginning of the process, but illustrate movement in a productive direction.  Bottom line – there is a lot of politics between here and there.

On balance, we see the aforementioned good news as a sign that positive momentum is continuing.  While consumer sentiment is still relatively low at 69.3 (the 30 year average is 87.7), it has steadily improved.  While Jobless claims were revised up last month, this month’s data shows a decrease.  While the National Debt and Budget Deficits are clearly a long-term problem yet to be solved, in the short term we are seeing improvement.   Additionally, just the fact that Congress has started debating the issue is a positive step, in our view.  While there is still work to be done, we see the data pointing to an improving economy, and it appears that we are coming out of the ‘soft-patch’ we saw over the summer of 2010.

Continue to be careful…have a plan, stick to it and be smart.  Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss. The fast price swings of commodities will result in significant volatility in an investor’s holdings.

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“The teacher asked me what was the capital of North Carolina…I said Washington, D. C…” Talladega Nights, 2006

It was an exciting week in Washington, D.C. – the town everyone was paying attention to last Tuesday night.  While I was at a conference in Dallas last week, several of my colleagues decided to pass up an opportunity to get a back stage tour of the new Dallas Cowboy’s stadium in order to watch the election results.  I opted to take the tour and was lucky enough to convince a security guard to throw me a pass into the end zone.  I think it was the only touchdown pass a Dallas fan has seen in that stadium all year.

Last week saw gains in the equity markets that recorded a 2010 high for the S&P 500 and led the Dow Jones Industrial Average to levels not seen since before the Lehman collapse.  The close of the market Friday marked the ninth positive week out of the past ten for the markets.

Now, it’s all about the TAXES!!!

The Dow Jones Industrial Average (DJIA) finished the week by gaining 2.93% to finish at 11,444, the S&P 500 Index gained 3.60% to finish at 1,226 and the Nasdaq Composite Index gained 2.85% to finish at 2,579.  The Russell 2000, which measures smaller capitalization stocks, rose an incredible 4.73% to finish the week at 736.59.

Financials fared well last week, reacting positively to the news that regulators may soon allow some banks to raise their dividends.  The only sectors that lost ground last week were defense sectors like Telecom, Health Care and the Consumer Staples.

Last week was all about the conclusion of two major events; the mid-term elections and the announcement by the Federal Reserve that they will purchase up to $600 billion worth of Treasuries at a clip of about $75 billion per week.  Not that there is much clarity now, but there is certainly a little bit more than there was.  Additionally, the jobs report showed that there was some life in the private sector as it related to hiring, with 151,000 new jobs created in October.  This is the best report since April.

Now that the election results are in, we shift our thoughts to questioning what will happen during the lame duck session as it relates to the upcoming end of the Bush tax cuts.  We suspect that the tax cuts will be extended but not made permanent, and hope that this happens before the end of the year rather than applied retroactively to Jan 1s after the new congress has been sworn in.  Since tax withholding will ratchet up on Jan 1st  to the pre-Bush tax cut levels automatically, the economy will not be the beneficiary of that withheld money until refunds are issued in the 2012 calendar year – so the sooner this is decided upon, the better for everyone involved.

Earnings reports continue to roll in, and while some of them are lackluster, the number of companies reporting higher than expected top-line revenue numbers stand at 57%.   Additionally, the number of companies beating bottom-line profit numbers stands at 75%.  We have contended for a long time that it is important for the economy to see companies increasing their top-line revenue numbers, and 57% is an acceptable number for us!  According to data from FactSet, 3Q 2010 earnings look like they will finish up about 30% higher than the same quarter in 2009.

Continue to be careful…have a plan, stick to it and be smart.  Call us for help or if you have any questions.     

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss. The fast price swings of commodities will result in significant volatility in an investor’s holdings.

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“Well, I’m not even sure that’s a crime anymore…” Fletch, 1985

News of it taking $363b to prop up Freddie/Fannie as well as mortgage documentation woes hitting a large bank for a -4.5% weekly loss were not enough to keep the market from continuing to rally last week.  Friday marked the sixth positive week out of the past seven for the markets.

BUT – while stocks were higher last week, there is some concern surrounding the current rally.

The Dow Jones Industrial Average (DJIA) finished the week above 11,000 again by gaining 0.63% to finish at 11,133, the S&P 500 Index gained 0.59% to finish at 1,183 and the Nasdaq Composite Index gained 0.43% to finish at 2,479.  The Russell 2000, which measures smaller capitalization stocks, was essentially flat at 703.43.

Recent economic data has been lack-luster lately, and we are still waiting to see some movement on the employment front. If unemployment stays at 9.5% through 2011, it will have been at this level for three full years. It’s disturbing that there has not been any sort of material decline in this number.

Additionally, mortgage applications declined last week and remain at a very depressed level – if you have any doubts about this, just ask anyone with a ‘for sale” sign in their yard.  This, despite record low mortgage rates, is starting to weigh on the sentiment of investors. 

As we have said before, the stock market could be the one great piece of stimulus needed for the economy.  However,  we think that the rally will stay muted relative to last year’s rally until investor sentiment increases to the next level.  This will likely take improvements in the employment and the housing markets, though.

The key risks to the current rally are:

  1. Future increases in the foreclosure rates – if we see foreclosures increase, the chance of a double-dip recession increases.
  2. State and local budgets tip into a crisis – when asked why he could not “find the money” to build the N.J. side of a new tunnel, Gov. Christie of N.J. stated, “I can’t print my own money like the federal government.”  These budget shortfalls present a risk.
  3. Bush Tax Cuts – there is a risk they will not be extended as we enter the New Year.  Even though they may be retroactively extended, paycheck withholdings will automatically start creating an economic drag and negative sentiment.

There are still positive factors contributing to the economy as well.  These include the strong third quarter corporate earnings and the expected quantitative easing that should be announced after the November elections.  So far this quarter, 30% of the S&P 500 companies have announced earnings and solid sectors include Tech and Materials.  There have also been noticeable improvements in top line revenue as well as bottom line earnings.  Increasing revenue is key given the cost cutting that has taken place over the past 18 months.

Please let us know if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss.

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