So far this year, the
S&P 500 is up about 12% on fewer Europe worries and slightly improving
economic data in the US. (Much of the world is in trouble with recession in
Europe and slowing growth in China.) Today,
the US investor has one big question.
Can the stock market
continue upward with gas averaging its present price of $3.90 per gallon? That is just 20-cents, or 5%, below the all time
record of $4.15 per gallon set back in mid-summer of 2008. In the summer of 2008 the S&P 500 had
fallen about 10% from its previous high made late in 2007. The bear market that
followed in 2009 cut stock values in half.
That bear-market bottom followed just 9-months after the price of gas
peaked.
At least one thing is
different this time: we don’t have
talking heads on CNBC predicting 10-dollar a gallon gas! I know that when I heard those 10-dollar a
gallon predictions I pulled back my spending.
High gas, a financial crisis and the housing collapse kicked off the
Great Recession. So what else is different
now?
We still have a
housing mess with most mortgages underwater; banks are hanging on, with added
earnings from the Federal reserve bond buying program (the Fed buys Treasury-issued
bonds from the Banks); unemployment is stubbornly high (The US still has fewer
jobs now than in 2000); growth is very slow; year over year GDP growth has been
falling since 1979 and the trend is continuing down; our deficit is so high
that we will not be able to respond to future crisis without risking a burst of
higher interest rates or our very own debt crisis...well...I’m getting dizzy
just recounting all that bad news.
Here’s more on the
subject from Ben Bernanke via CNBC:
“Although the U.S.
economy has shown signs of improvement recently, Federal Reserve Chairman Ben
Bernanke cautioned that high gas prices could lead to a "hit on
growth" and rising inflation.
"But at this
level we don't...think it's going to be anything that's going to stall the
recovery," said Bernanke in an ABC News interview on Tuesday.” Full story at: http://www.cnbc.com/id/46871946
Perhaps, but I certainly hope that Chris Cook was right and we will see $2.50 gas this summer. (28 Feb 2012 blog). If gas does continue up, the party will be over.
THE MARKET
The S&P 500 dropped
0.5% Wednesday to 1406, but today it recovered toward the end of the day –
that’s somewhat encouraging. VIX fell
about 1% to 15.5.
NTSM
The NTSM analysis
remained BUY Wednesday..
MY INVESTED POSITION
I bought back into
the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy
signal. I remain 100% long in the
long-term portfolio (100% stocks in the 401k.). (See the page “How to Use the
NTSM System” – the link is on the right side of this page).
