In case you have been living
under a rock – this is an election year.
Here’s a table of election-year stock-market returns since 1928.
Many follow the “Presidential Cycle.” The average return has been about 12% in
election years. There have only been 3-down
years in the 21 election years since 1928.
Of course, like 2008, we still have to worry
about recession. (In the 1966 Bear
market, both peaks and troughs seemed to cycle rougly every 4-years, so perhaps
this year will fool all of the pundits (including my previous commentary) and
give us another down year as we head down to a MAJOR bottom in 2013. The last major trough was in 2009.
Regarding the many pundits and talking heads
on CNBC who suggest that we won’t have a recession because important economic data
points look better, John Hussman wrote in his latest commentary: “Very simply,
neither a strong monthly employment gain nor a slight uptick in the PMI are
informative signals that recession risk has eased...the data set (not just a few points
of data) continues to imply a nearly immediate global economic downturn. Lakshman Achuthan of the Economic Cycle
Research Institute (ECRI) has noted if the U.S. gets through the second quarter
of this year without falling into recession, "then, we're wrong."
Frankly, I'll be surprised if the U.S. gets through the first quarter without a
downturn.” – Weekly Market Comment, John Hussman, PhD, at http://www.hussmanfunds.com/.
That’s a very disconcerting comment,
especially when you read the Mr. Hussman’s entire commentary. Mr. Hussman, PhD, presents a typically,
rigorous and analytic approach to the question of oncoming recession. His
comments can’t be dismissed, but he does present some possible scenarios in
which US recession might be avoided.
I don’t pretend to be an economist, so a few
layman comments follow. There have been
some concerns recently that might corroborate Mr. Hussman’s views: (1) The Holiday retail numbers weren’t as
good as initially reported for many retailers.
Except for the high end, retail-buyers were late with their purchases
and bought after retailers discounted heavily.
(2) A few pundits have suggested that the pre-releases of earnings have
been trending down. When it comes to
stock prices, it’s all about the earnings. Another important data point is
consumer confidence.
When it comes to consumer confidence – you
can read the tea leaves either way. Consumer
confidence has been improving since October.
The Consumer Confidence from the Conference Board now stands at 64.5. While the direction is good (up for the past
2-months), the overall number isn’t great and is at levels frequently seen in
recession.
Here is a chart from an article titled, “Consumer
Confidence at an Eight-Month High”, By Doug Short, posted December 27, 2011. Full article at http://www.advisorperspectives.com/dshort/updates/Conference-Board-Consumer-Confidence-Index.php
If
consumer confidence continues to improve significantly, I don’t think we’ll see
a recession; but what do I know – I’m an Engineer. My financial expertise, if you can call it
that, is analyzing the S&P 500 via the Navigate the Stock Market computer
program.
Today
the NTSM analysis slipped to HOLD.
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).
I
am 90% long in the trading portfolio.
Just
a reminder: 100% invested in stocks is way too much for most rational
folks. Don’t do it unless you have a
high tolerance for risk.
