Business News

More good omens

| More

by Peter Switzer

How far have nervous investors progressed since August last year? Heaps! Even with Greek talks stalling, again, and the Romanian president resigning amid austerity protests, the Dow was down a mere 17.1 points, or 0.13 per cent, to 12,845.13. The S&P 500 index was flat at 1344.33.

I’m always looking for good omens but when the bad news beats the good news I have to face facts and expect a sell-off. Right now the good outweighs the bad but I think there are still two crucial months — February and March — after which the market will come to an opinion on the credibility of the European Union debt plan and what its impact will be on the European economy and stock markets.

If the judgement is that the plan and strategy have flaws, the Yanks could easily follow the cliché: “Sell in May and go away.” This often works, but if good stuffs happens over the next two months, we could see a stampede or at least a steady flow of funds out of cash and bonds back into the stock market.

Positive for 2012

So, why am I positive for 2012, despite the fact I expect some sell-offs? Try these:

The fourth year of a presidential term is good for stocks.
When bond yields make dividends on stocks look really attractive it is great for stocks.
US unemployment fell from 8.5 per cent to 8.3 per cent and there were 253,000 jobs created in January.
Factory orders, the Institute for Supply Management surveys for manufacturing and services, are up and better than expected.
The Fed says its on hold with interest rates until 2014.
The ECB is set to expand the eurozone money supply.
Both the low euro and greenback will be good for these economies.
China is set for a soft landing.
And the Giants won the Super Bowl!

History shows when a team from the original National Football League wins the Super Bowl, Wall Street goes up for the year some 80 per cent of the time! Last year the Green Bay Packers won and the Dow was up 5.5 per cent for the year.

Worst behind us?

Clearly, I’m looking for any good or dodgy reason to hold onto stocks but if we can see two good months for the EU over February and March, I then might be willing to tip that the worst is behind us.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Tuesday, February 07, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

So what happens this week?

Suddenly, Wall Street went positive – what just happened?

Be warned – things will get better!

News, news, news: the good, the great and the unimportant

Notes from Turkey