By D. Scott Peterson
In future posts will be switching to Scott's 10 talking points for the week. People seem to like numbered lists and so do we. Enjoy!
1. Get used to this volatility. The Dow, down 300, up 200, and so on. There are a lot of crosscurrents: Greece, oil, the dollar, the Euro, China, slowing earnings, and so forth.
2. The market is in a trading range: S&P500 range is 2000 to 2120, so the overall trend is still up. Sideways is another way to express it.1
3. A possible reason oil is rallying is because the dollar has stopped going up and may have “topped.” Supply controls the price of oil, but so does the dollar. Dollar up, oil down. Dollar down, oil up. Oil is like a currency in some ways.
4. By the dollar “topping” we mean its price has peaked. There’s no way to know for sure. The dollars’ value has declined a bit in relation to other currencies the last month or so.
5. There is tremendous innovation in regular pharmaceuticals, medical devices, biotechnology and health care in general. This is a huge growth area. That’s why the health care is doing so well.2
6. Pay attention to earnings and how the market reacts. How the market reacts to earnings reports + especially forward guidance is the most important issue going forward.
7. Major headline “bombs” are only temporary. By “bombs” we mean sudden, unpredictable news events that the market reacts to. It could be any number of things. A short-term international event, or a US political controversy that briefly rattles the market.
8. Do no listen to the financial news media. They are usually wrong at important inflection points in the market.
9. Greece is still as issue: They do not have the money to pay back what they owe in European Union. And the EU is so far refusing to loan them any more funds. The concern is that they drop out of the European Union (the Euro), and that prospect unsettles markets.
10. Earnings season is always an odd time for market. Especially when the market is unsure about the overall direction of the economy for the next 6 to 12 months. Don’t get shaken by the day to day noise.
The S&P is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. 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. You cannot invest directly in an index. Past performance is no indication or guarantee of future performance. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations of any particular security, strategy or investment product for any individuals. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.