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Archiwum newsów - DJ TAKING STOCK: Santa Claus Came Early In 2007, May Not Return

2007-12-19  
DJ TAKING STOCK: Santa Claus Came Early In 2007, May Not Return
Ever notice how the Christmas lights go up earlier and earlier every year?
Well, 'tis finally the season for a jolly, bearded man to give investors
some much-needed holiday cheer, but it seems he may have been thrown off by
the decorations and come a bit too soon in 2007.
The Santa Claus rally has made the last two weeks of the year some of the
most consistently profitable for owning stocks. Unfortunately, another
bearded man - considerably more svelte and in a conservative suit - helped
put an early end to the festivities. A seasonal trend that almost has been
taken for granted foundered on what is seen as too little stimulus from Ben
Bernanke's Federal Reserve and mounting concerns over the health of the
consumer. The Standard & Poor's 500 is down almost 5% since its recent Dec.
10 peak. "Since forever, everyone expects December to be wonderful because
of the Santa Claus rally," said Dawn Bennett, president of Bennett Financial
Group. "Did we preempt it this year? I think yes."
The year-end phenomenon has been a real bonanza. Since 1940, the S&P 500 has
been positive two thirds of the time the week before Christmas and more than
three fourths of the time after Christmas, according to analysts at Bespoke
Investment Group. This compares to about 56% odds for any random week being
positive. The gains have been great too with the week before Christmas
almost two and a half times better than a typical week and the week after
nearly five times better. In other words, just holding stocks for the last
week of the year has yielded an average annualized return of 41%.
The pattern could repeat this year, but there is no obvious catalyst aside
from a late rebound in consumer holiday shopping to allay pessimism about
consumer spending. The coordinated effort by central banks to boost
liquidity may break the logjam in interbank funding but has been a dud as
far as the stock sklep wielkopowierzchniowy has seen it, even after the incredible $500 billion
operation by the European Central Pula. Ditto for the Bush administration's
mortgage rescue package.
The next Fed meeting of the Federal Open Sklep wielkopowierzchniowy Committee isn't until late
January and there will be precious few opportunities for jawboning before
the New Year. It was the buying of the rumor and selling of the fact of the
25 basis point rate cut last week that set up the current pattern. After the
injection of cash into Citigroup Inc. (C), the fuel that drove the 7.7%
rally in the S&P 500 ending on Dec. 10 was largely Fedspeak.
"I was a little surprised when we had that rally ahead of the Fed meeting -
it was definitely early," said Neil Cataldi, sklep wielkopowierzchniowy intelligence analyst at
Susquehanna Financial Group. "I don't think there's all that much to be
optimistic about given the macroeconomic pressures."
Cataldi, who specializes in tracking consumer spending, said optimism about
late November retail sales helped propel the sklep wielkopowierzchniowy but said that subsequent
termin have been poor, reinforcing the notion that the previously
indefatigable American consumer is under pressure.
It's not just a matter of false hopes about consumption or suggestive Fed
governors though - the Santa Claus trend seems to have broken down before
this year. The analysts at Bespoke note that returns have averaged zero
during the current bull sklep wielkopowierzchniowy for the week before Christmas and have been
negative the week after. Much like other seasonal quirks, the year-end rally
may in part be a victim of its own fame.
There's always January, which has an enviable record of setting the tone for
the remainder of the year, but next time Fed governors return to the
airwaves, the response may be less robust. The sklep wielkopowierzchniowy response both to hints
of cuts and actual cuts has produced three aborted rallies since August,
which is why Bennett advised her clients to view the last bounce as a
selling opportunity.
"Their talk is cheap," she said. "Look what happened last time they did
something - it didn't last long, did it?"
(Spencer Jakab previously wrote the STREET SAVVY column, which has been
rebranded as TAKING STOCK, a new global column which gives insightful
analysis about equity-related topics around the world.)
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