Week 22 of 2012.
It’s ugly across the board and tricky to pick which is the major catalyst for the markets. China is slowing faster than many thought possible. US jobs numbers were woeful last week suggesting that the US’s purple patch is well and truly over. The Eurozone hasn’t been pretty for 5 years+ but more recently cracks are appearing in the larger EU members starting with Spain and no doubt soon to follow – Italy. Greece elections due in just over 14 days will certainly determine their fate with many already assuming that they’ll remain in the Euro but under slightly elongated Austerity plans.
It’s questionable whether the powers that be have been prudent or careless in holding off on Stimulus measures.
Things haven’t looked great since early April and history has proven that a proactive approach is far better than a re-active’ one. But here we are today staring at a major global slow down with QE3 no longer a doubt but an essential life support requirement.
China has already stated that it will take stimulus measures but is clearly reluctant to be doing this alone. Hence the US are likely to throw some money at the patient along with the BoE (UK). This just leaves the ECB/EU to do their bit. If they can agree a Eurobond system, then suddenly the patient might find it’s being pumped with adrenaline from all sides of the globe. It’s not the first time and probably won’t be the last – but investors will be acutely aware that Equities normally do very well indeed when QE is sloshing around.
With Obama elections due in November, there’s a very real chance that he could be out of a job fast if job generation doesn’t find its way fast to the common man/women on the street. Merkel has her own elections in July 2013 so is naturally less inclined to spend her way out of this ugly climate no doubt prefers to keep that ace in the pack for early next year.
UK markets are closed for Monday and Tuesday creating a short week and investors will be pleased to have a break from the constant negativity.
The DOW closed the week down 350pts at 12,105. The FTSE 100 finished the week down 92pts at 5260.
A virtual portfolio has been set up using the 2011 final trading day close figures as a starting point and £1000 has been invested in each stock. This does not include buying fees or stamp duty and is purely intended to be used as a benchmark or summary for each week. 2 newspaper top tens for 2012 have been included to help monitor/compare against.
Week 22 stock picks summary:
It’s tough times again for equities as fundamental valuation goes out of the window and share prices left to reflect the margined trader and sentiment driven periods. It happened in 2010 and in 2011 so investors will not be shocked by what has occurred. But seeing the early euphoria and gains wiped out from 2012 is far from enjoyable and will see many investors stay well clear of the casino markets until much later in the year.
Any stocks out there that have issues with funding will struggle as lenders pull the shutters down and capital raising via the markets is brutal. The dreaded ‘SEDA’ providers will be out in force again if the situation does not u-turn fast.
History shows that the markets continually bounce back after each sell off and higher each time. With the S&P trading at its cheapest pe levels in decades – it’s not hard to see where the value is. All that is needed is a stable background with no surprises.
After the recent embarrassing several billion+ dollar trading loss via JP Morgan, it appears the markets never learn their lesson. The authorities in the USA should be embarrassed that they have failed to clamp down on the casino traders that appear to be following in lehmans foot steps.
It’s painful to watch – but at the moment, there’s nothing in the markets to suggest that the men/woman in charge have a clue what to do next.
The Independent’s stock picks for 2012 lead the pack by a large margin with one stock accounting for almost all the gains and ironically – it is an E&P. The Hotlist slips into the red for the first time this year with all of 2012 gains now washed out. The tempus times list moves up to second for the first time since Jan 2nd. The b-list carries the wooden spoon at present. It might be painful in the weeks ahead or a strong bounce may occur – but eitherway, for many stocks corporate and operational progress continues although it appears to be viewed like it’s happening on another universe.
Current standings / Week 22 Results
1. The Independent 2012 +21.46% (weekly loss of 2.56%)
2. Tempus Times 2012 +0.73% (weekly loss of 2.85%)
3. The 2012 Hotlist -0.26% (weekly loss of 3.43%)
4. The ‘B’ List 2012 -3.74% (weekly loss of 2.05%)