Markets in a Nutshell
August 25, 2008 Issue
Stocks dropped last week. The Dow lost 0.3% while the Nasdaq lost 1.5%. Both indexes remain in the red for the year with the Dow down 12.3% and the Nasdaq 9.0%.
The Dow has been in a “trading range” since March. After hitting an intraday low of 11,650 on March 18th, the Dow is right about at the same level currently, closing at 11,628 on Friday. Trading ranges (a time period where a stock index goes up and down within a short range) are usually followed by sharp rises or sharp falls. So which will it be? Read on…
$3 billion mutual fund manager Craig Callanan, in a Bloomberg report, believes stocks can rally 20% in the next year. Callanan says most stock rallies don't feel like rallies which is why many investors miss them. Kopin Tan, of Barron's “The Trader” column also thinks stocks could be “propelled” higher. In his 8/18 column, Tan says “negative sentiment and an indifferent crowd suggest there's money on the sidelines to propel [stocks] higher.” Read on…
Ah, but of course not all are optimistic on the future. Also from the 8/18 Barron's comes an interview with asset manager Eric Sprott who believes we are in a secular bear market (a long term downward trend in stock prices) where “lots of things that might go down for quite a long period…” Sprott points to higher energy costs as a big reason of his negative outlook. Read on for one more comment on this topic…
I always liked what hall of fame Fidelity mutual fund manager Peter Lynch used to say: “Which way the next 1,000 to 2,000 points in the market will go is anybody’s guess, but I believe strongly that the next 10,000, 20,000 and 40,000 points will be up.”
Came across a report this week from Oppenheimer Funds titled “Stay in the Market—Don't Miss Your Window of Opportunity.” The report looked at the time period 12/31/87–12/31/07 and calculated that the S&P 500 stock index had an annualized return of 11.5% a year over that time period. If an investor missed just the top returning 25 days over that period, the annual returns would have declined to 6.2%. Amazing considering that there were about 5,000 stock market days during that time period and they are talking about not being invested for just 25 of those.