Under the Influence
By Derek Carawan
Whether you were invested in the stock market through your 401(k) or otherwise, the first quarter of 2012 has probably made you a happy camper. The three measurements that people typically refer to, the Dow, S&P 500 and NASDAQ, were up 9.79%, 11.17% and 18.25% respectively, according to Hanlon Investment Management (as of April 6th, 2012). Those are some very impressive numbers. Many forecasters stated early on that the markets would deliver returns of between 9% and 11% for the year. Now that we have reached this point, what should we expect going forward? There are a number of influential factors that should push and pull on the market for the remainder of the year. I am going to discuss just a few of them here.
The Affordable Healthcare Act will get a thumbs up or down in a couple of months. As I have mentioned in previous articles, consumer emotions have a strong influence on the market in the short term. Whether the court accepts the mandate or not, and/or strikes down part of the law or keeps it intact, the market will react. Particular sectors (healthcare) may be affected more than others.
Spain has appeared on the radar screen again. If France, Germany and the other forces can rein in the threat of Spain’s financial troubles influencing the rest of the world, fantastic. If not, then it could spread to other nations. Let’s face it, if Europeans do not buy goods made in America, then American companies will see a slowdown unless the slack is made up by consumers elsewhere. This in turn trickles to workers and the economy.
Election season is here in North Carolina and around the country. Primaries are in early May and the general election is in November. Press coverage, opinions and spin will undoubtedly add to market angst.
The strong start to 2012 has set the stage for a phenomenal year or a short term breather. announce earnings quarterly and these reports are very important to investors.
The quarter may fall short for some, moving the market downward for a period of time. Keep in mind the projected earnings growth for the end of the year is positive.
As I write this, the March employment report has been released. Though disappointing, it still shows that jobs are moving in the right direction. There were 120,000 manufacturing jobs added in the first quarter. That is one of the best on record. [Source: LPL Weekly Economic Commentary April 9, 2012]. There were jobs added to the U.S. economy in each of the past 25 months! Other measures indicate momentum going forward. Of the 8.9 million private sector jobs that were lost from 2008 to 2010, 4.1 million of these have come back. Personal incomes are up too, which indicates that these jobs may be full-time, not part-time jobs.
These factors are only a few of the market influencers that we have to contend with and, as I said early, will have short term effects on the market and economy.
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