"Investor optimism is improving, according to various indicators. Bullish sentiment is slightly below 50% for the third consecutive week in our Sentiment Survey and is at 50% in the Investor’s Intelligence advisor survey. Yesterday, the Investment Company Institute (ICI) said domestic stock funds experienced their first week of net inflows since last August. Even Mark Hulbert’s Stock Newsletter Sentiment Index (HSNSI) is showing that market timers expect stock prices to rise.
As you know, stocks have started the year off on the right foot. In fact, the S&P 500 is enjoying its best early January performance since 1987, according to Bloomberg. The index is also extending a 17% rebound that started in early October. The advance has pushed the S&P 500 above its 200-day moving average, a positive chart pattern.
The U.S. economy is giving investors reasons to be hopeful. Both the ISM manufacturing and non-manufacturing indexes improved from November to December. December nonfarm payrolls surprised to the upside. This morning, the Labor Department reported the lowest number of initial jobless claims since April 2008. Though nobody would describe economic growth as robust, the data is good enough to diminish short-term worries of a forthcoming recession.
Dark clouds are still present in the sky, however. The World Bank cut its forecast for global economic growth yesterday: 1.4% expansion for developed countries and 5.4% expansion for developing countries. Europe has yet to solve its sovereign debt crisis. (The World Bank anticipatesEurope will fall into a recession with a 0.3% contraction.) China’s economy is slowing; we just don’t know exactly at what pace. Unemployment in the U.S. remains high, and many of the jobs created last month were low-paying gigs. Fourth-quarter earnings season has stumbled out of the gate. S&P Capital IQ says the earnings beat rate of 49% is the lowest it has been in 10 years. (As of this morning, 29 companies topped expectations, 19 missed and 10 matched.)..."
at http://pragcap.com/optimism-on-the-rise-but-problems-remain
As you know, stocks have started the year off on the right foot. In fact, the S&P 500 is enjoying its best early January performance since 1987, according to Bloomberg. The index is also extending a 17% rebound that started in early October. The advance has pushed the S&P 500 above its 200-day moving average, a positive chart pattern.
The U.S. economy is giving investors reasons to be hopeful. Both the ISM manufacturing and non-manufacturing indexes improved from November to December. December nonfarm payrolls surprised to the upside. This morning, the Labor Department reported the lowest number of initial jobless claims since April 2008. Though nobody would describe economic growth as robust, the data is good enough to diminish short-term worries of a forthcoming recession.
Dark clouds are still present in the sky, however. The World Bank cut its forecast for global economic growth yesterday: 1.4% expansion for developed countries and 5.4% expansion for developing countries. Europe has yet to solve its sovereign debt crisis. (The World Bank anticipatesEurope will fall into a recession with a 0.3% contraction.) China’s economy is slowing; we just don’t know exactly at what pace. Unemployment in the U.S. remains high, and many of the jobs created last month were low-paying gigs. Fourth-quarter earnings season has stumbled out of the gate. S&P Capital IQ says the earnings beat rate of 49% is the lowest it has been in 10 years. (As of this morning, 29 companies topped expectations, 19 missed and 10 matched.)..."
at http://pragcap.com/optimism-on-the-rise-but-problems-remain
