Major market indices were mixed last week. The DJIA gained 0.10%, the S&P 500 increased 0.04%, and the Nasdaq was unchanged. Growth stocks outperformed value stocks. And the small cap index 0.71%. The 10-Treasury yield gained 9 basis points on the week, closing at 2.88%.
Allow me to briefly wax nostalgic. Two years ago, in November of 2008, stocks were crashing. Governments around the world were panicked. Central banks we're drowning--their outstretched hands flailing above the water's surface, desperately reaching for something. Anything. The bond market's floor was dropping faster than Manny Pacquiao's opponents.
I was at the Chicago Zoo with my two sons on a lovely Friday afternoon. I should have been enjoying some much needed time with my beautiful little boys. They stared in wide wonder at the gorillas, elephants, tigers, and many more of God's creations. And I? I fought the urge to check the market at every moment. My heart raced. I was exhausted.
Those days are behind us. What has transpired since those November days of desolation and capital destruction? The Nasdaq 100 is up 80%. The Midcap 400 is up 70%. And the S&P 500 is up 37%. While those were indeed strange days, we must always keep in mind the words of Frank Sinatra's song, It's a Lovely Day Tomorrow:
"If today your heart is weary
If every little thing looks gray
Just forget your troubles and learn to say
Tomorrow is a lovely day"
October and November 2008 were desperate times. But these, according to Ned Davis Research, are better days. Retail sales are up 6.3% since last year. Vehicle sales alone are up 10.3%. General Motors is public again. Sales outside of vehicles are up 5.8%, the fastest pace since mid-2006. Since a broad economic recovery will begin with buying activity at the retail level-this is music to the ears.
Abroad, Chairman Bernanke was in Frankfort, Germany, last week for the ECB's Central Banking Conference. He used the opportunity to mount a defense of the Fed's QE2 decisions and implicitly criticize China for keeping its currency weak. While he did not point directly at China, he did voice concerns with "large, systemically important countries with persistent current-account surpluses" and says "both growth and trade are unbalanced" globally.
How do you say "pot calling the kettle black" in Mandarin?
Last week's market whipsaw was natural after the run-up heading into the election. When the GOP re-took Congress in 1994, stocks fell 5% for the next three weeks before turning and beginning a huge bull run. History repeats itself. Just listen to the echoes. And stay tuned...