12/29 - Weekly Market Commentary
Posted by Wayne on December 29, 2007 – 4:45 amFor a short week in the market we certainly saw a lot of action!
The week started off on a bright note – Merrill (NYSE: MER) announced they’d be selling a lending unit to GE Capital and had raised over $6 billion from Tamasek Holdings (a government owned investment firm out of Singapore).
But stocks took a serious turn for the worst on Thursday. The Dow was down over 190 points in a day and finished the week lower.
First we had bad news come out on the Durable Goods orders – the market had expected an increase of 2.2% but instead got a measly 0.1%. This number is important because it gives an indication of how strong/weak the manufacturing sector is. Seeing the number come in this far below expectations is causing investors to rethink how the overall economy will perform in 2008.
Combine that with a weaker than expected retail sales report and we now have a soft consumer market and a soft manufacturing/commercial market - if this housing situation continues to get worse then the whole economy runs the risk of falling into a recession next year, especially when we consider the fact that the Fed has a limited ability to spur growth through more rate cuts.
The one bright spot is that employment numbers are holding steady. We’re basically at full employment right now and as long as people have jobs they’ll continue to spend what they earn.
So I’m not going to start liquidating all my positions, going into cash or shorting the market, but if the employment situation changes in a dramatic way next year then I could easily see myself turning into a BBB (“Big Bald Bear”) for 2008.
The market also reacted to the news on the assassination of former Pakistani Prime Minister Benazir Bhutto. In fact, one of our members asked a question about this exact topic and how it might affect the market. Click here to view the question and the answer.
Essentially, any unrest in the Mid-east has the potential to affect oil supplies – and we all know what that’ll mean to the price of gas in this country.
But like I said, I haven’t turned into a bear just yet. I think there are still some dramatically undervalued stocks and sectors out there. I’m keeping a close eye on technology and on China – remember, there are always ways to profit in a market, even when it’s going down.
So I wish you a happy and healthy new year…and if you happen to get the “market jitters” heading into 2008, stop by TickerHound.com and send your questions out to the community members, we’re all here to help!
One Response to “12/29 - Weekly Market Commentary”
By Ethan Roberts on Jan 1, 2008
I think there is too much emphasis on the employment numbers. The thinking seems to be that if the employment numbers are high enough, that everyone will spend, spend, spend, and there will be no economic slowdown. What everyone forgets is that if you take someone who is earning $100,000 a year, lay them off, and then that person can only find another job that pays $60,000, they can not spend as much as previously. I think we have an economy loaded with people in this situation. There is a dichotomy between full employment and the soft durable goods/retail numbers that are coming in. People need good jobs to grow the economy, not just jobs.