In spite of the Chrysler's bankruptcy, investors have realized that the U.S. economy was not going into a depression. They also realized that too many stocks were priced for one, and this set off a buying spree driving stock prices higher.
The Dow climbed 7.3% for the month of April, the S&P 500 gained 9.4%, and the Nasdaq surged 12.3%.
Better than expected first-quarter earnings were the main drivers for the stock market’s gains in April. As of Friday, 68%, of the 375 S&P 500 stocks reporting announced earnings with upside surprises.
Investors are beginning to sense that China may lead the world out of the recession. They provide stimulus a little differently in China than in the U.S..The Chinese give their citizens vouchers to buy goods and services- like washing machines, etc. Here is the U.S., they pass out cash. That's all well and good, and some people will use the cash wisely, but idiots will blow it on stupid things.
Actually, we a staring at a good news/ bad news scenario. The good news is obvious- things aren't as bad as many had thought. The bad news is, well, maybe not so obvious.
Clearly, the markets have moved very quickly from a severe oversold condition. Stock prices are no longer cheap (exception-financials), and investor sentiment is getting too optimistic.
In this weeks Barron's Big Money Poll, 59% of the portfolio managers said they were bullish on the markets while only 13% said they are bearish. The recent sentiment indicators are also forecasting negative vibes as Insider Selling has escalated, volume has not been impressive considering the prices of some top blue chip stocks.
To take advantage of the markets new found life, we are going to pull a few chips off the table just in case we "Sinko in Mayo".
Here are our Top 10 ETF's for the week of May 4th:
New Sells:
VIS: Vanguard Industrials
IXP: iShares S&P Global Telecom
Let's hold the proceeds from the sales in a money market account for now. I have some sectors I would like to buy on the next pullback.
1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) SSO: ProShares Ultra S&P500 Trust
9) CASH
10) CASH
Here are our Top 10 Fidelity Sector Funds for May 2009
New Sells:
FBIOX: Biotechnology
1) FSPTX: Technology Portfolio
2) FSRBX: Banking
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) CASH
For the Week:
The gain on S&P 500 was its best since March 2000.
The “Buying Stampede” has driven the DJIA from 6469 on March 6th, to 8426 (up 1957 pts) in just 40 trading days.
Last week, the Federal Reserve said it would announce the results of its stress test on May 7. If the government says that banks need to raise more capital, I believe the "Sinko in Mayo" process will begin shortly after the announcement.
Oddly, sentiment is improving, and consumers are feeling better every day the market rallies, and investment portfolios come back to life. If the government announces higher capital requirements for banks, they will kill sentiment as the markets fall. Many major banks will find it very difficult to raise in today’s environment.
Economic News
-The first-quarter real GDP contracted by -6.3% in the fourth quarter of 2008. As capital spending and non-residential structures declined,consumption was up 2.2%.
-Gold
-The U.S. Dollar
Our current asset allocation is as follows;
95% Equities: (Normally 95%) Aggressive
80% Equities: (Normally 80%) Moderately Aggressive
60% Equities: (Normally 60%) Moderate
40% Equities: (Normally 40%) Moderately Conservative
20% Equities: (Normally 20%) Conservative
