There is currently an inverse relationship between the dollar and the stock market. When the dollar rises the market falls. The opposite is true when the dollar falls. There is also talk that a strengthening dollar will also put the U.S. back in recession. While it is true that a rising dollar hurts exports, it is wrong to conclude that a continually falling dollar is good for our country.
Yes, there are pluses from a declining dollar, but the country won’t benefit and you and I won’t be well served over the long term. I am not aware of a single instance where a country’s declining currency led to rising standards of living and sustainable economic growth. On the contrary, capital flows to countries with economic growth and relatively low taxes, and investors and foreign businesses buy that country’s currency, pushing it up and depressing the one they’re selling. Capital goes where it is treated best.
Tuesday, February 16, 2010
Wednesday, January 27, 2010
Market History
Because of two bear markets, the 2000-09 decade was the market’s worst performer, surpassing the miserable 1930s. Despite this, the market ended on a high note with a dramatic turnaround from the 2007-09 bear market.
The turnaround is stunning. Emerging market stocks had their worst year on record in 2008 (down 53%) and their best year on record in 2009 (up 79%). High yield corporate bonds had their worst year on record in 2008 (down 26%) and their best year on record in 2009 (up 58%).
Compared with 13 bear market recoveries since 1929, the 2009 stock market rebound is one of the most robust ever. The S&P 500’s 65% rise from March 9 to December 31, 2009, is more than a third higher than the average 46% rebound in the first year of new bull markets. The 2009 rally even beats the average two-year return of 57% in prior bull market recoveries.
Despite the 2009 rally, the S&P 500 remains 29% below its level prior to the start of the bear market. That is similar to prior large bear markets. A year after the 1937-1942 downturn, the S&P 500 was still 39% below its pre-crash high. A year after the 1973-74 bear market, the S&P was down 29% from its prior high.
No one knows what will happen in 2010 and past performance does not guarantee future results. But historically, in 12 out of 13 bear-bull cycles, gains continued during the second year of the recovery, just at a slower pace. Let’s hope so.
The turnaround is stunning. Emerging market stocks had their worst year on record in 2008 (down 53%) and their best year on record in 2009 (up 79%). High yield corporate bonds had their worst year on record in 2008 (down 26%) and their best year on record in 2009 (up 58%).
Compared with 13 bear market recoveries since 1929, the 2009 stock market rebound is one of the most robust ever. The S&P 500’s 65% rise from March 9 to December 31, 2009, is more than a third higher than the average 46% rebound in the first year of new bull markets. The 2009 rally even beats the average two-year return of 57% in prior bull market recoveries.
Despite the 2009 rally, the S&P 500 remains 29% below its level prior to the start of the bear market. That is similar to prior large bear markets. A year after the 1937-1942 downturn, the S&P 500 was still 39% below its pre-crash high. A year after the 1973-74 bear market, the S&P was down 29% from its prior high.
No one knows what will happen in 2010 and past performance does not guarantee future results. But historically, in 12 out of 13 bear-bull cycles, gains continued during the second year of the recovery, just at a slower pace. Let’s hope so.
Monday, January 4, 2010
Independent Firms
Here is an interesting Wall Street Journal article on the turmoil within the big name brokerage firms. Brokers are switching from firm to firm, and many are leaving to use our independent model:
http://online.wsj.com/article/SB126256739671014281.html
I especially like the Morgan Stanley Smith Barney spokesman that says, “The majority of departures have been people with below-average revenue production.” Keep in mind they are talking about their own revenue instead of how well their clients are doing. With these firms, it’s all about commissions.
Independent firms like our own don't have a conflict of interest. We don't make money from trading commissions. Our fee-only system is based on assets under management, so the more we grow client portfolios the more we (and our clients) are rewarded.
David Vomund
http://online.wsj.com/article/SB126256739671014281.html
I especially like the Morgan Stanley Smith Barney spokesman that says, “The majority of departures have been people with below-average revenue production.” Keep in mind they are talking about their own revenue instead of how well their clients are doing. With these firms, it’s all about commissions.
Independent firms like our own don't have a conflict of interest. We don't make money from trading commissions. Our fee-only system is based on assets under management, so the more we grow client portfolios the more we (and our clients) are rewarded.
David Vomund
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