The S&P 500 closed up 2.8% for the month and has gained 26.6% before dividends year to date. Stocks again beat a tired bond market for the month and year to date.
The stock market has risen nearly 50% without a 10% correction. This is a very unusual situation. It speaks volumes to the fact that the global Central banks have kept interest rates at historic lows.
U.S. companies are making historic earnings with record profit margins and record levels of cash on their balance sheets.
The Morgan Stanley Global Stock Market index is up about 15% year to date while Emerging markets are showing a negative 8% return.
Capital spending has yet to kick in during this abnormally slow recovery. U.S. and European CEO's remain cautious about the pace of recovery, regulation, and tax rates. The Consumer remains wary of taking on more debt.
In this environment companies buy back shares and raise dividends helping to lift the markets.
Unfortunately Washington policies have done nothing to help raise wages for the middle class or help the economy get to back 2007 employment levels.
We expect market trends to remain in place through December. Tax loss selling will be featured in a month when the market typically rises 1.5%.
In 2014 we expect additional loses in long term bond investments while global stock markets outperform both bonds and commodities. At 15.6 times forward earning the S&P 500 P/E ratio is in neutral territory.
Inventors are likely to make more positive allocations to stocks rather than bonds after they review their 2013 returns.
The Federal Reserve is expected to remain in "ease mode" long after tapering their bond buying program, likely in March 2014. We do not expect any important legislation out of Washington until after the November 2014 midterm elections nor do we expect another government shutdown or debt ceiling impasse.
As always your questions and comments are welcome.
Best wishes for a Happy Holiday Season.
Doug
December 5, 2013
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