Skip to main content

Markets in Sweet Spot ?

Markets welcomed new year with enthusiasm with first day DOW going up by 150+ points and S&P climbing up by 2.6% in first week itself. My recommendations in first post of 2010 did even better - they were up by nearly 17% (assuming you had bought on first trading day of year). One would be excited to get such return in a year. Now that these picks have returned 17% in one week, what should one do ?

To answer that, let's look at where markets and economy is heading. I think markets have found a nice sweet spot. Here are positives which are going for markets:
  • Economy is coming out of recession
  • Interest rates would remain low for quite some time
  • Inflation is till muted
  • Companies would have top-line growth due to increased consumer demand, inventory buildout and exports
  • Companies would have bottom-line growth since they have been very careful in increasing headcount or other expenses
  • 60% of stimulus funds are going to be spent in 2010
  • No significant profit pre-announcements before earnings season starts on Monday
  • Pace of GDP growth for emerging countries seem to be picking up
So there are quite a few positive factors, let's not ignore some of the speed-bumps:
  • Unemployment still at 10%
  • Commercial real estate market still faces decreased valuation causing potential trouble for banks
  • Once stimulus spending is done, unless private sector demand picks up, could slow down recovery
  • With commodities shooting up, inflation is around the corner
  • If expectations of inflation picks up, Fed would have to raise interest rates sooner than markets would like
  • To burst the asset bubbles in emerging countries, governments would rein in spending and raise interest rates. We had already seen this in Australia, Israel and now China
Evaluating both +ve and -ve factors, my prediction is that markets would be trending up potentially reaching 11000 in next few weeks on positive earnings momentum. However what happens after Mar 2010 would be another story for another blog !

As far individual stock recommendations, I would still recommend 10 picks of last week. After all they cumulatively still have 30% upside left.

Good luck investing !

/Shyam

Comments

Post a Comment

Popular posts from this blog

2025 = Is it going to be 1997 or 2000?

Happy Holidays... After 5 months of hibernation with no real reason than writing block, I decided to use quiet morning of Christmas day to start writing again. Lot has happened in last 5 months - in particular release of Animal Spirits with Fed starting interest rate reduction cycle and historic victory of President Trump for 2nd term. As the year turns into 2025 and stock markets at all time high, one would wonder, what's next?  To answer this, one needs to look back at 1920s and 1990s to give us some context on where markets may be headed. 1920s saw invention of televisions, radio, wider adoption of cars, vacuums, penicillin and many other which we consider household items now. These inventions created roaring 20s with markets going up by 500% eventually leading to crash of 1929. However during mid-20s, markets keep going up due to excitement of these inventions and end of World War-1 and Spanish Flu Pandemic. 1990s also saw many inventions - the key being launch of Netscape in 1...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more

The Politics and Gamesmanship of TikTok!

TikTok is less than 3 hours from going dark on USA's east coast if TikTok owner Bytedance (and Chinese Government) follows thru its "bluff" to honor the law " Protecting Americans from Foreign Adversary Controlled Applications Act" which goes into effect on Jan 19, 2025. And suddenly there is lots of politics and gamesmanship around TikTok.. Let's look at the players and their positions US Congress: The " TikTok Ban" law was passed by congress with bipartisan support and coincidently it goes into effect one day before new administration takes charge. Everyone knew the exact date and time of oath taking ceremony of new President...but maybe the congress did not think that there would be change of President and did not bother to put effective date post new government taking charge...that created a window of 36 hours of "law being in effect" unless... President Biden: Biden himself did not think that he won't be President for 2nd term. S...
Post a Comment
Read more