** Don’t Hold Your Breath for 2008 Year-end Rally — by Inya Ivkovic, MA - Profit Confidential
Historically speaking, the month of December is usually the time for stocks to rally. It is the time when investors are flush with year-end bonuses and holiday spirit, generally feeling very optimistic about what the New Year may bring. But, judging by the brutal selloffs across the board and around the globe the first day of December 2008, things are radically different this time around. The credit and financial crisis and the finally admitted recession in the U.S. are here to flat-line anything that might have had a pulse in North America, effectively killing the year-end rally to a point beyond resuscitation.
While the last week of November brought a little glimmer of hope, the frail state of investors’ nerves sent the world markets into another nauseating downward spiral. To illustrate, crude oil dropped below $50.00 a barrel. Canada’s S&P/TSX Composite had its worst performance since the Black Monday of 1987, plummeting 9.3%. Wall Street also had a dismal day of performance, dropping 7.7%.
It seems that any rally, regardless of how miniscule, cannot go unpunished in the current investment environment. Investors are out to squeeze as much juice out of the market as they can, to the extent that it is not just beaten and battered, but it appears it may soon be rendered barren, too. I honestly haven’t seen something like this ever and, after talking to people who have been on the Street much longer than me, nothing like this has been seen in at least the last three decades.
The National Bureau of Economic Research, which is a private organization responsible for monitoring and dating business cycles, announced this week for the first time that the U.S. economy has been in recession since last December (duh!). This would mean that the recession of 2007-2008 has already been longer than the downturns of 1990-1992 and 2001, as each of these bouts of recessionary pressures lasted no more than eight months. Worse yet, even after a year, there are no fundamental signals that the economy is on the mend. There’s no other way of putting it — it is a dismal state of affairs, economic and otherwise.
Looking for the silver lining — and it has almost become an exercise in futility ever since the subprime mess delivered the first punch — given the extreme volatility and deteriorating values, some investors might find certain market segments attractive and potentially even turn around the overall sentiment. An encouraging example was the S&P 500 the last week of November, which increased 19%, having the best week since 1933.
On the other hand, although December has been historically a great month for stocks, there are new, day-to-day realities that are more than likely to shackle this year-end rally. Most financial firms are foregoing holiday bonuses on account of the omnipresent economic gloom. This has been the usual breeding ground for year-end rallies, but it is simply not likely to pan out this time.
Profit Confidential
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About the author
Inya Ivkovic, BA, MA, Senior Editor at Lombardi
Financial, is the editor of Explosive Mine Stocks, Bio-Tech Breakthroughs and Payload Stocks.
Inya is co-author of The Revenge to Riches Strategy: How
You Can Profit from the Secret Greenspan Plan. Prior
to joining Lombardi, Inya held several positions with large
North American financial institutions, and has been an academic
specialist for a securities institute, a trader, and an investment
advisor. Inya’s diverse market background, coupled with
a passion for stocks, delivers an institutional perspective
to Lombardi Financial readers.
Tags: black monday, bouts, business cycles, crude oil, different this time, dismal day, downward spiral, eight months, financial crisis, glimmer of hope, holiday spirit, investment environment, last three decades, national bureau of economic research, private organization, recession, resuscitation, selloffs, tsx composite, world markets