Well it looks like we are riding a hangover from all of the Thanksgiving celebrations. The Market has now pieced together two losing sessions with some heavy selling pressure. Multiple sources of negativity still await. Could the end of the great 5 plus year bull market be on the horizon? I don't know if a bear market approaches, but I do see a 6% to 10% pull back in coming in the S&P 500 SPDR ETF (SPY) and perhaps even more so in the Russell 2000 index (IWM). Why do I see this as the case? The Fed is eventually going to pull back and the fear of the taper is going to pressure shares. If taper is actually announced before year end or in January, the market reaction could be ugly. When the inevitable correction begins, there are many approaches investors can take to position accordingly for the market
With a year-to-date gain of over 26%, the S&P 500 is having a great year. As impressive as these gains are, they pale in comparison to the 34% gain in the small cap Russell 2000. In fact, the Russell 2000 has not been up this much through the end of November since 2003. So what can we expect for the last month of the year?
The table below lists the historical return of the Russell
By Tom Smith
In the first decade of this century the enormous growth seen in China had a profound impact on our markets. When better-than-expected growth was reported in China it did have a positive impact on certain companies and sectors. Clearly, as China built out their infrastructure heavy equipment sales, for example, surged. The impact from growth in China led to a decade long advance in commodities across the board.
A negative aspect to this spike in growth was the higher input costs for consumers and businesses. Higher input costs hurt cash flows for companies and families. As profit margins come under pressure earnings growth slows and P/E multiples contract. All these factor lead to struggling markets. This put the market under pressure for several years without even getting into the mortgage meltdown.
I have cautioned many times this year about not trying to win the last battle. The