The Dean’s Market Outlook

The Dean’s Market Outlook

October 20th, 2009 at 8:17 am Posted by The Dean

Dear Students
As always, The Dean’s watching the wide world of stocks to get an idea of what’s going on in the markets to find opportunities that are hidden or underdisocovered. After last week’s news of JPMorgan Chase (NYSE: JPM) released third quarter profits of $3.6 billion, many are optimistic that positive numbers will continue to light up across the board.
Other news of profits have come from Goldman Sachs (NYSE: GS) who also saw profits of more than $3 billion in the past few months. But The Dean knows that these companies are making their money in investment banking—not just retail banking, late mortgage payments and other fees. This is why The Dean believes many are not completely confident that Wall Street and Main Street are out of the woods yet.
Today, the Wall Street Journal suggests that housing is keeping down continuing earnings in the overall market, as record numbers of foreclosures and late mortgage payments have been reported. Nevertheless, the Commerce Department says that home building increased in September and accounted for higher sales than 2008. But this increase was smaller than anticipated by the government who has offered an $8,000 tax credit for first time homebuyers to increase demand.
The Dean wants everyone to remember that Cash for Clunkers and a federal housing tax credit is a far cry from a family’s or individual’s ability to afford to pay for such things.
If this is true, why has the Dow been holding up around 10,000? The Dean believes this is simple—those willing to incest, and are more loss tolerant, are coming to the stock market to see better returns than bonds, CDs and money markets. In fact, Tyler Vernon, Chief Investment Officer at Biltmore Capital suggests that people are “getting sick of getting zero percent returns on money market accounts and are wanting to take on more risk.”
CNN Money reports that, in general, stocks have seen gains for 7 months, with the S&P 500 up 62.3% and the Dow up more than 50% since their low points in March. Although these points are believed to be pivotal, and the Dow around 10,000 may just be a psychological benchmark for some, The Dean believes that many are hesitant to dive back in.
Evidence of The Dean’s opinion can be found in investors dipping their toes into brand names like Apple (NASDAQ: AAPL), Pfizer (NYSE: PFE) and Coca-Cola (NYSE: KO).
The Dean doesn’t foresee too much movement on the day because he feels that many are waiting for the big players of the S&P 500 to report their third quarter results this week. Optimism and market trends will only get investors as far as their risk tolerance is high and pockets are deep.
pockets are deep.
Happy Trading, The Dean