As I write this shortly after the Dow Jones Industrial Average rockets higher by nearly 500 points, or 4+%, in just one day, I think back to the concerns raised in recent client meetings about the market’s volatility. In August and September, 40% of the trading days in the S&P 500 Index saw daily price swings of plus or minus 2%. This level of volatility was last seen in the early 1930’s.
Given all the negative news one is hearing and reading about, I expected investor bullish sentiment tobe much worse than actually reported by AAII. Much of the European news is negative and today, at the close of trading, the Dow Jones Industrial Average reported its worst Thanksgiving week performance (-4.8%) since the markets began observing the Thanksgiving holiday in 1942....
The Euro Crisis: Revisiting Pitfalls Of The Gold Standard
The current issues impacting the Eurozone countries harkens back to the problems with the gold standard in the 1930s. Many believe the U.S. depression in the 1930s was worsened by the fact the U.S. and many other countries, were on the gold standard. With the gold standard exchange rates were fixed i.e., depreciating ones currency was not an option.
One index measure investors review to gauge the level of fear in the market is the VIX Index. Currently, the VIX is trading at 31.78, down a little over 1 point today. High levels in the VIX translate into a fearful market and can be indicative of a short term market bottoms. In the early part of 2010, the market's first encounter with the Euro crisis, the VIX hit 48.
Dividend Growth Equities Attractive At This Point In The Market Cycle
For dividend investors, one of the keys is to invest in those companies that have a sufficiently high dividend yield that is sustainable and that have high dividend growth rates. Investors focusing only on high yielding stocks run the risk of investing in a company that can not sustain its dividend and then face a dividend cut.
Third Quarter Earnings Strong, But Q4 Growth Revised Lower
For the third quarter of 2011, 454 companies in the S&P 500 have reported results with 70% reporting earnings above expectations. The estimated earnings growth rate for Q3 is 17.7% according to Thomson Reuters (see chart). Companies are expressing less optimism about fourth quarter earnings though.