Courtesy of David Brown, Chief Market Strategist, Sabrient
Despite last week’s little rally, April showers have dampened market. While it didn’t build into a torrential downpour, it steadily showered investors with worse-than-expected economic data, including last week’s dreadful Durable Goods Report (-4.2% compared to last month’s +1.9%), continued but minor increases in initial jobless claims throughout April, and a disappointing initial Q1 estimate of GDP (+2.2% compared the previous quarter’s +3.0%).
Europe didn’t add any sunshine during April due to increasing worries over Spain, the other PIIGS, and last week’s unanticipated resignation of the Dutch Prime Minister. Today’s Personal Spending increase of only +0.3%, versus an expected +0.5% and last month’s +0.9%, drowned a more favorable yet anemic Personal Income Report; and the Chicago PMI of 56.2, compared with last month’s 62.2, didn’t help. Will reports later this week from Construction Spending, Auto and Truck Sales, both ISM Indices, and Factory Orders let a little sunshine through or even bring May flowers?
Unsavory investigations swirling around giants such as Walmart de Mexico; Apple (AAPL), with the spotlight on the poor working conditions of its Chinese manufacturing partners; and a number of new, nasty litigations between tech stalwarts, including Google (GOOG) and Oracle (ORCL), hasn’t generated positive reviews from Wall Street Analysts; nor did the media’s persistent, unfavorable reviews of Wall Street itself or poor reports from Goldman Sachs (GS), among others.
Will the showers turn into thunderstorms in May? Will new investigations and lawsuits follow as the lawyers gleefully line up to sue or defend? Or will the showers give way to sunlight if positive earnings surprises continue to outpace negative ones? If the latter happens, investors will surely realize that, despite its warts, the market is still the only place to generate adequate returns in the face of bond inflation risk and a real estate market sagging under an overbuilt burden of everything from houses to office buildings to shopping malls.
Gold and silver may still have some shine left, but the risk/reward ratio of shiny metals has certainly reached lofty heights while stock valuations remain quite reasonable against historic ranges (cheap, in fact, in various pockets).
For those of us who are still finding nuggets in the “stock” piles (see today’s ideas) and attracted by shorting or purchasing puts in the European ETF hedges that include EWP, VGK or IEV, we should probably focus our…