Monday, December 29, 2014

Week Ahead Magazine: The Last Week Of 2014

The day after Christmas saw the S&P 500 Index hit its 52nd record close for the year. Of note this past week was the strong GDP report (third estimate) for the third quarter reported at 5%. This was higher than the 4.3% consensus estimate. A potential offset to the strength in the GDP report was the durable goods report for November. The consensus estimate was a 3.1% increase with the actual report showing a decline of .7% . Oil prices continue to be a focus and Aswath Damodaran, Professor of Finance at the Stern School of Business at NYU, wrote an good article about the potential impact to various sectors of the market as a result of the decline in oil prices. A number of the articles in this week's magazine continues to highlight the issues surrounding hte energy sector. As a final note, the Stock Trader's Almanac Blog noted the following about the current market cycle.

  • 2015 is a pre-presidential election year, the best year of the 4-year cycle. Since their last loss in 1939, the third year of the cycle is up 16.0% on average for the Dow and 16.3% for the S&P 500. Since 1971 NASDAQ averages a whopping 30.9% in the third year of the 4-year cycle.
  • It is also the fifth year of the decade, which is also the best year of the decade with only one loss in the past thirteen decades. Years ending in “5” average 28.3% for the Dow and its predecessors since 1885, with S&P 500 averaging 25.3% since 1935 and NASDAQ averaging 25.6% since 1975.
  • We are also now firmly in the sweet spot of the 4-year cycle (midterm Q4 & pre-election Q1-2). These best three quarters of the 4-year cycle have produce averaged gains of 21.5% for the Dow and 22.2% for the S&P 500 since 1950 and 34.1% for NASDAQ since 1974. 
With the market entering what has historically been a strong cycle period, the next magazine will likely focus on forecast for 2015 for what they are worth. Below is the link to this week's magazine.

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