Now that the first quarter of the year has come to an end it is time to take stock of where we are in the equity markets, where we’ve been, and consider where we’re going. The following is a recap of the quarter courtesy of Bespoke Investment Group LLC:
As shown in the chart below, the S&P 500 was down 11.7% in the first quarter of 2009. Six sectors outperformed the index, while four underperformed. The Financial sector was by far the worst performer with a decline of 29.5%. Industrials, Energy, and Utilities were the three other sectors that underperformed the market as a whole. Only one sector finished the quarter in positive territory — Technology (4%). Consumer Staples, Consumer Discretionary, Health Care, Telecom, and Materials are the other five sectors that outperformed the market.
Below we highlight the 25 best performing stocks (>$3/share) in the Russell 3,000 for the first quarter. Just 28% of stocks in the index were up for the quarter, while 2% were up more than 50%. The stocks below were all up more than 65%. Providence Service (PRSC) was up the most with a gain of 374%, followed by DuPont Fabros (DFT), Palm (PALM), and gun-maker Smith & Wesson. Other notables on the list of winners include Sprint, Whole Foods, Western Digital, and Coinstar.
Just imagine how horrible the quarter would have been but for the recent rally. What seems to be behind the wild swings is uncertainty. When the market is dropping like a rock, it is because there is uncertainty as to whether the economy will ever improve. But just the same, when the market bounces higher, it is because there is uncertainty as to whether an economic recovery is right around the corner. Thus, the rapid declines and breathtaking rallies of the past year or so are the result of investors wanting to get out of the way (or being forced to sell because of margin calls) or desiring to get in before missing out on the final bottom.
As this author has stated repeatedly, there can be no visibility in the economy until the crisis in the banking system is resolved. Although the government appears to be inching closer to dealing directly with the bank’s toxic assets and recapitalizing banks to get them healthy enough to begin lending normally again, there has been little action on that front. Further, this is a process that may take years to complete, so wild aspirations of a quick economic recovery and restoration of the stock market to its pre-crisis highs are misplaced.
There are opportunities in equities, as there are in any market. This can be seen from the list above. But finding those opportunities requires heavy research and discipline. Simply shoving one’s 401(k) in an equity index fund is likely to be a mistake. Investors will need good advice to get through these difficult times.
Speaking of investment advice, there was an excellent article in The Wall Street Journal recently, educating investors about obtaining such advice. An excerpt of the article follows with a link to the full story:
A power struggle in Washington will shape how investors get the advice they need.
On one side are stockbrokers and other securities salespeople who work for Wall Street firms, banks and insurance companies. On the other are financial planners or investment advisers who often work for themselves or smaller firms.
Heath Hinegardner
Brokers are largely regulated by the Financial Industry Regulatory Authority, which is funded by the brokerage business itself and inspects firms every one or two years. Under Finra’s rules, brokers must recommend only investments that are “suitable” for clients.
Advisers are regulated by the states or the Securities and Exchange Commission, which examines firms every six to 10 years on average. Advisers act out of “fiduciary duty,” or the obligation to put their clients’ interests first.
Most investors don’t understand this key distinction. A report by Rand Corp. last year found that 63% of investors think brokers are legally required to act in the best interest of the client; 70% believe that brokers must disclose any conflicts of interest. Advisers always have those duties, but brokers often don’t. The confusion is understandable, because a lot of stock brokers these days call themselves financial planners.
First Quarter 2009 – Is The Worst Behind Us?
Posted by Gregg Killoren on March 31, 2009
Now that the first quarter of the year has come to an end it is time to take stock of where we are in the equity markets, where we’ve been, and consider where we’re going. The following is a recap of the quarter courtesy of Bespoke Investment Group LLC:
First Quarter Sector Performance and Top Stocks
As shown in the chart below, the S&P 500 was down 11.7% in the first quarter of 2009. Six sectors outperformed the index, while four underperformed. The Financial sector was by far the worst performer with a decline of 29.5%. Industrials, Energy, and Utilities were the three other sectors that underperformed the market as a whole. Only one sector finished the quarter in positive territory — Technology (4%). Consumer Staples, Consumer Discretionary, Health Care, Telecom, and Materials are the other five sectors that outperformed the market.
Below we highlight the 25 best performing stocks (>$3/share) in the Russell 3,000 for the first quarter. Just 28% of stocks in the index were up for the quarter, while 2% were up more than 50%. The stocks below were all up more than 65%. Providence Service (PRSC) was up the most with a gain of 374%, followed by DuPont Fabros (DFT), Palm (PALM), and gun-maker Smith & Wesson. Other notables on the list of winners include Sprint, Whole Foods, Western Digital, and Coinstar.
Just imagine how horrible the quarter would have been but for the recent rally. What seems to be behind the wild swings is uncertainty. When the market is dropping like a rock, it is because there is uncertainty as to whether the economy will ever improve. But just the same, when the market bounces higher, it is because there is uncertainty as to whether an economic recovery is right around the corner. Thus, the rapid declines and breathtaking rallies of the past year or so are the result of investors wanting to get out of the way (or being forced to sell because of margin calls) or desiring to get in before missing out on the final bottom.
As this author has stated repeatedly, there can be no visibility in the economy until the crisis in the banking system is resolved. Although the government appears to be inching closer to dealing directly with the bank’s toxic assets and recapitalizing banks to get them healthy enough to begin lending normally again, there has been little action on that front. Further, this is a process that may take years to complete, so wild aspirations of a quick economic recovery and restoration of the stock market to its pre-crisis highs are misplaced.
There are opportunities in equities, as there are in any market. This can be seen from the list above. But finding those opportunities requires heavy research and discipline. Simply shoving one’s 401(k) in an equity index fund is likely to be a mistake. Investors will need good advice to get through these difficult times.
Speaking of investment advice, there was an excellent article in The Wall Street Journal recently, educating investors about obtaining such advice. An excerpt of the article follows with a link to the full story:
Read the rest here.
This entry was posted on March 31, 2009 at 7:15 pm and is filed under Economy, Investing, Market Commentary, Personal Finance, Stocks. Tagged: Economy, Investing, Market Commentary, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.