The markets rallied this week, reaching new yearly highs for the overall market, and record highs for the Dow. The rally was fueled by positive economic data that has been released this week and last week as well. The hope of a “Goldilocks” economy is becoming harder to disprove as both market conditions and economic data is pointing in that direction.
This week’s snapshot:
DJIA- Up 138.03 or 1.12%
S&P 500- Up 17.25 or 1.22%
NASDAQ- Up 19.84 or 0.81%
The Dow has now risen 16.1% for 2006, and has created significantly attractive returns for its investors. The rally this week was fueled by a few economic indicators that where in favor for a continued market increase. Firstly, on Friday of this week the November consumer price inflation number was released, coming in flat for the month, which eases fears of inflation. Last Friday the Labor Department released their employment report that was more attractive than analysts had predicted which eased fears of a recession in the near future. The Federal Reserve also hinted that they might not be as worried about inflation as they had been prior. This opens up the possibility of interest rate cuts in the first half of 2007. Finally, strong retail sales reports where released which eased fears that the consumer was tightening their wallets.
Oil was up this week rising $1.40 a barrel, or 2.26%. Crude oil closed above $60.00 a barrel at $63.43.
Overall, 2006 has continued to prove to be an excellent year for investors as returns have been robust and unexpected to a certain extent. Pessimists will argue that 2007 will be a correction or even worse recession (bear) market and they do have factual data to back up their position. As value investors, however, we can generate attractive returns in either a bull or bear market. While we are pleased with the current returns our positions have accomplished, we are skeptical knowing that all good things must eventually slow down. Until next week have a productive and profitable week!