Market Summary

Happy New Year everyone and welcome to 2009. Many may say good riddance to 2008 as it was the worst year in the market in recent memory. There is an expectation among some market observers for a poor first half of 2009 and a pick up in the second half to finish the year up instead of down. Who knows? And that is too far out for me. But it is nice to know some gurus are optimistic and predict a 15% advance for the year which would take the S&P 500 to about 1070. We will just have to wait and see.

The January effect is the tendency of the stock market to rise between December 31 and the end of the first week in January. There are many theories for why this happens, the main one being that it occurs because many investors choose to sell some of their stock right before the end of the year in order to claim a capital loss for tax purposes. Once the tax calendar rolls over to a new year on January 1st these same investors quickly reinvest their money in the market, causing stock prices to rise. The January effect has been observed numerous times throughout history, though the first week of January 2008 was a notable exception. The January Barometer is the first 5 days of the new year and the old saying is as goes January so goes the rest of the year. Again, we will have to wait and see.

Real estate has been the crux of the economic downturn, the crash in the stock market, and the financial crisis. It is reasonable to assume that the recovery in real estate will be necessary for a recovery in the stock market. However, the normal course is for real estate which follows an 18 year cycle to decline following a recession and a rise in unemployment. With high unemployment foreclosures increase. This time the bubble in real estate popped before the recession. With rising unemployment we should see further declines in home prices as foreclosures increase. Home prices will need to stabilize for a sustainable recovery. We have a rough road ahead.

Below is the first weekly Market Summary table for 2009 with 0% gains for the year so I have sorted by the 12 month column. When looking at the near term performance Oil has made a 22.65% gain in the last week. This was the result of the conflict in Israel and Gaza. Also, oil prices had become so low they were do for a bounce. What other markets will lead the way up in the near term? Keeping an eye on these one, two, and four week columns may help us spot the leaders. Click on table to enlarge.