Home » Finance Articles » Sloy, Dahl & Holst, Inc. - 2011 3rd Quarter Market Review
Sloy, Dahl & Holst, Inc. - 2011 3rd Quarter Market Review
Ron Sloy provides SDH-Inc.'s 2011 quarterly review. This review examines the performance of the stock market over the past 3 months and show insight into the next 3 months.
October 15, 2011 /Finance PR News/ -- Back in June our newsletter suggested that it would be a very volatile summer, which proved to be the case.
PORTLAND, OR, Over the course of the last seven months we've experienced a handful of major events which have made 2011 very challenging. First, in March, Japan suffered a devastating earthquake and tsunami. The stock markets both dropped and recovered very quickly during the following weeks, but the long term effects of an event like that are significant. In July, for the first time in history, the U.S. credit rating was downgraded. Whether it should have been or not is debatable, but one of the results of this event was additional fear and uncertainty for the majority of investors. The downgrade most likely could have been avoided with more swift and decisive action out of Washington, but our current political situation wouldn't allow for it. This ongoing battle between political parties isn't new, but it continues to harm investors and financial markets in a time when uncertainty is one of the last things we need. In addition to all of these, and probably the most significant for 2011, the European debt crisis continues to drag on. Despite great earnings reports over the last few quarters, this continues to be the primary dark cloud holding us back. All of these factored in to the tremendous volatility we have experienced in the financial markets. However, we still feel confident in most of our previous year-end forecasts.
As you're aware, our previous forecast for the Dow at year-end was 13,500 or higher. We are still confident that we will approach these levels by year-end, if not shortly after, even with all of the difficulties we've experienced this year. We had suggested that oil would close the year at $110 per barrel. We topped that price target earlier in the year at $114, on the heels of the disaster in Japan. However, because of the global slowdown, we now have adjusted our year-end price target to $95 - $100 per barrel. This still validates our overweight in energy, and we believe it is a very strong position to hold as the global economies continue to recover. Nine out of 10 bond traders had the ten year T-bill at a 4.5% yield by year-end, as did we. Even bond guru Bill Gross (who manages PIMCO, the largest bond fund in the world) sold his U.S. Treasuries, because he felt interest rates were going to increase. We all missed the mark on this, as the Federal Reserve has very publically stated their plan to hold these rates as low as they possibly can until at least early 2013. The current yield on the 10-year T-bill is approximately 2%, and with the Federal Reserve continuing to buy our long-term debt to stimulate our economy we do not see this yield any higher than 2.5% by year-end. Additionally, our previous forecast was that Apple Computer would close the year at $400. We have actually increased that price target to $450 per share.
Let's talk about what we do know, and what we see happening between now and year-end. On October 4, 2011, the markets officially crossed into what is considered "Bear Market" territory, which is a drop of 20% or more from this year's market high. Interestingly enough, this was a retest of the August 9th lows of approximately 10,400 on the Dow. Since that retest, the market has moved approximately 1,000 points higher. It is our belief that we saw the low for the year on October 4, 2011 and we'll continue higher between now and the end of the year. Here are some data points to consider:
• Historically, the following 30 days after the market has crossed into bear market territory, and bounced, the market rallies 15%; 90 days later a 25% rally, and six months later a 35% rally.
• The S&P 500 is currently selling at 11 times earnings, which is a 20 year low.
• Not once since 1940, in the third year of a presidential term, has the market ended the year negative.
• The economic data released last week, i.e. construction spending and ISM (Institute for Supply Management) both indicated that the economy is doing better than most people think.
• Last quarter the S&P 500, was negative approximately 14%. Whenever the return on the S&P 500 has dropped more than 10% in a quarter, the average return in the following quarter is positive 8.4%.
• November, December and January are the three best months for the markets.
The European credit crisis seems to be coming to a resolution, which will be a very positive catalyst for the markets to head higher.
In summary, don't panic, be patient, and remember that volatility creates opportunity. Again, from October 4th to October 11th, the market has moved over 1,000 points, (which is not reflected in the enclosed report). The leading sectors, in order, have been: Energy, Financials, Technology and Real Estate. These are four sectors that we are over weighted in, and we are extremely confident about the value of these investments for the long term investor.
Please don't hesitate to contact us with any questions. Happy holidays to you and your families.
Ron Sloy, CFP
Sloy, Dahl & Holst, Inc.
Sloy, Dahl & Holst, Inc. is a registered, full-service financial advisory firm with over $250 million under management. The company was founded in 1986 by certified financial planners Ronald J. Sloy, Tony Dahl & Jim Holst, three enterprising young men who dreamed of offering their clients better solutions than the in-house investment products available with their former employer. You can reach us at http://www.sdh-inc.com or at (503) 248-9800
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Press Release Contact Information:
Ron Sloy
Sloy, Dahl & Holst, Inc
Certified Financial Planner
1230 SW 1st Avenue, Suite 310
Portland, OR
USA 97204
Voice: 503-248-9800
Fax: 503-248-7088
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