The S&P 500 (SPY) has fallen 10% from its high on April 2, and is now up 1.6% for the year (The Dow is down (0.8)% and the NASDAQ is up 5.5%). This has been driven by a combination of concerns about Europe, disappointing economic data in almost every major country in the world (especially the U.S., China, Germany, UK, Spain, France, India and Brazil) along with increasing awareness of higher taxes and mandated spending cuts in the U.S. starting January 1, 2013 (which may be addressed but not until after the elections).
Over the prior 12 years (2000 to 2011) and 47 of the past 50 years at some point during the year the S&P 500 has closed lower than when it started the year. In the 2000 to 2011 time frame the range is (2)% in 2006 to (50%) in 2008 (see table below).
Note that of the past 50 years, 16 of the lower closes were in January, so if you remove them - since many were in the first week or two - it makes the analysis less skewed since 31 of 50 years the S&P 500 closed lower than at the start of the year.
From an article in Saturday's Wall Street Journalthe S&P 500's June quarter earnings are projected to increase 4.3% per FactSet. However, if Bank of America's (BAC) earnings are removed the earnings growth rate is projected to fall (0.5)%. Also it would not surprise me that if Apple's (AAPL) earnings are removed that the S&P 500's earnings would decrease between (2.0)% and (3.0)%. Obviously if June quarter's earnings growth is negative this would not be good for the market.
While it is very difficult to time the market and a lot of these negatives have already impacted stocks I believe some additional caution is warranted.
I do not believe the market has fully discounted
- Worldwide growth continuing to deteriorate
- Bank runs accelerating in Europe
- Rhetoric about Greece exiting the euro increasing (note upcoming June 17 elections)
- Two trade insurers won't offer new insurance for exporters shipping goods to Greece
- The problems in Spain continue to compound or
- Something like Cypress needing bailout funds is required
- A European Commission report said Cypress' economy is "Very Seriously Imbalanced" (also Spain's)
Below is a table of the past 50 years of trading in the S&P 500 showing the prior year's close, its low close during the year, which month it occurred and the percentage delta.
S&P 500 | Prior Year | Low | Low | % Below |
Year | Dec. 31 | Intra-day | Month | Start of Year |
2012 | 1257.60 | June 1 | 1.6% | |
2011 | 1257.64 | 1074.77 | Oct. | (15)% |
2010 | 1115.10 | 1010.91 | July | (9)% |
2009 | 903.25 | 666.79 | March | (26)% |
2008 | 1468.36 | 741.02 | Nov. | (50)% |
2007 | 1418.30 | 1363.98 | March | (4)% |
2006 | 1248.29 | 1219.29 | June | (2)% |
2005 | 1211.92 | 1136.15 | April | (6)% |
2004 | 1111.92 | 1060.72 | August | (5)% |
2003 | 879.82 | 788.90 | March | (10)% |
2002 | 1148.08 | 768.63 | Oct. | (33)% |
2001 | 1320.38 | 944.75 | Sept. | (28)% |
2000 | 1469.25 | 1254.07 | Dec. | (15)% |
1999 | 1229.23 | 1205.46 | Jan. | (2)% |
1998 | 970.43 | 912.83 | Jan. | (6)% |
1997 | 740.74 | 729.55 | Jan. | (2)% |
1996 | 615.93 | 597.29 | Jan. | (3)% |
1995 | 459.27 | 457.20 | Jan. | (0)% |
1994 | 466.45 | 435.86 | April | (7)% |
1993 | 435.71 | 426.88 | Jan. | (2)% |
1992 | 417.09 | 392.41 | April | (6)% |
1991 | 330.22 | 309.35 | Jan. | (6)% |
1990 | 353.40 | 294.51 | Oct. | (17)% |
1989 | 277.72 | 273.81 | Jan. | (1)% |
1988 | 247.08 | 240.17 | Jan. | (3)% |
1987 | 242.17 | 216.46 | Oct. | (11)% |
1986 | 211.28 | 202.60 | Jan. | (4)% |
1985 | 167.24 | 163.36 | Jan. | (2)% |
1984 | 164.93 | 147.26 | July | (11)% |
1983 | 140.64 | 138.08 | Jan. | (2)% |
1982 | 122.55 | 102.20 | August | (17)% |
1981 | 135.76 | 123.28 | Oct. | (9)% |
1980 | 107.94 | 94.23 | March | (13)% |
1979 | 96.11 | 96.73 | Jan. | 1% |
1978 | 95.10 | 86.45 | March | (9)% |
1977 | 107.46 | 90.01 | Nov. | (16)% |
1976 | 90.19 | 90.90 | Jan. | 1% |
1975 | 68.56 | 68.65 | Jan. | 0% |
1974 | 97.55 | 60.96 | Oct. | (38)% |
1973 | 118.05 | 91.05 | Dec. | (23)% |
1972 | 102.09 | 100.87 | Jan. | (1)% |
1971 | 92.15 | 89.34 | Nov. | (3)% |
1970 | 92.06 | 68.61 | May | (25)% |
1969 | 103.86 | 88.04 | July | (15)% |
1968 | 96.47 | 86.73 | Feb. | (10)% |
1967 | 80.33 | 79.43 | Jan. | (1)% |
1966 | 92.43 | 72.28 | Oct. | (22)% |
1965 | 84.75 | 80.73 | June | (5)% |
1964 | 75.02 | 74.82 | Jan. | (0)% |
1963 | 63.10 | 62.32 | Jan. | (1)% |
1962 | 71.55 | 51.35 | June | (28)% |
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.
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