Stock Market Commentary
For the week of November 3, 2008
The Dow had its best week in 34 years last week, gaining 11.31 percent. On Tuesday, the Dow recorded its second highest daily gain on record, jumping 889 points in anticipation of the Federal Reserve rate cut. Wednesday the Fed came through with half a percentage point cut, lowering to 1 percent the rate that banks charge on overnight loans. The Dow ended the week at 9,325.01, and the S&P gained 10.53 percent to close the week at 968.75. The NASDAQ rose 10.88 percent to finish the week at 1,720.95.
More Planes, Autos – U.S. orders for big-ticket manufactured items experienced its largest gain in three months during September on demand for airplanes and cars. Orders had fallen by 5.5 percent in August, the largest decline in two years. The September gain was 0.8 percent.
Millions to Billions – Trading volume on the New York Stock Exchange first exceeded 10 million shares in a single day during the 1929 crash. Trading volume on the exchange on Friday, Oct. 10, 2008, was 11.2 billion shares or more than a 1,000 times increase from the 1929 level (Source: NYSE, BTN Research).
Jobless – Understanding the unemployment rate in the U.S. during the Great Depression reached 25 percent. Even as the decade of the 1930s was ending, the nation’s unemployment rate was still close to 15 percent. The unemployment rate in the U.S. is 6.1 percent today (Source: Wall Street Journal, Newsweek, Department of Labor, BTN Research).
How Long Will It Last – Of the eight bear markets for the S&P 500 since 1960 (i.e., a peak to trough drop of at least 20 percent), the average length of time from the index’s bull market closing high to its bear market closing low has been 13½ months. The index’s most recent bull market closing high (set on Oct. 9, 2007) occurred 12½ months ago (Source: BTN Research).
College Climbing – College costs have had little relief from the economic downturn, posting a 6.4 percent jump at state universities this fall and a 5.9 percent increase at private colleges, according to the College Board.
Fewer Turkey Flights – U.S. airlines will provide nearly 3,000 fewer daily domestic flights during the Thanksgiving season, meaning fewer choices, fuller planes and higher fares for travelers. The 11 percent drop in flights means 2.6 million fewer seats between Nov. 20 and Nov. 30, according to the Official Airline Guide (OAG). High fuel prices led to many of the cuts.
WEEKLY FOCUS – Tax Season Preparations
The past several years have given us record increases in the major stock markets, extending one of the longest bull markets in our nation’s history. This year, we experienced the inevitable – a market correction that has left many of us frustrated and concerned. We understand that, face with portfolio declines, it may be difficult to see any positives. The silver lining, however, may be in your 2008 tax return.
As the end of the year approaches, you and your tax advisor will be looking at your earned income, capital gains and losses (realized and unrealized) and other financial information as you begin to prepare your 2008 return. A simultaneous review of your investment portfolio may reveal strategies you can use to reduce your tax liability. Some of these strategies may have a direct impact this year, while others may be implemented over the next several years, depending on Internal Revenue Service rules.
We can work with you and your tax advisor to conduct a thorough review of your options. While in a declining market we do not recommend any extreme changes to your investments, some small adjustments may be advisable. Gains from selling certain positions to rebalance your portfolio may be offset by losses you’ve experienced elsewhere.
Let’s get together with your tax advisor to explore strategies and possibilities to strengthen your portfolio in the current market. Please contact us at your earliest convenience to schedule an appointment. With the press of activities as we enter the holiday season, we will want to allow plenty of time to implement any changes you choose to make.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Written by Securities America. SAI#289443