Stocks are expected to start the recovery process in 2009, but volatility will remain with a big question mark hanging over corporate health.
By David Goldman, CNNMoney.com staff writer
December 31, CNN
NEW YORK (CNNMoney.com) -- As 2008 comes to a close and stocks mark their worst year ever, 2009 will be the start of a very slow and very painful recovery.
Investors should brace for wild market swings as companies and the economy struggle to rebound. This past year was marred by horrid corporate results, record high oil and gas prices, dismal housing news and a full-blown shakeup on Wall Street.
"A fair amount of damage has been done, and earnings needs to stabilize first," said Tobias Levkovich, chief investment strategist for Citigroup. "Before the patient gets better, let's make sure his condition doesn't worsen."
On many days, analysts predict markets could tumble on poor corporate earnings and sour economic news. But optimism about the new administration and apparent success of government interventions will help stocks skyrocket on other days.
That sounds just like 2008, which witnessed four of the five worst market days ever in the Dow Jones industrial average - but also the three largest increases.
2009 may be better, but stocks won't rise in a straight line to recovery. A majority of analysts expect that in the first months of the year, the S&P 500 index will test its 2008 low of 752, set on Nov. 20, even though the market has recovered more than 16% since then.
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photo by Getty Images
The Fannie/Freddie takeover has made some pros more optimistic, but individuals may want to think twice about jumping back in
By Ben Steverman
September 9, Business Week
It wasn't hard to find skeptics on Wall Street on Sept. 8, the day after the federal government's weekend takeover of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).
Yes, some investors were reassured by the bold, risky move. They hope it hastens the end of the yearlong financial crisis. The stock market, and financial stocks particularly, moved higher on Sept. 8 (with the notable exceptions of Fannie and Freddie, each of which plunged to below $1).
Yet with a range of problems hanging over America's economy and housing and mortgage markets, most fund managers and market experts interviewed by BusinessWeek said they weren't ready as investors to embrace the embattled financial sector.
Spooked by Bear
Some analysts reacted to the Fannie and Freddie news by upgrading their view on financial firms like Goldman Sachs (GS) and some regional banks.
But by contrast, many other investors cited the Bear Stearns collapse in March, when the Federal Reserve tried to ease the credit crunch by providing liquidity to investment banks. The federal government's actions initially met with Wall Street approval. But the stock market rally was short-lived, and by summer stocks were again tumbling lower.
The best that could be said of the Fannie-Freddie action is that it answers a big question: No, the federal government will not allow these crucial mortgage financiers to fail and potentially cripple the mortgage and housing market in the U.S.
"They've taken a big question mark out of the mortgage market," says Dave Hinnenkamp, chief executive of KDV Wealth Management. "It will stop things from getting worse" for the housing and mortgage industries, says Jeff Layman, chief investment officer at BKD Wealth Advisors.
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photo: Sept. 7, 2008. The U.S. government took control of mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) after investors' confidence in the government-sponsored enterprises tumbled. Fannie and Freddie, which together held nearly $5 trillion in mortgage debt, were unable to raise enough capital to shore up their balance sheets amid the slumping housing market. The Treasury Dept., acting under authority it received from Congress in July 2008, put the companies into conservatorship, ousted both CEOs, and agreed to invest up to $100 billion each in the loss-plagued companies to prevent a failure that could have shocked the already tight credit market. (BW)
By Jeff Kearns and Edgar Ortega
May 23, Bloomberg
Trading on the New York Stock Exchange fell 26 percent this quarter to the lowest since 2001 as alternative venues captured market share and the total volume of U.S. equities climbed.
The shares changing hands each day on the 216-year-old exchange fell to an average 1.27 billion in the second quarter from 1.57 billion a year ago, according to NYSE data compiled by Bloomberg. Total trading rose 19 percent from a year ago to an average of 6.84 billion shares a day, as companies such as Bats Trading Inc. and Direct Edge ECN LLC won more of the business, Bloomberg data show.
The NYSE's share of the total value traded slipped to 52 percent in the first three months from more than 70 percent in 1990, according to data from the World Federation of Exchanges. Analysts who depend on volume to help forecast the market's direction are losing one of their tools.
``Technicians should be losing sleep over this,'' said Ralph Acampora, the 40-year Wall Street veteran who helped pioneer technical analysis. ``I can't be as trusting of my indicator, because I don't have all the data.''
Bats, the third-largest equity market, took business from the NYSE and Nasdaq Stock Market since it started in January 2006. Kansas City, Missouri-based Bats matched about 8.9 percent of total U.S. shares in April, up from 3.5 percent a year earlier.
Trading, Volatility
Direct Edge, which is based in Jersey City, New Jersey, has matched 4.1 percent of the shares traded this month, up from 1.2 percent a year ago, spokesman Rafi Reguer said.
Trading in U.S. markets rose with stock volatility as investors took advantage of wider price swings. The NYSE's move to lift restrictions in March 2007 on automation increased volume by making it easier for brokerages that accommodate rapid-fire strategies.
The new venues make it more difficult for technical analysts, who use exchange data to measure demand for stocks. A rally in the Standard & Poor's 500 Index without an increase in volume may fade, analysts say. Last year's rebound in the S&P 500 during September came with the lowest volume in four months. The benchmark peaked in Oct. 10, and fell 11 percent since then.
``More volume means there's more money and support, more demand and momentum,'' said Acampora, the director of technical studies at the New York Institute of Finance. ``You need money to push stocks up.''
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photo: Traders work on the floor of the New York Stock Exchange, May 19, 2008. Photographer: Jeremy Bales/Bloomberg News
Feb 26, Channel News Asia
ABU DHABI : Former US Federal Reserve chairman Alan Greenspan said on Monday that opposition to investments by Gulf and Asian sovereign wealth funds in the United States did not serve US interests.
"I suspect that most of the negative response (to SWFs' investments) is (driven by) protectionism. In fact, I don't suspect it, I know it," he told a corporate leadership forum in the United Arab Emirates.
"I think that is extraordinarily counter-productive because the United States has probably gained as much, if not more, from globalisation," Greenspan said.
Globalisation has entailed "a very considerable amount of ownership of assets across borders," he said.
"We have always been the major force pushing (for globalisation), and I think for us to be pulling back makes me sad ... because it is not to the best interest of the United States."
Concerns about the state-run investments funds, founded in Gulf and other oil-exporting states and Asian exporters to invest their reserves, were aired at the World Economic Forum in Davos last month.
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photo: Alan Greenspan (by CNA)
By Rob Hof
Jan 31, Business Week
Google didn’t miss Wall Street’s fourth-quarter earnings estimates by much, but it’s Google and every little shortfall matters. The miss was enough to send its stock falling about 7% in after-hours trading. The search giant said its net profit rose 17%, to 1.21 billion, or $3.79 a share. Subtracting stock awards to employees, profit was $4.43 a share, a penny shy of analysts’ estimates.
Sales rose 51%, to $4.827 billion, just a hair under analysts’ estimates. Revenue after payments to marketing partners, known as traffic acquisition costs, was $3.39 billion, also shy of analysts’ $3.45 billion estimate. Google doesn’t give guidance, so its results are often subject to guesswork by analysts.
After Yahoo missed estimates on its fourth-quarter earnings, investors were looking to Google for clues to whether the economic slowdown would hit online advertising. With the conference call about to start, it’s not yet clear what accounts for the earnings shortfall, or at least the perceived shortfall. But with sales more on target than earnings, it looks like expenses, in particular those traffic acquisition costs, came in high. More to come as the call starts...
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photo by Getty Images
By Linda Stern
WASHINGTON (Dec 2007, Reuters) - Wondering where to put your money in 2008? It may seem like all the choices are bad, and I'm not talking about the presidential candidates. Stocks, bonds, real estate, and money market funds have all been underwhelming -- at best. Chinese stocks, gold, oil and India suggest bigger gains but also much bigger risks.
It could be a wild ride.
The year 2008 is an election year; they're usually bullish. But it could be a slow (or no) growth year; a year in which recession AND inflation are very real possibilities, and in which it's worth remembering that the worst times always precede the best times.
It's also worth remembering this caveat from Tim Swanson, chief investment officer at National City Bank: "Markets often move in the direction that the fewest people expect."
With that said, here are some observations and trends about where to put your money down in 2008...
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