What a Long Strange Trip It’s Been

Four months into 2016, it might be difficult for some to recall that the year had the worst start ever for the stock market.  This is partially a function of the historic recovery that started in mid-February which erased all of the earlier losses as well as the markets’ nightmarish memories.  This bounce has included a string of 5 consecutive advancing weeks and 8 out of 10 weekly gains ending in mid-April.  While this returned the major averages to marginally positive year-to-date numbers, they remain below their all-time highs reached last May (the Nasdaq’s high was in July).
Here are the major averages through May 5th:
2016YTD
Dow Jones Industrial Average   +1.4%
S&P 500                                     +0.3%
Nasdaq Composite                     -5.8%
Russell 2000                              +0.3%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
It may surprise many that this back and forth action has been in place well beyond 2016.  For example, the Dow Jones Industrial Average closed above 18,000 for the first time in December 2014.  Then after peaking at an all-time high last May, stocks fell in August on fears surrounding China.  Prices recovered somewhat into year-end but plunged in January.  However, the rally of the past two months has helped the Dow recover this 18,000 level again.  Obviously, the Dow was little changed during this almost 17-month stretch, but remarkably, the index traveled 42,155 points during the trip!!  That’s a lot of mileage to end up where you started.
Stocks have struggled during the past few weeks.  The Nasdaq has been the weakest area as some high profile companies reported some disappointing 1st quarter earnings.  Google, Apple, and Netflix, three of last year’s heroes, all fell after their earnings reports. Of course, Amazon and Facebook are two stocks that reacted positively and have moved higher.
However, there are many high profile stocks trading below the 50-day moving averages.  This might be a sign of a consolidation before another move higher or a signal for a market dip.
Unfortunately, we are entering the historically weaker 6 months of the year as we are in the “sell in May and go away” timeframe.  Since 1929, the S&P 500 has averaged a 5.04% gain during the months November through April.  This is contrasted with an average gain of just 1.87% in May to October period.[i]  While this latter period is positive, there have been some memorable stock market declines during these six months.
Last weekend Warren Buffett hosted Berkshire Hathaway’s annual shareholder meeting.  Naturally, it was the focus of the financial media and Mr. Buffett reminded us that the U.S. is the greatest economy in the world.  But before everyone finished shaking their heads in agreement, Stanley Druckenmiller, speaking at the high profile Sohn Investment Conference, told listeners to sell everything and buy gold.  Mr. Druckenmiller, one of the most successful hedge fund managers in history, criticized the Fed saying that there is no “end game’ for the “radical monetary experiment”.[ii]
Two really smart, successful investors on the opposite ends of a bull-bear debate highlights the uncertainty in the markets.  Both make compelling arguments in defending their view which makes it difficult to determine who the market will side with.  Perhaps the sidewinding price action will be with us for a while longer until a clear winner is declared.

I The Bespoke Report, April 29, 2016
[ii] Yahoo, Finance, May 4, 2016
Jeffrey Kerr is a Registered Representative of and securities are offered through LaSalle St. Securities LLC, member FINRA/SIPC. Mr. Kerr is an Investment Advisor Representative of and advisory services are offered through Kildare Asset Management, a Registered Investment Advisor. Kerr Financial Group and Kildare Asset Management are not affiliated with LaSalle St. Securities LLC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results. Investing
involves risks, including the risk of principal loss. The strategies discussed do not ensure success or guarantee against loss. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. Trading of derivative products such as options, futures or exchange traded funds involves significant risks and it is important to fully understand the risks and consequences involved before investing in these products. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional

Mr. Kerr is an Investment Advisor Representative of advisory services offered through Kildare Asset Management, a Registered Investment Advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results. Investing involves risks, including the risk of principal loss. The strategies discussed do not ensure success or guarantee against loss. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.  The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.  Trading of derivative products such as options, futures or exchange traded funds involves significant risks and it is important to fully understand the risks and consequences involved before investing in these products. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
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