A year ago, Wall Street was giddy and called for a strong up year for stocks. I was also in that camp, but thought technology and small-cap stocks would be the market drivers. Fast forward a year and here we are at the Christmas break…and it has not been as forecast.
The S&P 500 sits at 1,242 at the close of December 21. A year earlier, the Wall Street bulls, such as Bank of America Corporation (NYSE/BAC), predicted strong moves for the S&P 500 to 1,400, driven by technology and energy. So, unless the S&P 500 can rally 11% next week, Wall Street has miscalculated.
Some of the other Street estimates for the S&P 500 were even higher. Take a look.
J.P. Morgan: S&P 500 1,425
Barclay Capital: S&P 500 1,420
Goldman Sachs: S&P 500 1,450
As I said, last year at this time, I said, “I expect tech and small-caps to drive trading again in 2011.” It looked that way earlier in the year, but then the European debt crisis materialized,Chinashowed some stalling, and stocks began to sink quickly. In 2010, there were some rumbling concerning the weak condition of some of the banks inScotland, but clearly there was not a firm indication that the eurozone debt issues would magnify quite so much.
Domestically, the housing market failed to really improve all that much in 2011, especially with home prices continuing to decline acrossAmerica. President Barack Obama signed an $858-billion package to extend tax cuts for an additional two years and unemployment benefits that were set to expire. The package was aimed at driving consumer spending and growth, but it has fallen well short of any sustained growth. The jobs market remains a major issue.
The lack of any leadership was the downfall for many in 2011. The big banks failed to attract buying, while technology had its moments, but overall failed to inspire traders.
The index charts at this point are vastly different from a year ago when the major stock indices edged higher breaking the successive chart tops. At this point, we are seeing an intermediate downtrend with tough upside resistance that will make it difficult.
Europe continues to be a major hurdle, as I see more problems brewing down the road, especially with some of the PIIGS (Portugal,Ireland,Italy,Greece, andSpain) countries.
Chinais stalling.China’s GDP estimates for 2012 range from as low as 6.5% to as high as 9.5%. Comparatively, this range is superior to domestic GDP growth of 1.8% in the third quarter. I continue to favorChinaheading into 2012 and over the next several years, as long asEuroperegenerates.
The next several weeks after January 3, I will take a look at the global environment and offer you my forecast on what to expect for 2012. But right now, with only a few trading sessions left for the year, I advise taking some profits prior to the year-end. In addition, take a look at some of your losers if you want to absorb some losses to be used against your gains.
Read what I have to say about the alternative energy sector and a company that is trying to benefit from the electric car movement in The Alternative to Being Held Hostage by Oil-rich Countries.