4th "E" Boosts the Market
Previously we talked about the 3 E's affecting the market (Europe, Economy & Earnings). However, there is clearly a 4th one that needs to be added to the mix: East Asia. (Really I mean China, but that doesn't start with an E ;-)
So what happened there to move stocks on Tuesday? They reported 4th quarter GDP of +8.9%. That does show a little slowing from the past, but was certainly better than expected. Here again, talks of the demise of China seem quite premature. That is most definitely true for a country that has tons of stimulus ammo at the ready if need be.
Europe was the other main "E" in the news today. Lower bond ratings haven't scared away investors as bond rates continue to drop. That confidence has spilled over to their stock markets which are at their highest levels in 3 months.
Now with all of this good news you would expect me to be a tad more bullish. However, we have been rallying pretty hard since the late November lows. And with the problems in Europe not being 100% contained there is a limit to how much further we can climb at this time.
My guess is that we might consolidate here around 1300 on the S&P until either earnings prove to be impressive or Europe moves closer to containment. That is the short term picture. Looking out to the year ahead, I still see more upside as the Muddle Through economy becomes the greater driver of stock prices and thoughts of a European implosion can barely be seen in the rear view mirror.
That is the same outlook our analyst team took to assemble our coveted Top 10 Stocks portfolio. These are our favorite buy and hold picks to outperform in the year ahead. And today that list of 10 stocks is being released to the public. I hope you check them out now.
Zacks' Top 10 Stocks for 2012
Executive VP, Zacks Investment Research
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