If you look at a chart of the S&P 500, you’ll see that it has been moving sideways in an amazingly orderly way since mid-November. You’ll also see that this behavior contrasts, both in monthly movements and in intraday swings, from what the index has been doing during the recovery from the March lows. Yes, there are swings in the prices of individual stocks, but they haven’t been enough to nudge the needle up or down for the S&P as a whole.
Why is this?
One “reason” is actually a description of the market’s behavior–investors don’t see any economic factors, positive or negative, that need to be factored into today’s prices. In particular, I think there’s still considerable uncertainty about how the global economy will play out in the early months of 2010, so investors figure there’s no rush to make a bet in either direction.
Also, I think professional equity investors have decided that they’re satisfied with the year they’ve had and have more or less gone home until January. About the only thing left to look for in 2009, I think, are the inevitable “quirky” (read: deliberate stock manipulation) movements that may occur in small-cap stocks on the last trading day of the year–a date that will differ from market to market.
Apropos of nothing, I think it’s noteworthy that Pimco is reported to be raising huge amounts of cash by selling Treasury bonds. It’s also starting an equity division. On the other hand, Pimco, you may know, has been vigorously pounding the drum for the “New Normal,” the idea that world economic growth will be anemic for a long period of time–and that therefore investors should still be buying bonds despite the fact that interest rates are at historic lows. Hmm? What’s that all about?
Finally, I’d like to thank all my readers for their support this year and wish you a happy holiday season and a prosperous 2010.