Consider some sobering stats. Since yearend '99, over 13½ years, the market's annualized rate of return was 3.3%. The past decade compounded at 8%, barely respectable considering the ultimate risk in the 2008 – '09 meltdown.
The market owes us a lot more. Boiled down, I see China and U.S. corporate operating margins as the most potent metrics that determine the course of the market in coming quarters.
Venice shines as one of my favorite leading, but quirky indicators. My countess and I had topped off dinner there with complex desserts at our favorite hole-in-the-wall, Al Covo. Mine was a grappa and cinnamon flavored semifreddo with meringued pine nuts. Hers a babá con crema chantilly al limone e frutti di bosco. Both deliciously sinful, signaling the worst must be over for Italy and Europe. Don't discount that a country gets the cuisine it demands and finds affordable.
Strangely, no fireworks displays in the financial press when the S&P 500 Index forged over 1,700. But, the best leading indicator for the Big Board is the Big Board, itself. The efficeint mart stocket is the only game in town. Fixed income rests in a marble orchard embracing Treasuries, corporates, muni paper and preferred stocks. I pick at preferreds selling 10% below their $25 call price, but so far a loser's game.
When I look over the world's bourses, specifically China and other emerging markets, numbers flash yellow and red. The MSCI World Index fares poorly. At home, small cap paper outperforms the S&P 500 Index by several percentage points. Growth stocks trail value by 300 basis points, a not insignificant variance. Tech, so far, doesn't sing to me.
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