Jingle
Bell, Jingle Bell, the bull has run away! 19
November, 2012.
In
the second week of November, we had the US Election and a bear attack in the US
stock market. Dow Jones Industrial Index
failed to hold on to 13,000 points which is a psychological support and went
all the way to 12500 level in just over a week.
Recently, the US “fiscal cliff” has
probably got more hit than Niagara Falls in the internet. It is not as beautiful but it is likely to be
more powerful. The combination of tax
increases due to the expiration of the Tax Relief and the spending reductions
due to Budget Control could mean recession.
So the bears have arrived the stock market and drove the bulls
away. US stock market has done a nice
run since June 2012, putting on a 12.5% in 4 months marking the peak on 4
October 2012. The UK stock market has
been moving hand in hand with the US stock market this year. FTSE 100 Index also added 12.5% from 23 May
2012 to 10 Oct 2012 but still failed to touch 6,000 level. The highest close this year is 5989.07 on 14
March, 2012.
One of the strongest performers
in the FTSE 100 index is Whitbread that is up around 50% year to date as of 16
November 2012. They must have sold a lot
of Costa coffee and many room nights in Premier Inn. Whitbread’s other brand includes Beefeater
Grill and Brewers Fayre. Other 2
household names in the top 10 performing stocks list are ITV and
Intercontinental and both are up more than 35% this year. Looks like chatting in coffee shop, watching
TV and staying in hotels are what people could afford to do these days. With good cost control, these companies could
do well. Intertek Group is a very
sophisticated quality control company and is also in the top 10 performing
stocks list. The other 6 names are all
financials and I cannot blame anyone who read newspaper or watch news for
missing them out this year. They are
Hargreaves Landsdown, Lloyds, Aberdeen Asset Management, Standard Life, Royal
Bank of Scotland, Legal & General and they have gone up 35-78% this
year. There is so much negative news on
the financial sector that most private investors have stayed away from them.
The Eurostoxx 50 index
surprisingly outperformed US and UK in November. It is up 17.3% from June. In mid September, the Eurostoxx 50 index was
up 25% from the June low. Could the
strongest companies in Europe be immune to Eurozone crisis? Interestingly, if you look at the year to
date index performance (as of 16 Nov) of Dow Jones, FTSE 100 and Eurostoxx 50,
they range between 1-6%. If you add the
dividend as well, 2012 has matched inflation for long term equity investors. Will be better if Santa arrives with a few
raging bulls in December.
In the currency world, November
has been a tough month for GBP. It fell
from 1.617 level to 1.584 level. The
downtrend from September continues.
Considering this year high is GBP 1 to USD 1.6309 on 21 September and
this year low is GBP 1 to USD 1.5235 on 13 January, with US Fiscal Cliff
hanging around and Draghi’s steroid fading, GBP could trail towards the low
again. If you are going to US for
Christmas, maybe you want to change some money now.
EUR has a nice run against GBP
since July and it may have ended in October.
On 23 July, GBPEUR was at GBP 1 to EUR 1.2896, EUR has been
strengthening from July to October and it was GBP 1 to EUR 1.226 level near the
end of October. Since then, we are back
to 1.24 level on 16 November. There are
little reasons for a strong EUR versus GBP.
Even with Greece successfully raised EUR 4bn on 13 November, investors
are still very cautious with the Eurozone.
There is no real fix but a few pain killers. Will be interesting to see how long it takes
Spain to accept an international bailout.
That could make both EUR and GBP much weaker against USD.
Gold price is going through a
roller coaster ride. It peaked in
October at 1796.05 (this year high) and from 1st to 6th
November, gold price lost USD 1,700 level in bungy jump style, touched USD
1,675 and rebounded to USD 1710 level.
Once again, investors were disappointed with gold failing to break USD
1,800 psychological resistance and start to wonder if we will ever see USD
2,000 per ounce. In the end, investors
only invest in gold with spare cash.
Money will probably be spent on Costa coffee before gold bars.
Merry
Christmas!
