Jingle Bell, Jingle Bell, the bull has run away! 19 November, 2012.

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 1^st to 6^th 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!