Let's Start at the Top

It doesn't matter where you look, the stock market looks good.  I'm not sure exactly what rock the "double-dippers" or the "new normal" people are hiding under now, but their loud chirps from six months ago have certainly been quieted.  The stock market has a way of generating messages for the soap box "chirps of the moment," and in July, it was much easier to say "double-dip" than it is now.  So, let's start at the top and see how this message is sounding for the future.

We believe that the S&P 400 measures the new normal.  No, not that "new normal"...we're talking about the real new normal.  This country and this world have been in the process of building this new normal since the late 1970s, and the progression has taken on many different camouflages.  Occasionally we've been given sneak previews, and occasionally we have gotten way off track and had to be jerked back onto the path.  But it is January 18, 2011, and here we are with the S&P 400 making new highs. 

This is just the tip of the iceberg.  Even the double-dippers are starting to waffle under their rocks.  But the S&P 400 can't continue to drag its big brother, the S&P 500, along forever.  However, recently, Financials and Technology, the sectors that have really been dragging the S&P 500 down, have begun to gain strength according to our weekly sector studies.  We're excited about the possibilities of the S&P 500 starting to perk up.

So, Ladies and Gentleman, the cheering is loud and excited and happy as the S&P 500 is now providing an earnings yield higher than any other time since 1994.

To view today's complete Market Comment, click here.

Don Hays

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