Entries for August 2011

The sentiment readings released so far this month continue to be reported at levels weaker than those associated with stronger economic growth. The IBD/TIPP Economic Optimism Index is reported near the beginning of each month. In August, the TIPP Economic Optimism Index declined by 5.6 percentage points to a historic low of 35.8 vs. 41.4 in July. The index is 8.6 points below its reading of 44.4 in December 2007 when the economy entered into its last recession. Index readings above 50 indicat...  Read more...

Once again the equity put/call ratio moved above 1.0 at the close on Friday, reaching 1.04. The equity P/C ratio tends to measure the sentiment of the individual investor by dividing put volume by call volume. At the extremes, this particular measure is a contrarian one; hence, P/C ratios above 1.0 signal overly bearish sentiment from the individual investor. This indicator's average over the last 5-years is approximately .7, indicating the individual investor has been generally mostly bullish a...  Read more...

Analyst are extrapolating the weak report for the Philadelphia Fed Outlook on Thursday as a precursor to more stock market weakness. In actuality though, the monthly performance of the S&P 500 Index has a very low correlation to the monthly Philly Fed report. The below chart shows the data from August 2007 through August 2011. The "red" plot point is the August 2011 data. From The Blog of HORAN Capital Advisors As the above chart shows, the monthly Philly Fed report and the monthly return for t...  Read more...

After today's market downdraft, the market is certainly oversold on a short term basis. The percentage of stocks trading above their 50 day moving average is now at the same level reached in late 2008, i.e., .40%. The caveat is, historically, the market has had a tendency to trade lower on a prospective basis after these low moving average percentage levels are reached. From The Blog of HORAN Capital Advisors Additionally, for those that are superstitious, the S&P 500 Index feel 6.66% today and...  Read more...

As S&P noted in their downgrade of the U.S. government's credit rating, the rate of growth in the U.S.'s spending is a significant reason for the downgrade.From The Blog of HORAN Capital Advisors  Read more...

Talk to any owner of a business and they will tell you one of the major issues that inhibits the company's ability to grow is not only the level of regulations, but the proliferation of ongoing new regulations.A recent report by the Heritage Foundation notes,The spring 2011 Unified Agenda (also known as the Semiannual Regulatory Agenda) lists 2,785 rules (proposed and final) in the pipeline (emphasis added).Of those, 144 were classified as “economically significant.” With each of the 144 pending...  Read more...

For the first time in history, the U.S.'s credit rating was lowered by Standard & Poor's from AAA to AA+. S&P’s action is the most tangible vote of disapproval so far by Wall Street on the deal between President Obama and Congress to cut the deficit by at least $2.1 trillion over 10 years. S&P has said that it wanted at least $4 trillion of deficit reduction. S&P noted the recent debt ceiling hike did not adequately deal with the underlining deficit issues. The federal budget is at a point wh...  Read more...

This morning we sent out a client note covering the recent market action in light of the market's volatility. Much of the recent discussion has centered around the U.S. economy falling into a “double dip” recession. A recent JP Morgan strategy comment to investors noted the following:“Historically, US recessions were about over expansion (consumer or business) followed by a contraction of liquidity-businesses/consumers have strong balance sheets and while the US bank system is extremely well cap...  Read more...

Today's market sell off has the S&P 500 Index down for seven days in a row. The S&P index has declined 6.8% in this seven day period. A result of this decline is the number of stocks trading above their 50 day moving average has declined to 14%, a level at which the market has rebounded historically.From The Blog of HORAN Capital AdvisorsAs we noted in our prior comments and second quarter newsletter, the market does seem stuck in a trading range. Today's decline puts the S&P at the bottom of th...  Read more...