Dow: What Matters Next Quarter

Both Spain and France unveiled their new budgets today, and Spain disclosed the results of a new round of independent bank stress tests as the cherry on the cake. But -- as is common in this type of exercise -- some of the figures just don't add up. For example, the French budget assumes 0.8% GDP growth next year, which is above private forecasts. In the same week that Spaniards protested against austerity and clashed with police, the new Spanish budget calls for more of the same. The French CAC-40 index was off 2.5% today, while the Spanish Ibex 35 fell 1.7%.

U.S. stocks also fell, but they didn't fare as badly, with the Dow Jones Industrial Average (INDEX: ^DJI  ) down roughly one-third of a percentage point. Despite finishing on a low note, the fact remains that the S&P 500 (INDEX: ^GSPC  ) (a better measure of the U.S. stock market than the Dow) gained 5.8% during the quarter, which puts it up 14.6% year to date. That Federal Reserve-fueled rally is the only explanation I can find for the fact that, even after a 6% rise today, the VIX (INDEX: ^VIX  ) -- the "fear index" -- remains below 16. These are levels that are consistent with the carefree days when flipping houses was still the national pastime.

According to the Stock Trader's Almanac, stocks have advanced in every fourth quarter since World War II, excluding 1948, when an incumbent president wins the election. So, assuming Barack Obama takes the election -- as seems increasingly likely based on polls and prediction markets--is that a good sign for U.S. stocks next quarter? I think investors might be better served following events in European politics instead, for, as The Economist warned in its Thursday print edition, "unless the Spanish prime minister and his counterparts around Europe act, the single currency itself will once again soon be at risk."The other alternative is to focus on individual stocks; happily, The Motley Fool has analyzed the economic programs of both presidential candidates and found Stocks That Could Skyrocket After the 2012 Presidential Election.

Fool contributor Alex Dumortier holds no position in any company mentioned. Check out his holdings and a short bio; you can follow him on Twitter, @longrunreturns. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2036717, ~/Articles/ArticleHandler.aspx, 12/20/2014 1:49:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement