Weekly Look Ahead

Last week was more buoyant than most people expected for the first trading week of a new year. One would expect the unravelling of the "Santa Rally" caused by year-end portfolio dressing. Or maybe people noted that since 1939 the third year of any presidency has always been an up year for the market.

Look no further. The good news last week was dropping oil prices. Oil dropped about 9% within a week, constituting a veritable crash for leveraged commodities traders who were bidding up prices. Those of us here at the finance wonk with our eyes on production numbers and the arguments of the market were not surprised, having analyzed that peak oil is not a real argument and come to the conclusion oil was in a trading bubble.


Other than oil the news was mildy inflationary and the market responded with a decline by the end of the week. Big contributors included a suprisingly strong job report, and the apparent realization by many investors that the federal reserve is not going to have to lower rates anytime soon.

This is perfect for us. As people decide rates are not going up it is the perfect time to be finally shifting some money into bonds (that one's a timely read).

I will be moving some assets out of index funds and into a position to buy some bonds for the long run. For the immediate future though it's kind of unclear which will get more traction: stocks or bonds. After all there is that rule about the third year of a presidential term.

Of course, the fourth year of a presidential term hadn't shown a loss since 1969 -- then came 2000 and the big crash. Market rules are made to be broken.

Invest well,

FW