The Ides of 2012

“I’m weary of this moon; would he would change!”  [from A Midsummer Night’s Dream]

Midsummer; mid year.  We are now halfway through the year, a very volatile one at that, and your feelings about stocks and the economy may be similar to the above quote.  Because of that, I wanted to share a brief update of the year-to-date market activity:

  • The Dow Jones Industrial Average is up 5.4% for the year, and the S&P 500 is up over 8.3%.
  • The 10-year Treasury note interest rate is down over 11% year to date; this is great for those refinancing loans, but continues to be terrible for interest income.
  • The Greek elections took place two weeks ago and the moderate pro-Euro New Democracy party won, beating out the radical Syriza party and the Socialist PASOK party, which helped to stabilize the European Union (for now).
  • Yesterday the Supreme Court upheld most of the Patient Protection and Affordable Care Act (aka Obamacare), which was great for the hospitals and healthcare facilities industry, but there are many things to be shaken out on the ramifications of this for industries, sectors, and the public.
  • On the subject of sectors, year to date: Financials, Healthcare, and Consumer Discretionary are the winners, all up around 10%;Energy is the only negative, and is down around 5%
  • Apple surprised many with its drastic run-up which started in November, and it is now up 44% for the year.  It has a target on its back from other hardware providers, though, and it will be interesting to see if the iPhone maintains dominance and/or if Apple has something else up its sleeve.
  • Facebook caused high hopes among investors, and those hopes were quickly dashed.  I am personally happy about this; I continue to harp in this blog about how stocks are for the long term, but somehow people think that a new issue should triple their money overnight.  Facebook did not, and in fact lost over 30% over the course of the 12 days following its IPO on May 18th.  It has since come up from those lows, but is still about 20% below its initial offering price.

The big looming issue continues to be the European debt crisis, which has really been lingering for over two years.  Just this morning, though, there was a big positive in that Euro-zone officials agreed to lend bailout funds to individual banks, which is good for two reasons: it takes some of the worst-performing countries off the hook of trying to bailout the banks in their own country, and it makes the unity of the Euro-zone more solid which is very necessary for the psyche of the member countries (as well as the financial markets of the world).

What’s next?  Well, today’s rally could be short lived, as the pain in Europe isn’t over.  I can’t tell you where stocks will be six months from right now.  What I can tell you is that I’m long-term bullish, which is what you must also be if you are investing in equities.  By the way, anything that you own (your home, land, small business, etc.) are all equities, as their valuation is calculated by the difference between what it’s worth (based on what others would pay) and what you owe on it.  If you hope that your equity in these will increase in value over time, and you are doing things in your job and your community to increase the chances of that, than you too are bullish for the long term.

Disclosure: This is not a recommendation of any securities. I am long Apple (AAPL) and Facebook (FB).

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