November 11, 2013


Last week was mostly positive for US equities with the exception being the Nasdaq. The Dow Jones was up 0.9%, the S&P 500 up 0.5%, and the Nasdaq slipped 0.1%. Interest rates moved higher for the week which put pressure on the Barclays Aggregate Bond index. For the week the “Agg” dropped 0.52% and remains negative 1.9% for the year.

Over the last couple of years, we have talked about the shrinking stock market. Initial public offerings (IPOs) have been minimal and companies have been purchasing their own stocks at record rates which has led to a decline in available stock for sale. However, 2013 may be a turning point. Flows into stock mutual funds have been the strongest since 2004 with net inflows of $76 billion this year.  With market confidence up and stocks at record prices we have seen the IPO market return as U.S. companies have raised $51 billion in IPOs. That is the most since $63 billion in the same period of 2000, the year bubbles in tech stocks and IPOs both popped. Follow-on offerings by already public companies have been even larger, surpassing $155 billion this year. That is the most for the first 10-plus months of any year in Dealogic’s records, which start in 1995.

We are cognizant of this renewed confidence as an eventual concern. However, we see the equity markets as fairly valued and still a good investment for the long term.

“Confidence is contagious; so is lack of confidence”
– Vince Lombardi