Record Highs…

May 6, 2013

05.06.13

The S&P 500 hit yet another all-time high last week on better-than-expected U.S. jobs data and global monetary news.

The S&P 500 closed higher by 2% last week to close at 1,614.42.  Likewise, the Dow Jones Industrial Average gained 1.8% for the week to close at a record high of 14,973.96.  The NASDAQ, far from its record high, moved ahead 3.1% for the week to finish at 3,378.63.  The push higher last week was prompted by better-than-expected U.S.jobs data as April non-farm payrolls came in at 165k with expectations of 140k.  The European Central Bank provided further good news as the ECB cut interest rates by 0.25% along with commentary indicating a willingness to provide more stimulus, if needed.

Bonds traded lower last week as yields rose in response to U.S. jobs data and ECB monetary actions.  The benchmark 10-year treasury closed the week at a yield of 1.73%.  The Barclays Aggregate Bond Index is now up 0.62% for the year-to-date period.

Market valuations are no longer a bargain at 15.4x trailing EPS of $105 (2Q12-1Q13).  We see the markets as more-or-less fairly valued.  Despite valuations, we continue to favor equities as we do not see any other assets that we like better than equities.  We would not be surprised to see the market trade sideways or lower for the next few months as is typical for this time of year (see chart below).


“In the business world, the rearview mirror is always clearer than the windshield.”

– Warren Buffett