Stocks continued to move higher…


Stocks continued to move higher for the past two weeks as all of the major averages posted impressive gains. Market internals have continued to be very positive as the new bull market continued to gain momentum. For the past two weeks, the Dow Jones Industrial Average has gained 298 points (+3.59%) and closed at 8604. The NASDAQ plowed ahead posting gains of 86 points (+6.0%) to finish at 1520.

For the two-week period ending May 7, 2003, U.S. equity mutual funds experienced inflows of $1.1 billion, compared to outflows of $790 million the previous week. The percentage of bullish investment advisors has now ventured into bearish territory, at 55.8%. Readings over 50% are considered bearish and readings under 40% are bullish.

Quarterly corporate earnings reports continue to flow in, with approximately 65% of companies reporting better-than-expected results, and only 25% reporting worse-than-expected results. Guidance from corporate executives continues to be murky at best; however, the markets continue to factor in an earnings and profit recovery expected later this year.


We continue to ride the wave forward in the markets, with all model portfolios continuing to prescribe full participation. As we have mentioned in previous weeks, we are eager to have our clients participate in as much of the upward market move as possible, with a target of capturing 80% of the market’s appreciation (in exchange for avoiding 80% of the bear market’s fury). This ratio is extremely healthy for an investment portfolio, as it allows our clients to comfortably participate in the equity markets with an eye on investment risk management. We are currently capturing between 85% and 90% of the market’s upward move, a bit above our target.

Readers familiar with our investment management approach know that the Compass Wealth Management process responds proactively to changing market conditions. Just as the captain of a ship is responsible for noting subtle changes in the ebb and flow of the sea, a portfolio manager is responsible to responding proactively to changing market conditions. This flexible approach does not attempt to predict the next market move; however, it has proven to be extremely adept at positioning our clients for “the right side of the market.” Over time, this approach objectively balances risk with reward, and elegantly enables us to help clients meet non-financial goals when they are expected to occur.


The U.S. unemployment rate jumped to a four-month high of 6.0% in April and businesses cut jobs for a third straight month, the federal government reported Friday. Planned job cuts at U.S. employers jumped 71% in April to the highest level since November, confirming that the national employment picture remained bleak despite the end of the war in Iraq. U.S. firms announced 146,399 layoffs in April, up from 85,396 announced in March, employment research firm Challenger, Gray & Christmas said. Forty percent of the job cuts announced in April came from the public sector as state and local governments battle financial crises, the Challenger report said. The 57,927 job cuts announced by government agencies in April were the biggest one-month total from a single industry since Sept. 11, 2001.

While the U.S. employment picture continues to be bleak, first-quarter earnings reports from the major banks suggested that, despite the weak jobs market, consumer credit continues to perform well. For credit card debt, the riskiest of consumer loans, write-off and delinquency rates were generally at or even below year-ago levels. Low interest rates have allowed consumers to refinance this high-interest debt with lower-interest, tax-deductible home equity loans. Economists expect this trend to continue in 2003, although at a slower pace. In short, just as Corporate America has cleaned up its balance sheet to weather hard times, it appears so too have consumers. People are also beginning to save again, creating reserves that can be spent as confidence rebounds.

On the legislative front, President Bush’s embattled dividend tax cut appears to be a victim of his own party. The tax package from the Republican-controlled Senate Finance Committee is unlikely to include the dividend-tax cut President Bush wants, although it may leave room for a smaller reduction if party members can dig up support for it, the Wall Street Journal reports. Citing Republican officials in the Senate, Finance Chairman Charles Grassley is inclined to leave the dividend measure aside, and introduce a bill including more popular pieces of the president’s original economic plan, which would accelerate previous income tax-rate cuts, among other measures. The report said Republicans — reluctant to deprive Bush of one of his top domestic priorities — could try to add a gradual dividend-tax repeal once the Finance Committee begins debating the bill.

By | 2003-05-12T11:35:40+00:00 May 12th, 2003|Market and Portfolio Commentary|Comments Off on Stocks continued to move higher…

About the Author:

Mark’s commitment to objective, independent wealth management led him to establish The Appleton Group LLC in April of 2002. With over 19 years of experience in the financial services industry, Mark serves as portfolio manager for our private client group, and co-manages all assets held in our suite of portfolio offerings. His responsibilities include risk analysis, asset allocation, market research, and institutional client development. Mark also serves as both Principal and CEO of The Appleton Group LLC. He earned his Accredited Investment Fiduciary (AIF) designation in 2016