A couple of weeks ago we gave what we believe to be the good and not-so-good factors currently impacting the stock market. Our conclusion was that the financial health of our public companies and the opportunity for Washington to leverage that health would bring decent economic data in the coming quarters and provide a spring board for stock prices. The news and stock market action, especially in Europe, for the last week has left that analysis on increasingly shaky ground.
A key data point to us was the market’s reaction to the President’s speech Friday, we felt he said the things that stocks would want to hear, yet the market dropped 2 to 3% across the board. We have noticed that most of the time when the President speaks the market tends to move higher. Some claim the Plunge Protection Team is responsible for goosing the market so as to appear that it supports the administration’s policies and promotes investor/consumer confidence.
Most domestic indices and sectors are clearly sitting on a precipice as depicted by the S&P 500 daily chart here.
A key data point to us was the market’s reaction to the President’s speech Friday, we felt he said the things that stocks would want to hear, yet the market dropped 2 to 3% across the board. We have noticed that most of the time when the President speaks the market tends to move higher. Some claim the Plunge Protection Team is responsible for goosing the market so as to appear that it supports the administration’s policies and promotes investor/consumer confidence.
Most domestic indices and sectors are clearly sitting on a precipice as depicted by the S&P 500 daily chart here.
The low in early August held for the fourth time on Monday this week. Consolidation patterns like this often continue in the current direction of the market and this chart appears to be headed lower. Most European indices have broken well through their August lows. There are some data points indicating this area may hold, but with the drama attached to the overnight headlines anything can happen. The situation calls for vigilance and flexibility, ostriches may be at risk in a market environment like this.
The recent two year stock market rally (up over 100% bottom to top for the S&P 500) even higher numbers. Is this the start of a Secular (long term) Bull Market? Or have the credit excesses of the last couple of decades left us stuck in a trading range that started fifteen years ago? The last Secular Bull started in 1982 and factors like inflation, interest rates, and taxes all were headed lower. The current environment appears that these components may now be headed higher.
Healthcare Sector
As the baby boomers age it appears they are creating the Right to Work Act for healthcare practitioners. As of July 2009 there were 39 million Americans over the age of 65. About 65 years ago the first baby boomers were born and that 39 million is projected to be 72 million by 2030. That would comprise approximately 19% of the total US population. A recent study revealed that 80% of seniors have at least one chronic health condition requiring ongoing care and 50 percent have at least two. The study predicts that by 2030 six out of ten boomers will be managing more than one chronic condition. What makes these stats even more compelling is that life expectancy from 1950-2004 increased nearly 50%. It may not continue at that clip, but will probably continue to get older. The study and stats above are all provided by the US Census Bureau.
According to the US Department of Health dollars spent on healthcare nationally have been increasing steadily every year. They first topped $1 trillion dollars in 1995 and exceeded $2 trillion ten years later. By 2019 they are expected to reach $4.5 trillion. The youngest and oldest age groups have the highest office visits. The 65 and over age group has shown a dramatic increase in number of office visits.
A decided factor in that increase is due to the number of new therapies coming out of the life sciences sector. In the fourth quarter of 2010 venture capital spending in the categories of biotechnology, medical devices, and equipment represented 23 percent of all venture capital spending, according to Price Waterhouse Coopers. Obviously this data supports the lengthening of our life expectancies. When you look at the growth in chronic diseases like diabetes and obesity the amount of healthcare expenditures could even be higher than are projected.
We find the data above to be very compelling and worth exploring how profits may be made in this sector. Many consider healthcare to be a relatively recession proof industry. It is one of the few sectors to have job growth every year during the recent recession.
Let’s keep our fingers crossed the market can hold the August lows, with our leaders in Washington making some strong, far reaching decisions getting more people back to work and much of the stress and pessimism of the last few months eases. We could sure use a good night’s sleep!
As the baby boomers age it appears they are creating the Right to Work Act for healthcare practitioners. As of July 2009 there were 39 million Americans over the age of 65. About 65 years ago the first baby boomers were born and that 39 million is projected to be 72 million by 2030. That would comprise approximately 19% of the total US population. A recent study revealed that 80% of seniors have at least one chronic health condition requiring ongoing care and 50 percent have at least two. The study predicts that by 2030 six out of ten boomers will be managing more than one chronic condition. What makes these stats even more compelling is that life expectancy from 1950-2004 increased nearly 50%. It may not continue at that clip, but will probably continue to get older. The study and stats above are all provided by the US Census Bureau.
According to the US Department of Health dollars spent on healthcare nationally have been increasing steadily every year. They first topped $1 trillion dollars in 1995 and exceeded $2 trillion ten years later. By 2019 they are expected to reach $4.5 trillion. The youngest and oldest age groups have the highest office visits. The 65 and over age group has shown a dramatic increase in number of office visits.
A decided factor in that increase is due to the number of new therapies coming out of the life sciences sector. In the fourth quarter of 2010 venture capital spending in the categories of biotechnology, medical devices, and equipment represented 23 percent of all venture capital spending, according to Price Waterhouse Coopers. Obviously this data supports the lengthening of our life expectancies. When you look at the growth in chronic diseases like diabetes and obesity the amount of healthcare expenditures could even be higher than are projected.
We find the data above to be very compelling and worth exploring how profits may be made in this sector. Many consider healthcare to be a relatively recession proof industry. It is one of the few sectors to have job growth every year during the recent recession.
Let’s keep our fingers crossed the market can hold the August lows, with our leaders in Washington making some strong, far reaching decisions getting more people back to work and much of the stress and pessimism of the last few months eases. We could sure use a good night’s sleep!
Did You Know
Stock Market Stats - In the last 20 years (1991-2010), the S&P 500 stock index has gained more on a total return basis during the 4th quarter (i.e., October-November-December) than it has during the other 3 quarters combined. The final 3 months of the year have gained +150.9% (total return) vs. a gain of +129.2% for the first 9 months of the year over the last 2 decades. The best monthly performance on a total return basis for the S&P 500 over the last decade (2001-2010) has occurred in April, October or November in 9 of the 10 years. The only year that 1 of these 3 months did not lead the way was in calendar year 2010 when September was the best month. With still 4 months to go in 2011, February’s +3.4% gain is the frontrunner month YTD (source: BTN Research).
Final Thought
“We never really grow up, we only learn how to act in public” – Anonymous
Stock Market Stats - In the last 20 years (1991-2010), the S&P 500 stock index has gained more on a total return basis during the 4th quarter (i.e., October-November-December) than it has during the other 3 quarters combined. The final 3 months of the year have gained +150.9% (total return) vs. a gain of +129.2% for the first 9 months of the year over the last 2 decades. The best monthly performance on a total return basis for the S&P 500 over the last decade (2001-2010) has occurred in April, October or November in 9 of the 10 years. The only year that 1 of these 3 months did not lead the way was in calendar year 2010 when September was the best month. With still 4 months to go in 2011, February’s +3.4% gain is the frontrunner month YTD (source: BTN Research).
Final Thought
“We never really grow up, we only learn how to act in public” – Anonymous
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