With the first quarter of 2011 behind us, there's a lot to take away and learn from - especially when it comes to the direction of oil prices, interest rates and stocks.
Granted, we're right now navigating one of the most uncertain periods in modern global history. But if you're a trader or an investor, knowing how markets have been reacting to recent news and events provides you with some valuable insights that you can use going forward.
And after we address each of these three topics - oil prices, interest rates and stocks - we'll be able to recommend some specific moves that investors should consider.
So let's look at each topic more closely.
For three ways to profit from these trends, please read on...
U.S. Industrial Stocks Now Back on Top, As Emerging Markets Falter
Stocks tiptoed through a typically introspective, no drama December week in the past five days, with the Dow Jones Industrials rising 0.7%, and the Nasdaq, S&P 500, and Russell 2000 all rising about a third of a percent.
While an 0.3% gain doesn't sound like much for a week, it is actually a great result. If the market were up 0.3% every week for 52 weeks, it would be up 17% for the year without dividends, which is about double the long-term average. And just to round out that idea, if the market were up 17% every year for 10 years, it would end the decade up 380%. Small amounts add up due to the magic of compounding.
The market was not fully in gear across all industries. The deep cyclicals performed best, led by steelmakers, which were up 6.5% as a group. Leading the way was mini-mill Nucor Corp. (NYSE: NUE), which rose 7% for the week after offering a bright forecast for the first half of 2010. Consumer staples were another plus, led by food makers such as Hansen's Natural Corp. (NASDAQ: HANS) and Boston Beer Co. Inc. (NYSE: SAM), up 7.5% and 13% for the week.
Retailers and financials fell back the most during the week led by the 18% plotz of Best Buy Co. Inc. (NYSE: BBY). Consumer spending is actually on track, as I'll discuss in a moment, so this was mostly a BBY problem not a problem for the whole industry.
Click Here to Read Why U.S. Stocks Are Now Leading...
M&A Set to Accelerate in 2011 After a Late November Surge
A flurry of mergers and acquisitions (M&A) in late November could presage the biggest surge in deals since the economy tanked three years ago.
In just the last week, nearly $25 billion in M&A deals were announced. BP PLC's (NYSE ADR: BP) sale of its majority stake in Pan American Energy, which went for $7.1 billion, was at the top of the list. With that sale, BP will have secured about $21 billion of the $30 billion it hoped to raise from asset sales to help cover damages from its oil spill disaster.
Find Solace in Emerging Market Stocks Amid U.S. Economic Turmoil
Maybe you've noticed that many of the stocks rising through the ranks of the broader market lately have a foreign accent.
The Claymore/AlphaShares China Small Cap exchange-traded fund (ETF) (NYSE: HAO), MV MarketVectors Indonesia Index ETF (IDX), and the PowerShares Emerging Markets Sovereign Debt ETF (NYSE: PCY) are just a few of the ETFs I've recommended in the past that are leading the market higher.
Similarly, Swiss instrument maker Mettler-Toledo International Inc. (NYSE: MTD) and Chilean fertilizer maker Sociedad Quimica y Minera (NYSE: SQM) have helped carry our Strategic Advantage "StrataGem" portfolio higher.
Look to Emerging Markets as the Federal Reserve Diminishes the Dollar
The main thrust of the past two months has been the renewed collapse of the U.S. dollar.
The dollar has been on a one-way elevator ride to the ground floor since August, when U.S. Federal Reserve Chairman Ben S. Bernanke first warned that quantitative easing was on the horizon.
Most recently, the minutes of the Federal Open Market Committee's (FOMC) last meeting telegraphed further monetary stimulus.
''In light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information before reaching a decision about providing additional monetary stimulus," the minutes read. "In addition, members wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus. Several members noted that unless the pace of economic recovery strengthened or underlying inflation moved back toward a level consistent with the Committee's mandate, they would consider it appropriate to take action soon."
Concerns about inflation being too low almost guarantees additional quantitative easing unless the recovery gets a big shot in the arm before the next meeting in early November.
International M&A Boom Fueled by Global Currency War
A binge of mergers and acquisitions (M&A) is being fueled by the global currency war, which has increased the value of emerging market currencies.
The value of worldwide M&A totaled $1.75 trillion during the first nine months of 2010, a 21% increase from comparable 2009 levels and the strongest nine month period for M&A since 2008, according to Thomson Reuters.
But mergers and acquisitions involving companies located in the emerging markets skyrocketed by 62.9% during the same period over 2009, totaling $480.7 billion. During the first three quarters of 2010, emerging markets accounted for 27.4% of worldwide M&A volume compared to 21% during the comparable period in 2009.
And companies are showing more willingness to venture across borders to find the resources they're after.
M&A activity in deals across international borders has surged during the first nine months of 2010, totaling $723 billion accounting for 41.2% of overall M&A volume, compared to 26.1% last year at this time.
Four Emerging Markets Making Waves Around the World
I'm focused like a laser beam on emerging markets this year, because there is much more at play than just relative strength. This is where the economic growth in the world is occurring.
I hope you are participating. And if you're not, don't worry - there's still time to get in and make a profit before the mainstream catches on.
Let's take a look at a few of my favorite plays right now, beginning with Singapore and Thailand - two economies I told investors to keep an eye on earlier this month.
Why Investors Need to Pay Attention to These Emerging Markets
The U.S. market showed improvement last week, but is still falling short of the continued growth and profit opportunities that emerging markets have to offer.
Stocks inched higher on Wall Street over the past week, taking heart from news of a modest improvement in jobs and a narrowing of the U.S. trade deficit. Both acted to counter the argument that the U.S. economy is speeding for a cliff in a foreign-badged car.
Bonds finished down slightly, crude oil rose 2.6%, and gold was down slightly.
A tad dull, sure. But the fact that there wasn't a rout after the big gains of the first week of the month, though, has to be considered a win for the bulls.
And some updates from the corporate world and overseas markets should keep investors cheering this week.
To read why investors have reason to celebrate -- and what opportunities they can't ignore -- click here.
Emerging Stock Markets Thrive as U.S. Shares Tumble
As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.
Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook from Cisco Systems Inc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.
Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.
Read on to find which markets are outshining the U.S....
Buy, Sell or Hold: Peabody Energy Corp.'s (NYSE: BTU) Global Dominance Is Heating Up Profit Growth
While advanced economies are still facing high levels of unemployment, more than a billion people in emerging markets are experiencing advancing standards of living.
As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.
This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.
The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.