Source - http://www.bloomberg.com/
By - Nick Taborek & Whitney Kisling
Category - Budget Hotels In Miami
Posted By - Homewood Suites Miami
By - Nick Taborek & Whitney Kisling
Category - Budget Hotels In Miami
Posted By - Homewood Suites Miami
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| Budget Hotels In Miami |
The U.S. congressional standoff that
shut down the government for the first time in 17 years is a
buying opportunity for stock investors, if history is any guide.
The Standard & Poor’s 500 Index (SPX) has risen 11 percent on
average in the 12 months following a government shutdown,
according to data compiled by Bloomberg on the 12 instances
since 1976. That compares with an average return of 9 percent
over 12 months. In all the cases, the U.S. equity benchmark was
higher by the end of the next two years.
While the S&P 500 has fallen seven of the past eight days
on concern the political deadlock over the U.S. budget and debt
limit will hurt the economy, investors at Raymond James &
Associates and PNC Wealth Management say equities will recover
as profits rise. Analysts’ forecasts show earnings will increase
at the fastest pace in two years during the fourth quarter. More
than 300 companies in the S&P 500 are scheduled to report
results this month, according to data compiled by Bloomberg.
“I’m a buyer on weakness,” Jeff Saut, the St. Petersburg,
Florida-based chief investment strategist at Raymond James, said
in a phone interview. He helps oversee about $400 billion.
“Once it’s in the rearview mirror along with the debt ceiling,
the market will start to focus again on the improving economic
numbers and improving earnings.”
The U.S. government will be partially closed today with
Congress deadlocked over whether to tie any changes to the 2010
health-care bill to an extension of government funding. Even if
the budget fight is resolved, lawmakers would immediately move
to the next fiscal dispute over raising the $16.7 trillion debt
ceiling.
Stocks Retreat
The S&P 500 slumped 0.6 percent to 1,681.55 yesterday,
closing at a three-week low. The U.S. equity benchmark is still
up 18 percent this year, on track for the biggest annual
increase since 2009. Treasury 10-year note yields fell one basis
point to 2.61 percent yesterday, trading at an almost seven-week
low, and the dollar weakened against the majority of its most-traded peers.
The last time there was speculation about a U.S. government
shutdown was in August 2011, when the S&P 500 fell more than 11
percent in three days. Stocks tumbled during the stalemate
between President Barack Obama and Congress over whether to
raise the debt ceiling and S&P stripped the U.S. of its AAA
credit rating that month.
The losses were later reversed, as the Federal Reserve
pledged to hold the benchmark interest rate near zero and
maintain bond purchases to support the economy. The S&P 500
gained 25 percent in the 12 months through August 2012.
Government Shutdown
“If you go back to the 1990s and the last time we had a
government shutdown, that was actually good for the stock
market,” said Martin Leclerc, founder of Barrack Yard Advisors
LLC, in a phone interview from Bryn Mawr, Pennsylvania. His firm
oversees $230 million. “It seems the market has climbed every
wall of worry and every risk that’s out there, the market has
seemed to surpass.”
In the last government shutdown that started in December
1995, the S&P 500 rallied 21 percent in the following year,
according to data compiled by Bloomberg. The U.S. equity
benchmark was up 36 percent in the 12 months after a one-day
closure in 1982. That was the biggest advance of the 12
instances.
Stock swings will widen during the shutdown, according to
Kristina Hooper, a U.S. investment strategist at Allianz Global
Investors in New York. The firm oversees $409 billion. The S&P
500 has declined an average of 0.59 percent during government
shutdowns since 1976, according to data compiled by Bloomberg.
Equity Volatility
“We’ll definitely see more volatility if there is a
shutdown, because the majority of the market wasn’t anticipating
it as late as last week,” Hooper said in a telephone interview
yesterday. “The longer-term picture is positive. We’ll likely
work through this relatively quickly.”
The Chicago Board Options Exchange Volatility Index (VIX) jumped
7.4 percent to 16.60 yesterday, the highest level in a month. It
is still 18 percent below its average since 1990.
Stocks need to fall further before they become bargains,
according to Kevin Caron, a Florham Park, New Jersey-based
market strategist at Stifel Nicolaus & Co., which oversees about
$150 billion. The S&P 500’s valuation slid to 16.1 times
reported operating earnings yesterday, from a three-year high of
16.5 on Sept. 18. The benchmark’s multiple has increased 14
percent this year.
Fair Value
“We haven’t seen a significant correction yet,” Caron
said in a phone interview. “We’re right around what we would
consider to be fair value for the market.”
A shutdown of the U.S. government may reduce fourth-quarter
economic growth as federal workers from park rangers to
telephone receptionists are furloughed, according to Moody’s
Analytics Inc. Mark Zandi, chief economist at the firm, has
estimated that a three-to-four week shutdown would cut growth by
1.4 percentage points. He projects a 2.5 percent annualized pace
of fourth-quarter growth without a shutdown.
E. William Stone, chief investment strategist at PNC Wealth
in Philadelphia, said the gridlock in Congress isn’t likely to
weaken the overall economy. Earnings for S&P 500 companies will
increase 9.1 percent in the fourth quarter, the biggest
expansion since the three months ending September 2011,
according to more than 11,000 analyst estimates compiled by
Bloomberg.
Profits have been climbing for the past four years and
analysts forecast growth will continue in 2014 and 2015, when
they rise more than 10 percent. For the full S&P 500, earnings
expanded 1.8 percent last quarter, projections compiled by
Bloomberg show. Alcoa Inc. (AA), Yum! Brands Inc. (YUM) and Safeway Inc. (SWY)
are among the 316 companies in the S&P 500 scheduled to report
in October.
“It certainly makes sense in our mind to take advantage of
these kinds of selloffs,” Stone said by phone yesterday. The
firm manages about $119 billion. “At the end of the day you go
back and say, does this whole fight really harm the long-term
market or the underlying economic picture? And I don’t think it
will really have any true impact there.”













