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I just landed in Newark, New Jersey this morning after 23 days travelling throughout India … and it feels good to be home!
Despite the many problems in our country today, we should never take for granted the amenities, freedoms, and opportunities available here.
And with that in mind, I’d like to turn your attention back to the U.S. markets today, especially the outlook for domestic stocks in the coming year.
Let’s start with a question I’ve been hearing …
“Does the Strong Start in 2010
Signal an Even Better Finish?”
If you read this column frequently, you know that I’m a big fan of market history. And among market historians, much ado is made about the opening trading day of the year.
One reason why: A positive opening day for the stock market resulted in a positive year in 25 out of 37 instances since 1928.
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Thus, investors often figure that like a good opening day for a sports team, a positive start for the market means glory at the end of the year.
My take? While it’s not the most reliable indicator around, I’m not one to dispel a reason for hope.
And here’s another noteworthy “first day” fact from my former colleague at Standard & Poor’s, Howard Silverblatt:
“During the last decade, the first trading day of the month was a great time to be invested in stocks …”
In fact, putting money into the S&P 500 only on the first trading day of the month would have resulted in a 10-year gain of about 25 percent vs. a fully-invested-throughout-the-decade loss of nearly 23 percent.
That one’s a bit depressing for buy and holders, I know.
Still, I remain an advocate of investing for the long haul. And I see reasons to be positive about 2010, beyond just a solid start to the trading year …
Other Historical Indicators Point to At Least
Moderate Gains for U.S. Stocks in 2010 …
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| I see at least moderate gains for 2010. |
In a Money and Markets column almost exactly one year ago, I mentioned the presidential cycles, and gave you some background information on them. As you might recall, I also said the third year of a president’s term is far and away the best for stocks.
But what about the second year, the year we’re in now? It has provided an average gain of 4.05 percent.
It’s worth noting that last year’s tremendous gain deviated sharply from the typical first year of a president’s term, but whether that means this “year two” will also produce big gains remains to be seen.
Overlaying historical gains seen in bull and bear markets, however, makes things look more positive …
The average S&P 500 bull market has produced a 164 percent gain off the previous bottom, implying an ultimate price of 1801.93 from the March 2009 low.
That clearly leaves room for LOTS of additional upside from stocks in 2010 and beyond.
However, I feel compelled to come back to today’s reality — especially
my belief that we are unlikely to see a V-shaped economic recovery.
Things have stabilized, but our country is still wrestling with a major debt hangover.
In short, don’t be surprised if we see only modest capital appreciation from stocks in the year ahead.
But I Would Also Remind You That Dividends Are Critical
To Your Portfolio’s Overall Performance in 2010 and Beyond
Yes, 2009 was the worst year on record for dividends in more than 50 years, with both the most payment decreases — 804, more than six times as many as we saw in 2007 — and the fewest increases — 1,191, a 36 percent drop from 2008.
The good news, however, is that:
- Many of my Dividend Superstars recommendations not only maintained their payments, but increased their dividends last year, and …
- The third quarter of 2009 could have marked the bottom for dire dividend releases, with better news on both the increase and decrease fronts happening in the fourth quarter.
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| Dividend stocks can boost your income in 2010 and beyond. |
Never forget that dividend payments have accounted for about 42 percent of the stock market’s gains through the years, either!
So the bottom line is that I continue to think dividend stocks — especially my favorite superstars — will be the best income alternative in the year ahead.
They have the potential to post additional capital appreciation …
They should continue to increase their payments …
And based on their current yields relative to other investments, they remain terrific income investments, too.
Best wishes,
Nilus
P.S. Don’t think I’ve forgotten about India! I’ll be spending the next week reviewing my notes and formulating my thoughts for the next issue of Dividend Superstars, which goes to press on January 29.
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Marci Campbell, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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