Stocks advanced yet again last week in light of rising optimism about economic growth, strong corporate earnings and a continued fading of the fears that kept many investors away from risk assets over the past couple of years. In our view, while the rally has been strong, it is not yet exhausted. Although a short-term correction could take place at any time, we believe the bull market should continue.

Economic growth in the United States has continued to improve in recent weeks. Business confidence measures have moved to multi-year highs, sales levels are rising, profits are improving and business investment levels remain robust. The economy is clearly transitioning from a recovery phase to an expansion phase. The difference between the two is that the former is dependent on monetary and fiscal stimulus while the latter is based on improvements in demand from the consumer sector as well as on companies’ top-line growth and growing trends in capital investment — trends that are more self-sustaining.

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For several weeks, we have suggested that the macro market backdrop has been dominated by global bullish forces in conjunction with localized bearish ones, a description that largely explains last week’s stock market action. Early in the week, headlines surrounding European debt issues and US municipal budget concerns faded somewhat, and risk assets (particularly stocks) experienced strong performance. Toward the end of the week, the Egyptian protests and resulting political turmoil unnerved investors, causing stock markets to experience a sharp decline.

The situation in Egypt has reminded investors that geopolitical risks are always present and in this case uncertainty is high, both in terms of what will happen and what the potential impact will be.

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A number of technical factors came into play over the past week to interrupt the broader equity rally, although issues related to sovereign debt in Europe account for some fundamental causes as well. In this context, we believe that there are a number of near-term catalysts for potential market correction: strongly bullish sentiment, peripheral country issues in Europe, commodity inflation that could cause further policy tightening in emerging markets, the need to raise the US debt ceiling and bad weather in areas of the United States that could cause a slowdown in the economic recovery. However, looking beyond these technical issues, we believe there is no reason to change our constructive view regarding the recovery and trajectory of the markets. Growth indicators remain good and are being reinforced by the fourth quarter reporting season, and evidence of flows out of fixed income and into equities should provide a positive supply/demand backdrop.

Last week, initial jobless claims moved lower by 41,000 (based on the revised number) to 404,000 (much better than the expected level of 425,000), undoing most of the prior week’s increase. In addition, December month-over-month home sales rose 13.2%, offering another sign that the economy continues to heal. Fourth-quarter earnings reports continue to beat expectations, though not as much as in previous quarters. The best earnings performances have been in technology and materials, while more mixed reports have come from some of the financial and consumer sectors. The market has rewarded fourth-quarter “earnings beats” in particular when those results are accompanied by top line revenue gains. Companies that have been only cost-cutting have not had their stocks go up. The focus on top line performance is increasingly important, as investors are skeptical of the ability of margins to move higher.

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Don’t get left out in the cold! Follow our Cold Weather Safety Tips
http://www.westchestercounty.redcross.org/pdf/wcRCcoldSafetyTips.pdf

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Stronger-than-expected economic data and a solid start to the fourth-quarter earnings season helped push stock prices higher for the seventh consecutive week.

At present, it appears that the competing forces driving the market are the worldwide bullish backdrop of the global economic recovery, falling uncertainty levels and attractive risk premiums for stocks in most markets and the bearish local problems of sovereign debt issues, rising inflation in emerging economies and US state and local budget problems. Our view is that while these localized issues are likely to surface and cause problems from time to time, the bullish backdrop for the economy and equity markets is likely to prevail.

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Need something to do while you're waiting for New Year's Eve and 1/1/11? Here's a quick suggestion! Declutter!

1) Start the new year off with less email! Go through your inbox and old eblast emails from companies and organizations and hit the unsubscribe link for those you no longer wish to receive.

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Okay, I felt the need to share these great places with you, yes, these are shameless plugs!

Photographer for my new headshot: Mary-Elizabeth Edelman, visit her at http://meephotography.com/ We've been working together for over 20 years!

Best steakhouse anywhere! Morton's, 9 Maple Avenue, White Plains. They are open New Year's Eve and New Year's Day. Check out the menu: http://mortons.com/holiday/new-years-eve/ And call Kim for a reservation; 914-683-6101.

Best movie experience: IMAX Theatre at Palisades Center in West Nyack. If you haven't been to this IMAX, you haven't really experienced an IMAX. The Palisades Center is one of the few remaining IMAX owned and operated theatres with the original technology. The visuals are breathtaking. They are also the only theatre around to give away freebies and prizes all year long (keychains, collector's pins, movie posters, Kookie pens, you name it!). Visit www.imax.com/palisades. Tron will play through January (awesome on this gigantic screen!) along with some of the traditional IMAX films which are absolutely beautiful and educational, a great thing to take the kids to.
Need financial advice? Give Richard Rudinger a call. Richard, based in White Plains, recently received the coveted Certified Retirement Consultant(R) designation. He's one of only a handful in NYS. As an accountant and licensed in NYS for insurance and securities, he brings a unique perspective to financial planning. Just what you need for these turbulent times! Oh and he also has an MBA and can address your small business concerns as well. Reach him at 914-422-3344 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Okay, that's it for now! Happy Holidays!
Risa

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Hi all and Happy Holidays and Merry Christmas! We all made it through another year, some of us stronger, some of us weaker, but most of us are still here to tell the tale. So, next week when you have some down time, reflect on what went right this year and what went wrong. Write down what you want to change for 2011 and sketch out some plans for your marketing program for 2011. It won't seem so daunting because you should be having a quiet week next week (unless you're in retail!). So think in quarters (January through March, etc.) and plan out what you would like to accomplish with your marketing in each quarter. On January 3rd you will be very glad you did!

Happy Holidays and a very Happy New Year to all!

Risa

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The big news last week was the tentative agreement reached by President Obama and the Republican leadership regarding a temporary extension of the Bush-era tax cuts. The agreement turned out to be more equity market-friendly than most expected. It was not a surprise to see the extension of current marginal tax rates for all tax brackets or the extension of unemployment benefits, but the agreement also included a cut in payroll taxes, lowered rates on estate taxes and provisions allowing for the expensing of corporate capital expenditures. While a final deal is not yet in place, it is looking like the tax package could result in higher disposable income levels, perhaps resulting in some combination of higher savings rates and increased consumer spending levels in 2011. Although there has been quite a bit of criticism over the package from many in the President’s own party, our view is that the fact that at least a tentative agreement was reached is a good thing, and could pave the way for additional broad-based tax reform over the next year or two.

Recent economic data releases have continued to be generally positive, with highlights including some decent consumer spending figures. In addition to accelerating growth trends in the United States, most areas of the world have also shown signs of economic improvement in recent weeks.

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This is a feel good opportunity: 

Supply drive for the Troops:

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