Unlike last week, the broader indexes outpaced the DOW's gains. For the week, the tech-laden Nasdaq index gained 128.46 points to 1620.95, or 8.6%. The S&P 500 stock index rose 8.93 points to end at 1056.42 or 7.3%. The Russell 2000 small cap index gained 7.7% for the week closing at 342.88. The 30 year Treasury Bond finished yielding 4.98%
As I write, the DOW sits midway between its all time high of $9368 and the correction low of $7539. For the year, the DOW, S&P500 and Nasdaq are up 6.4%, 8.9% and 3.2% respectively. Exceptional value remains in the Russell 2000 index which is down 21.5% for the year. The big question for investors is "when will money start to flow from the favorite large cap stocks and into smaller capitalization stocks that compose the Russell 2000 Small Cap Index?" As the answer to this question remains unclear, I recommend a portfolio with broad diversification that roughly follows the market capitalization weighting of the Wilshire 5000. Index. This weighting means roughly 70% of your portfolio should be in the S&P500. The remaining 30% of your portfolio should be invested in mid and small cap stocks. Visit my "Personal Finance and Investing Discussion Group" at http://www.suite101.com/discussions/page.cfm/270 to learn more about this asset allocation and how to achieve it.
What has happened in the world to signal the end of the correction?
- The bears made 5 attempts to break through DOW $7539 and failed
- Russia and Asia really couldn't go much lower as no money was flowing in so their only direction was up. New money is now slowly trickling in.
- The American people don't want their president impeached, but it is clear that the GOP will drag out the pretense of impeachment through the November elections.
- Peace is breaking out all over, including Kosovo and the Mideast.
- The FED is easing on interest rates showing a strong interest in keeping our economy growing
- A US budget is nearly in place without a government shutdown and the phony "surplus" from excess Social Security collections is still mostly intact.
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