Practical analysis for investment professionals
19 January 2012

Equities Roundup

Posted In: Equity Investments

As global stock markets closed out a rather disappointing 2011, there was no shortage of stories to catch the attention of equity investors. Below are some of the most interesting stories I came across over the past month:

    • A couple of U.S. corporate icons have found themselves behind the innovation curve and, as a result, fighting for survival. Reuters’s “Insight: Memo to Eddie Lampert — Dump Kmart” succinctly recounts the struggles of Sears and the strategic decisions facing its chairman and controlling stockholder. Kodak is another American institution that has fallen on hard times, and the Wall Street Journal’sKodak Teeters on the Brink” describes the company’s last-ditch efforts to stave off a bankruptcy filing. (Update: Kodak did file for Chapter 11 bankruptcy on 18 January 2012.)   
    • Historically high correlation levels within and across financial markets was a challenge investors faced throughout 2011, and this recent Thomson Reuters article neatly captured this trend. The Wall Street Journal, looking ahead and citing BCA Research, considers whether these conditions will persist in this brief article.
    • The issuance of market forecasts and predictions has become increasingly popular at this time of year, and there are usually a few that are considered must-reads. In its 2012 global outlook, UBS expects continued volatility to dampen stock gains worldwide. While the Wall Street Journal has reported that Wall Street strategists see, on average, a 6.1% gain in U.S. stocks in 2012, a recent piece from strategist John Hussman is a well-reasoned and comparatively somber assessment of the current investment outlook. And the outlook for European equities is the subject of this recent Financial Times article.
    • Speculation continues as to the timing of a Facebook IPO. The most anticipated public debut in years could come in the second quarter of 2012, according to a report by Silicon Valley’s However, not everyone is convinced Facebook’s shares will soar: blogger Josh Brown offers a thoughtful, contrarian view in “The Red Giant (Five Reasons Facebook is Over).”
    • As the American presidential primary season gets underway, the political backdrop will be top of mind for most U.S. investors, and many will look to history for clues on what to expect from the stock market. In “Electoral Maths: Presidential Elections and the S&P 500,” the Financial Times addresses the performance of U.S. equities in past election years and the implications for 2012. And a 2011 paper, “Resolving the Presidential Puzzle,” by Oumar Sy and Ashraf Al Zaman, further explores the historical link between the U.S. presidential election cycle and stock returns.

For more news and trends, visit the Equity Investments Community of Practice.

About the Author(s)
David Larrabee, CFA

David Larrabee, CFA, was director of member and corporate products at CFA Institute and served as the subject matter expert in portfolio management and equity investments. Previously, he spent two decades in the asset management industry as a portfolio manager and analyst. He holds a BA in economics from Colgate University and an MBA in finance from Fordham University. Topical Expertise: Equity Investments · Portfolio Management

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