Market Wrap-Up for Dec.20 (ACN, DRI, CAG, DFS, HOT, PAYX, more)

Market Wrap-Up for Dec.20 (ACN, DRI, CAG, DFS, HOT, PAYX, more)

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As traders continue to hope for further gains from the Fiscal Cliff resolution rumors, the markets are getting closer to calling it a year for 2012.

There are numerous bullish forecasts being set by market experts for how 2013 will fare, but there are plenty of headwinds facing corporate America next year — likely nothing bigger than the implementation of Obamacare. We expect to hear about this topic much more as 2013 unfolds. What will it ultimately mean for an already fractured job market? Probably more of the same “keep it lean” mindset from those doing the hiring (and firing) in big and small business America.

Looking at today’s stock headlines, plenty of earnings reports moved several names. On the upside we had stocks like Jabil Circuit (JBL) and ConAgra Foods (CAG) gaining ground following their better-than-expected results. On the flipside, earnings news from Discover Financial Services (DFS), Darden Restaurants (DRI), Paychex (PAYX), and Accenture (ACN), were not met with much investor enthusiasm. Finally, Deutsche Bank was out with a bullish call on lodging plays, naming Starwood Hotels (HOT) as its favorite name of the bunch.

Be sure to check out The Dividend Daily for all of our latest coverage on earnings reports, analyst moves, and much more.

The Diminishing Returns of Massive Fed Printing

As the Federal Reserve announced the latest fiscal band-aid (QE4) recently, it made sense to go back and look at how the markets have reacted following the liquidity events. There is no question the first burst of liquidity (QE1) had the biggest effect with the S&P gaining 50%. QE2 was followed by a 30% return. QE3 was then followed by an 18% return, and the current plan, QE4, has netted the S&P about 10%. The pattern should be obvious: we’re seeing diminishing returns for each subsequent liquidity injection. As I’ve noted many times, this pattern isn’t much different from Japan’s string of endless interventions to prop up struggling banks (and the rest of its economy). The story in Japan continues to be one of lower birthrates, 0% interest rates, high unemployment (especially among younger citizens), and an overall very weak economy.

The big question is how far will U.S. policy makers go with not letting the economy eventually go through a normal recessionary period. Japan felt they could disrupt the cycle and we see how ineffective that plan eventually became. For investors, the plan is to continue to monitor economic events as closely as need be, for as decisions get made in Washington, the repercussions can easily reverberate in how well you position your portfolio going forward.

Thanks for reading, and I’ll see you tomorrow!

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