Faded: Wall Street Logs Best Q3 Since 2010
The closing of this past third quarter represents Wall Street’s best Q3 since 2010 after global, coordinated central bank actions led to a reversal in equity markets as they announced “QE until…the economy gets better” in attempts to stave off the open-acknowledgement of a Second Great Depression. According to Reuters, the S&P 500 climbed 5.9 percent over the past three months as central banks geared up to boost liquidity to markets and kick-start their failing economies. The move had lifted the benchmark as much as 17 percent this year, recently pushing the S &P to its best level in five years – but, remember, quantity, not quality, defines new markets. ”The reality is that the fundamentals of the market certainly don’t support a 17-plus-percent run-up year to date, but with all the QE (quantitative easing) action, that has had a huge, huge impact,” said Oliver Pursche, president of Gary Goldberg Financial Services. To be sure, the huge, huge monetary dope high this time around has been even more shortlived than the first two times (QE1, QE2), basically lasting half-a-month before the headlines began demonstrating that its not…really…working. After pulling back over the last two weeks 1.7 percent, the S&P 500 has gained 14.6 percent in 2012 thus far. To be sure, the S&P 500′s 1.3 percent drop last week is its worst weekly decline since the beginning of June.
In the third quarter, the Dow rose 4.3 percent, while the Nasdaq climbed 6.2 percent. For the months of September alone, the Dow gained 2.6 percent and the S&P 500 rose 2.4 percent, while the Nasdaq advanced 1.6 percent. There can be no doubt that quantitative easing programs announced by Europe, the US, China and Japan – as well as continuing QE out of England – all helped to cement the rally over the summer in stocks and commodities.
The final three months will be difficult for markets, even in an election year. Third-quarter earnings are anticipated to demonstrate the first drop since 2009. Nike Inc (NKE.N) has warned of slowing orders out of China, after many company’s have sounded the same alarm about economic weakness in China affecting its business.
The best quarter since 2010 very easily could transition into a very rock Q4 for Wall Street, as all quantitative easing plays have been made (by the Federal Reserve , at least). With elections and the fiscal cliff incoming, investors will be tempted to take profits here in the wake of the best Q3 since 2010. The strong Q3 has done nothing to stave off Wall Street’s lowest sentiments since the mid-eighties. Expect economic data to begin taking center stage again with QE3 done-and-announced, as well as earnings reports not up-to-par, putting further pressure on the top-heavy stock markets.