Santa Claus is finally coming to town this yearend.  Following the panic in the global stock markets during the third quarter, positive signs are pointing to a robust year-end turnaround.

According to Bloomberg, investors should start buying stocks because indicators of momentum and breadth suggest that the Standard & Poor’s 500 Index’s rally from an October low would last up to the first quarter of 2012. Chart patterns are showing signals of a tremendous turnaround at the end of the year extending to February, 2012.

The US economy has already stabilized with a high consumer confidence level, according to the University of Michigan’s Consumer Confidence Index.  Economic data have greatly improved and are starting to gather upward momentum. This would translate into heavy Christmas spending and drive the US economy upward. 

In Europe the expectation that Italy and Greece are going out of business has faded. These debt-ridden countries are now expected to overcome their financial miseries with legislated austerity measures and financial assistance from European allies. In short, the threatening global financial typhoon has weakened into a storm.

The local bourse would also experience a robust ending. The Philippine Stock Market index tracks the SP’s 500 and the Asian stock indices. When these indices move up, the PSEi follows. The expected strong corporate earnings of our index stocks can certainly help boost the grand turnaround at Christmas time.

A Reuters survey of 59 leading investment houses in the US, Europe, and Japan showed that investors are holding 6.3 percent of their total portfolios in cash, the highest since 2009. 

My feeling is that these cash hoards are now being plowed back into equities as shown by the unabated daily global gain of stock indices, including the PSEi, around the globe during the past two weeks.

Instead of sitting on the sidelines and holding on to their cash, fund managers are now finding opportunities so they can deliver modest returns to their investors. This, I think, would be the trend in the final month of the year.  Citiseconline.com, in one of its reports, stressed that the last quarter would be a bullish period for our stock market. 

Notes on PH economy

At yearend most economists project the country’s growth as measured by the gross national product to be within four percent to five percent, a modest band in contrast to the government target projection of from five percent to six percent.

Most GNP projections coming from reputable economic think tanks are pointing to this direction on account of a double-digit drop in big-ticket items such as merchandise exports and vehicle sales for the last 10 months, and  the recent extensive damage caused by typhoons to agriculture, infrastructure, and property.

With barely one and a half months more to go before the yearend coupled with the turtle-paced government effort to sort out domestic problems, even with the massive and sudden infrastructure spending now on stream, it is no longer possible that the GNP could eke out more gains at this time.

Plotting PSE course

I expect healthy corporate earnings of our index stocks to drive equity prices upward this month until December. The robust global stock indices would also  help lift local stock values.

Because of robust corporate earnings, the stock market would stay largely in positive territory.

The mining sector would have the best year in its financial history because of the unprecedented higher mineral prices, especially for gold, silver, and copper.

The property sector would end a modest year because of continued demand of call centers for bigger office spaces and residential units for their foreign managers and employees.

The leisure and entertainment sector would be showing a blockbuster performance because of increased tourist arrivals and enthusiastic Asian casino players.

Till next week. 

In the meantime keep your mind on the money and your eyes on the market.