Here we are about a year-and-a-half after the official end of the Great Recession and yet it's still hard times for millions of Americans. Unemployment remains stuck at 9.6% and shows no signs of falling significantly any time soon. The Federal Reserve just said unemployment will stay as high as 8% for the next two years. And the central bank cut its outlook for economic growth all they way through 2011. Ugh.
But as rocky and sluggish as the economic recovery has been both at home and abroad, investors have plenty to be thankful for. Stocks and bonds have generated pretty decent returns so far this year, corporate profits are rebounding sharply and the economic data is (mostly) getting incrementally better, among other bullish news.
So as the market takes a time out for Thanksgiving, we thought it would be a good time to reflect on some good fortune. Here, then, are six things for which investors should be thankful this holiday season:
1.) Weekly jobless claims -- which traders on the floor of the New York Stock Exchange eyeball closely -- are finally headed in the right direction. Indeed, on Wednesday the reading on jobless claims declined to its lowest level since June 2008, helping the Dow Jones Industrial Average ($INDU) to a triple-digit gain Wednesday.
2.) The V-shaped recovery in corporate profits continues unabated, which is great news for investors since stocks are supposed to represent a claim on future earnings. In the third-quarter corporate profits hit an all-time record, according to data from Thomson Reuters, and have grown for seven consecutive quarters.
3.) Third-quarter gross domestic product was significantly better than Wall Street expected. Even David Rosenberg, the bearish chief economist and strategist at asset manager Gluskin Sheff, was impressed by the latest reading on GDP. "There was a nice upward revision to [third-quarter GDP] to 2.5% from 2.0% initially and the 2.4% that was widely expected," Rosenberg told clients in a note. "Outside of non-residential construction, the upward revisions were quite broad-based."
4.) The latest flow of economic data has made the chances of a double-dip recession look pretty remote. As Jeff Saut, chief investment strategist at Raymond James, told clients Wednesday, a slew of recent economic data is flashing bullish signs, including better-than-expected housing starts, a rise in small business optimism and an encouraging pick-up in year-over-year retail sales.
5.) If Wall Street's forecasts for future corporate profit growth are on the mark, stocks look like a bargain. The forward price/earnings (P/E) ratio on the S&P 500 is currently lower than it was when the market bottomed out back in March 2009, according to data from Thomson Reuters. In other words, stocks look cheaper now than they did during the darkest days of the crash, when they subsequently rallied a good 75%.
6.) Broadly speaking, both stocks and bonds have generated decent -- and very similar -- returns this year. That's good news for bulls and bears alike. The S&P 500, a proxy for the wider market, has generated a total return of 7.8% year-to-date, according to data from Lipper. Meanwhile, the Vanguard Total Bond Market Index Fund (VBMFX), a proxy for the wider bond market, has generated a total return of 7.78% this year, albeit with far less volatility. See the chart below.
Introduction to Value Investing
Are you the next Warren Buffett?View Course »