Most of us have been speculating what will happen to the precious metals market, particularly gold and silver, after the election results come in. While we still have to wait to see what will develop there, we are already aware of what is going on with gold, silver and other precious metals during this election Tuesday. Both the yellow metal and the white metal have jumped up on a day where millions of people will be heading to the polls to vote.

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This is a great sign heading into the election, as it shows that the precious metals market is not going to take a back seat to the election and that trading, buying and selling can still go on. Lets take a look at how all the major precious metals, especially gold and silver, have performed on this election Tuesday.

Gold: Gold for December delivery GCZ2 +2.02% jumped up by $15.40, or 0.9%, to come in at $1,698.60 an ounce on the Comex division of the New York Mercantile Exchange. The yellow metal is trying to inch itself back over the $1,700 per ounce price mark.

Silver: Silver for delivery in December SIZ2 +3.20% jumped up by 35 cents, or 1.1%, to come in at $31.48 an ounce.

Platinum: Platinum for January PLF3 +1.15% shot up by $4.10, or 0.3%, to come in at $1,548.80 an ounce.

Palladium: December palladium PAZ2 +2.78% was up by $16.75, or 2.8%, to come in at $619.75 an ounce.

Copper: Copper for December delivery HGZ2 +1.01% was up by 3 cents, or 0.9%, to come in at $3.50 a pound.

As you can see, all of the major precious metals enjoyed price hikes today and it will be interesting to see what they all do tomorrow after the election results are tallied and reported.

Also driving gold and silver up more today was the fact that the dollar remained weak. The dollar had gotten strong a few days ago, but then decided to take a nosedive and has lost ground for almost a weak straight now. While it is never a good sign that the dollar is weakening, it usually means good things for gold, silver, and other precious metal prices.

That being said, we still need to look for a good balance between precious metals and the dollar index. In a perfect world both would be strong at the same time.

Published in United States Economy

On the heels of one of the worst hurricanes in some time, Wall Street was finally able to open back up. As expected, gold jumped immediately, welcoming back traders and investors as over 6 million people try to get their normal lives back on track after the super storm.

Hurricane Sandy recently swept through the east coast, causing major damage and shutting down thousands of businesses, as well as leaving millions without power. The hurricane was devastating enough that it even caused the east coast markets to shut down for the last couple of days. However, Wall Street was up and running again today, and gold responded, jumping double digits for the first time in almost two-weeks.

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Gold for December delivery GCZ2 +0.49% was up double digits to come in at $13.40, or 0.8%, to $1,725.70 an ounce on the Comex division of the New York Mercantile Exchange. This was both a great way to open the market back up, as well as a much-needed jump in the price of the yellow metal after it had dropped considerably over the last couple of weeks.

It felt good to be back to open trading, and while gold did respond with a nice double digit boost, the fact of the matter is that there are a couple of underlying issues that the yellow metal will have to face after the excitement of the east coast market reopening subsides.

There are of course the issues in Europe that are once again spinning their ugly head around. A fast bailout for Greece was on the table, but there were a couple of nations at odds over the structure, so that is in somewhat of a limbo while they figure out how to come to a compromise. Another issue facing gold is the fact that the current bailout program that was put in place by the Feds several weeks ago is starting to lose its luster. While the Feds will keep it in place, along with keeping interest rates low, this most current stimulus package is proving a point I have been driving home for some time now; these packages only work as a temporary fix.

While it remains to be seen what will happen in the long run with the current stimulus in place, right now we are seeing a roller coaster of emotions from traders and investors. The stimulus was able to drive gold prices to the brink of the $1,800 per ounce price mark before the yellow metal had a positive pullback and corrected itself.

Published in Gold Investing

Gold remained steady today despite the fact that Hurricane Sandy is still wreaking havoc on the east coast and has forced the New York market to stay closed for a second straight day. The dollar weakened and the market rose overall, but gold was down just barely as traders and investors also wait on a jobs report that is due later this week.

Gold was able to take some support from strength in European shares, which were boosted by well-received company reports from BP and UBS, and the euro, after data showed the Spanish economy contracted at a slightly slower rate than forecast in September. This was a bit of good news for the yellow metal, especially since it is still trying to wait out Hurricane Sandy.

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Spot gold dropped slightly by 0.31 or (-0.02%) to come in at $1,710, up 0.1 percent, while U.S. gold futures were up by 0.80 or (+0.05%) to come in at $1,709 per ounce. As you can see, no big gains for the yellow metal, but no significant losses either.

The yellow metal still does however remain on track for its biggest monthly loss since this past May of 2012 right before the Feds went ahead with their latest stimulus announcement. October has actually been an interesting month for gold, as the yellow metal hit an 11-month high above $1,795 earlier in the month after the Fed's stimulus plan but retreated after failing to break $1,800. Now, in the same month the yellow metal will end up taking a loss. However, the month of November is right around the corner, and since November has traditionally been strong for gold it should be interesting to see how much of an upswing gold takes during November of 2012.

A Reuter’s poll shows the economy is expected to have added 125,000 jobs last month, though the unemployment rate is seen at 7.9 percent, against 7.8 percent the previous month. I don’t think that data will be too much of a factor for the price of gold, as the 8 percent unemployment level is somewhat of a constant number.

Peter Fertig, a consultant with Quantitative Commodity Research, said the stubbornly high rate of unemployment in the United States suggested that monetary easing was not likely to end soon, signaling well-supported gold prices.

"The level of unemployment is still at a level where the Fed does not feel comfortable with it," he said.

Published in United States Economy

Just when we thought everything was alright.  Few breaths were taken in the world financial community last September 13 until Ben Bernanke surfaced from the Fed FOMC’s annual meeting on monetary policy at Jackson Hole, Wyoming.  Then he made his fateful announcement:  The Federal Reserve would now execute its mandate to print money as it deemed necessary to boost U.S. employment figures in particular, and the economy in general.  Welcome America, to QE3!

Once Bernanke made his announcement, several things became clear:  a) the price of gold would increase, but not without some speed bumps along the way. b) monetary easing would need to catch on internationally. c) gold would require help from additional economic events to push it past the $1,790-per-ounce resistance level.

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What remains unclear is how the Fed makes its decision about how much inflation it would allow to slip into the economy and who exactly in the Fed is voting to keep the presses running, and who exactly is voting to hold them back or stop them altogether.  As it turns out, the twelve board governors are not a unanimous gaggle of geese.  There’s some dissension in the ranks; so they’re more like a fluttering bunch of doves and hawks, squawking over the nation’s tolerable rate of inflation.

According to a Reuters report Friday, all is not peachy keen at The Fed.  Since the U.S. is recovering slowly, the official position is that the Fed would continue to buy bonds until the economy improves “substantially.”  Depending whether you’re a Fed hawk or a Fed dove, you ‘ll probably come up with a different definition of “substantially.”  (Figures don’t lie, but liars figure).  Minneapolis Fed President NarayanaKocherlakota feels comfortable with a 2.25-per-cent rate of inflation.  Chicago Fed dove Charles Evans, on the other hand, can sleep nights as long as the inflation rate stays under 3 per cent.

Than we have Richmond Fed President Jeffrey Lacker who feels that what his colleagues are putting forth is all feed for the birds. According to a Bloomberg report Friday, Lacker asserts that the QE3 “will increase inflation risks and complicate the pull-back from record stimulus while not fueling economic growth.”  In a speech at the University of Virginia in Charlottesville, Lacker said that “adding to our balance sheet increases the risks we’ll have to move quickly when the time comes to normalize monetary policy and begin raising rates.”  Lacker doesn’t believe the Fed should be sainted with the authority to meddle with rates in the first place.  Moreover, he has little faith in Fed action’s ability to impact unemployment rates.

Published in From The CEO
Friday, 12 October 2012

The View from Abroad

Here at The Investor’s Corner, we try to tap the views of experts from around the world, not simply from those here in the United States.  After all, gold represents real money to the entire world, not just to the U.S.  Still, it’s all too easy to get caught up in our own point of view, particularly since the United States is the world’s third largest consumer of gold (India is the first, and China is second); and the US Dollar is the principal currency of all international transactions.

Today, as gold hovers quietly around the $1,765-per-ounce level, let’s take a look at the Union Bank of Switzerland’s updated view of the yellow metal.Though UBS has had a long and controversial history, it remains the world’s second largest manager of private wealth assets. As such, the influential Swiss organization needs to monitor gold very closely through its investment research department. While some of today’s report repeats what we already know, other parts of the report seem refreshingly novel and direct.

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On the one hand, UBS reports what we know to be the case about our own Fed – that its role in the debasement of currencies through quantitative easing will be the principal driver of the gold price in the coming year.  In the words of the report, “a $2,000 price tag is not overly ambitious.”

On the other hand, while we have emphasized that the ultimate price of gold has little to do with political considerations, UBS investment researchers think otherwise.  They observe that the US debt ceiling is expected to be reached in early December, and that politicians will work hard to keep the country from reaching a resulting fiscal cliff in 2013.  But since the electorate will emphasize government growth over the budget, the debt ceiling will likely be extended.  If this happens, ratings agencies will downgrade the US credit status, thus weakening the dollar.  Obviously a credit downgrade will bode well for gold.

Perhaps the biggest surprise in the UBS report is its view of the current Presidential race.  Since Romney is more conservative than President Obama, UBS researchers view his proposed hawkish actions towards the Fed as being detrimental to quantitative easing, and therefore towards the price of gold. (Romney has pledged to fire Fed Chairman, Ben Bernanke, if he’s elected President.)  And in what some pollsters would no doubt consider an outlandish prediction, UBS comes out and states “we expect resident Obama to be re-elected, and so from a Fed and QE perspective the current status quo to prevail.”  This projected scenario remains particularly ironic since Vice Presidential hopeful, Paul Ryan, remains a big supporter of a gold standard.

Looking beyond what many would consider its off-the-wall perspective of U.S. politics, the UBS report sees three conditions for “a sustainable gold rally” as being firmly in place:  robust spec buying, “sizeable ETF inflows and physical demand.”  Also, due to initiatives from the Indian government, the rupee has shown considerable strength. This currency strength comes at the right time for gold -- during the heightening of the Indian wedding season in late October.  This is particularly strong news on the demand side coming from the world’s largest consumer of gold.

While some analysts would disagree with some of the UBS report, they should not ignore it entirely.  Nor should you.  The outlook on gold remains promising for those who choose to accumulate the physical metal at current prices.

Published in From The CEO
Thursday, 25 October 2012

Gold Rebounds on Fed Policy Comments

After a few days of losses gold was able to rebound based on the most recent Fed policy comments. After the Fed meeting was over yesterday they went ahead and reiterated their commitment to ultra-easy monetary policy. This was a welcomed piece of news, as it eased some tensions that have been created over the last few days within the gold trading arena.

Gold for December delivery jumped back up by $11.40, or 0.7%, to come in at $1,713.00 an ounce on the Comex division of the New York Mercantile ExchangeGold futures had settled $7.80 lower on Wednesday, bouncing off the psychologically important $1,700 level. Yes, that’s right. That $1,700 per ounce price mark is very important right now, as investors and traders look at that number very carefully.

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Many think that the positive correction in gold price we have experience over the last week or so may be over. However, not all are on board with that statement. There are still many (including myself) who think gold may drop a bit more before regaining footing and spiking back up to the $1,800 price mark and beyond. All of this will more than likely happen sometime in 2013. That being said, November is right around the corner, and traditionally November has been a very strong month for gold.

“It is too early to tell yet if the October correction is over,” said Mark O’Byrne, executive director at GoldCore. “But a higher close this week would suggest the recent dip is over and it is time to get into position for November, which is one of gold’s strongest months.”

While the Feds may have stated that they are still committed to their monetary policy, this really didn’t do anything to the market. What it did do was encourage investors to keep buying and selling gold.

“The market was not expecting much from [Wednesday’s] Fed statement, and nothing much is exactly what it got,” Ben Traynor, chief economist at BullionVault, wrote in emailed comments. “Nonetheless, the commitment to ongoing asset purchases at $40 billion a month should be a supportive factor for gold. The initial impact of last month’s announcement may have worn off, but the steady drip-drip of liquidity will go on.”

All signs point to November being a strong month for gold, so it would be a wise move to buy into the precious metal now before November comes. That way you have a much better chance of making gains.

Published in Gold Investing

The Federal Reserve on Wednesday provided a slightly more upbeat view of the economy but said it had decided not to scale back the aggressive steps it took last month to stimulate a still-sputtering recovery.

Fed policymakers announced no change in policy and no new action at 2:15 p.m. ET, after a two-day meeting in Washington, D.C.

To continue its efforts to help push down mortgage rates, the Fed reiterated it will buy $40 billion a month in government mortgage-backed securities until there are signs that the job market is improving significantly.

And Fed policymakers again said they plan to keep short-term interest rates near zero until at least mid-2015 — a timetable the Fed extended last month from late 2014.

In a statement after the meeting, the Fed said the economy has continued to expand at a "moderate pace in recent months," echoing the view it said it held last month. And despite September's surprising drop in the jobless rate to 7.8% from 8.1%, the Fed repeated that unemployment "remains elevated."

On the bright side, the Fed said "household spending has advanced a bit more quickly." Last month, it simply said spending "has continued to advance." Retail sales rose briskly last month across a broad range of categories.

However, the statement was a bit more downbeat about business spending, saying growth "has slowed." It previously said growth "appears to have slowed."

Economic reports generally have been more positive since the Fed launched a third round of government bond purchases on Sept. 13 to bolster the recovery. The Commerce Department said Wednesday that new homes sales in September rose 5.7% to the highest level since spring 2010, solidifying confidence in a burgeoning housing recovery. And manufacturing activity, retail sales and consumer confidence all strengthened in September.

But businesses have pulled back on spending and disappointing third-quarter corporate earnings have pummeled stocks the past week.

The Fed's mortgage bond buying program marks the first time Fed policymakers have made an open-ended commitment to buy government bonds, signaling an unprecedented level of support for the halting recovery.

Since the Fed's Sept. 13 move, rates on 30-year mortgages have fallen to 3.37% from 3.55%. Mortgage applications, particularly refinancings that give consumers more spending money, surged initially but have fallen in recent weeks.

The Fed action also was intended to spur investors to move money from bonds to higher-risk stocks, driving up stock prices and making consumers feel wealthier so they'll spend more. Back in Sept. 13, the Dow Jones Industrial Average jumped about 200 points, or 1.5%, immediately after the Fed action, but has fallen more than 400 points the past week on weak earnings and bleaker profit outlooks.

The mortgage bond-buying initiative supplements a Fed program to buy $45 billion in long-term Treasury bonds each month and sell a similar amount in short-term bonds until year's end. That program, known as Operation Twist, is also intended to lower long-term interest rates.

The Fed indicated it could launch additional asset purchases if the labor market doesn't pick up substantially. Deutsche Bank Chief Economist Peter Hooper says the Fed likely will decide to buy $25 billion to $45 billion a month in additional Treasuries when Operation Twist ends in December, in addition to continuing the mortgage bond purchases.

Economist Paul Ashworth of Capital Economics says the Fed might defer such a move to see if a divided Congress is able to soften the impact of a package of year-end tax hikes and spending cuts that could hobble the economy.

Published in United States Economy

Gold futures fell to a six-week low as the dollar’s advance curbed demand for the metal as an alternative investment. Palladium tumbled the most since March.

The greenback rose for the fourth straight session, the longest rally in five months. The euro dropped as Spain’s economy contracted for the fifth straight quarter and French industrial confidence fell to the lowest in more than three years. Gold has declined 4.1 percent this month.

“Spain continues to drive the direction of the market, and people are moving toward the dollar and staying away from riskier assets,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview.

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Gold futures for December delivery fell 1 percent to settle at $1,709.40 an ounce at 1:48 p.m. on the Comex in New York. Earlier, the price touched $1,705.10, the lowest for a most- active contract since Sept. 7.

On the New York Mercantile Exchange, palladium futures for December delivery plunged 4.6 percent to $593.85 an ounce, the biggest drop since March 22. Earlier, the metal touched $590.40, the lowest since Aug. 17.

Platinum futures for January delivery fell 2.3 percent to $1,575.60 an ounce. The price dropped as low as $1,573.70, the cheapest since Sept. 7.

Silver futures for December delivery slid 1.4 percent to $31.793 an ounce on the Comex. The price touched $31.65, the lowest since Sept. 4.

In 2012, silver has climbed 14 percent. Platinum has gained 12 percent, and gold has advanced 9.1 percent. Palladium has dropped 9.5 percent.

Today, the Standard & Poor’s GSCI Spot Index of 24 raw materials, which includes gold and silver, erased this year’s gain.

Published in Gold Investing

One day after gold managed to climb up some it was back down to a six-week low, as a stronger dollar helped to curb investor interest in trading the yellow metal today. While the yellow metal still sits over the $1,700 price mark, it is concerning that it is beginning to drop again. This may also have a lot to do with the fact that it is an election year.

The U.S. Dollar Index managed to climb to a one-week high against a basket of currencies after Moody’s Investors Service cut the credit ratings of five Spanish regions and the nation’s gross domestic product shrank for a fifth quarter. French industrial confidence also fell to the lowest that it has been in more than three years.

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Gold has declined around 4 percent over the last month, which basically means that the yellow metal has given back almost all the gains it made after the Feds announced another round of debt buying. As I have stated time and time again, sometimes these money injections and debt crisis maneuvers only work in the short term, and right now this looks to be the case. The Feds conclude another meeting tomorrow, so we will have to wait and see what comes from that.

“Spain continues to drive the direction of the market, and people are moving towards the dollar and staying away from riskier assets,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview. “Some investors are also waiting to hear from the Fed tomorrow.”

Gold futures for December delivery fell 0.9 percent to come in at $1,711.10 an ounce earlier today on the Comex in New York, after slipping to $1,705.10,  which was the lowest for a most-active contract since Sept. 7. As you can see, the yellow metal is still strong, but all the momentum it has gained over the past sex-weeks seems to be slipping some.

Gold should be able to pull through this situation fairly quickly. If you are a gold investor you already understand that the yellow metal in volatile, and price drops like this are just part of the game. Don’t let the recent price drops scare you away from purchasing gold, as it is still arguably the very best investment you can possibly make.

We will see if anything new comes out of the Fed meetings when they conclude tomorrow.

Published in Gold Investing

U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009.

The Standard & Poor’s 500 Index has rallied 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P 500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the index gained another 93 percent in the next 2 1/2 years.

For all the concern about unemployment and manufacturing growth, the best assets this year remain American companies after unprecedented steps by the Federal Reserve to support growth. Forecasts for a rebound in the U.S. economy and the central bank’s pledge to keep interest rates near zero for years convinced bulls the S&P 500 will extend gains. Bears say political gridlock will drag down prices after monetary stimulus wears off.

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“We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets,” said Max King, a multi-asset strategist at Investec Asset Management in London, which oversees $100 billion. “This is a major green light for equities and the fact that people don’t see it, is great.”

Treasury Returns

Treasuries have returned 3.3 percent in 2012, compared with 9.9 percent for U.S. investment-grade corporate bonds and 14 percent for high-yield debt, based on Barclays Plc index data. The S&P GSCI Index of 24 commodities advanced 1.7 percent, while the Dollar Index (DXY) that measures the U.S. currency against those of six trading partners weakened 0.7 percent.

The S&P 500 gained 0.3 percent last week to 1,433.19 following better-than-estimated data on U.S. housing starts and as earnings from Citigroup Inc., Honeywell International Inc. (HON) and Mattel Inc. topped forecasts. Including dividends, the index is up 16 percent this year, led by PulteGroup Inc., Sprint Nextel Co. and Gap Inc., which have risen more than 96 percent. The S&P 500 added 0.1 percent to 1,434.16 at 10:03 a.m. New York time.

The bull market will last another year as individuals regain confidence and return to equities after withdrawing money since 2007, according to Laszlo Birinyi, the president of Birinyi Associates Inc. in Westport, Connecticut. Investors have pulled about $100 billion from U.S. stock funds this year and added $250 billion to bond funds, according to data from the Investment Company Institute in Washington.

‘Better Shape’

“I don’t think you’ve seen the signs of a frothy, toppy market,” Birinyi, who traded equities at Salomon Brothers Inc. in the 1980s, said in an Oct. 17 phone interview. “People are realizing that the stock market is not all that bad. It’s been telling us that the economy and companies are in better shape than people think.”

Shares worldwide rallied this year as European Central Bank President Mario Draghi said July 26 the bank would step up its fight to save the euro and bring down record borrowing costs in Spain and Italy.

The Fed initiated a third phase of so-called quantitative easing on Sept. 13 to purchase $40 billion of mortgage-backed securities per month and said that it will keep interest rates near record lows at least through mid-2015.

The U.S. recovery is the weakest post-recession expansion since World War II, according to Bloomberg data, and the International Monetary Fund forecasts gross domestic product around the world will expand 3.3 percent this year, the slowest since the 2009 recession.

Leader Board

While the S&P 500 is outperforming broader indexes, nine national markets among 24 developed nations tracked by Bloomberg have gained more. Germany’s DAX Index (DAX) has jumped 25 percent as investors raised expectations policymakers will solve Europe’s debt crisis. The Athens Stock Exchange General Index soared 28 percent on optimism Greece will reach a deal with the IMF and European partners to remain in the euro zone. Silver, corn and platinum have risen at least 15 percent.

Bears say the support of central banks can only do so much. They also note that the so-called fiscal cliff, the more than $600 billion of tax increases and spending cuts that are set to kick in automatically next year unless Congress breaks a deadlock, is weighing on investors deciding which assets to buy.

‘Moving Up’

“I’d rather have things be moving up as a result of fundamentals than a very aggressive central bank,” Jason Brady, a managing director at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $83 billion, said in an Oct. 18 phone interview. “You’re looking at a bunch of companies in situations where there are a lot of headwinds and a real difficulty of getting growth.”

Intel Corp. (INTC) and International Business Machines Corp. (IBM) reported results last week that showed the global economic slowdown is prompting companies to curtail technology spending. The stocks have fallen every day since releasing quarterly earnings, with Intel down 2.5 percent in the first trading session and IBM losing 4.9 percent, the biggest loss since October 2009.

General Electric Co. (GE), the biggest maker of power-generation equipment, fell 3.4 percent on Oct. 19 when it reported revenue that missed analyst estimates and cut its 2012 sales target. It was the second quarter in a row of lower-than-projected sales, data compiled by Bloomberg show.

Jobless Rate

While the unemployment rate unexpectedly declined to 7.8 percent in September, payroll growth slowed, a Labor Department report showed on Oct. 5. Companies added 114,000 workers last month after a revised 142,000 gain in August, according to government data.

Reports on the world’s largest economy beat forecasts last month. U.S. manufacturing unexpectedly expanded in September after three months of contraction while service industries grew by the most in six months, data from the Institute for Supply Management showed this month.

“The negative case is always more compelling,” Birinyi said. “It’s always more rational because the negative case is about now. The stock market is about tomorrow.”

S&P 500 earnings may rise 4.7 percent this year to $101 per share, the highest on record, according to the average prediction among Wall Street equity strategists. While the growth rate is about a third of the pace in 2011 and the slowest since 2009, profits have already expanded an average 23 percent a quarter since the start of 2010. They’re projected to pick up in 2013, increasing 5.7 percent, the data show. For the 117 companies in the S&P 500 that have reported quarterly results so far, earnings are exceeding estimates by 4 percent on average, while sales are increasing 1.8 percent, according to data compiled by Bloomberg.

Record Predicted

Wall Street strategists tracked by Bloomberg predict the S&P 500 may surpass its all-time high next year. The benchmark may end 2013 at 1,585, according to the median forecast of five analysts polled by Bloomberg News, 1.3 percent higher than a record in October 2007.

The improvement in the U.S. economy and signs Europe’s debt crisis may be easing made Treasuries less attractive than equities this year. The yield on the benchmark 10-year bond fell to 1.38 percent on July 25, according to Bloomberg data, a record low. It finished last week at 1.76 percent, from 1.88 percent at the end of 2011.

Bond Returns

Barclays Plc’s 10-20 Year Treasury Total Return Index has climbed 3.3 percent this year. The Barclays Municipal Bond Index has advanced 6.1 percent, while a gauge of Treasury inflation- indexed notes known as TIPS added 6.3 percent.

Debt issued by companies, loans and hedge funds also trailed stocks. A Barclays index of investment-grade U.S. corporate debt has gained 9.9 percent in 2012 and a gauge of high-yield credit advanced almost 14 percent. The S&P Leveraged Loan 100 Total Return Index is up 9.7 percent this year, while the HFRI Hedge Fund-Weighted Composite Index added 4.8 percent .

The S&P GSCI commodity index is poised for its smallest annual advance since plunging in 2008. China expanded 7.4 percent last quarter, the lowest pace in more than three years, the government said Oct. 18. A slowdown in the world’s second- biggest economy and largest consumer of raw materials is putting pressure on the ruling Communist Party to add stimulus, fueling confidence the country will avoid a hard landing and boost world economic growth.

Emerging Markets

The MSCI Emerging Markets Index (MXEF), which tracks stocks in 21 developing nations including China, Brazil and Russia, has climbed 9.8 percent, and the Euro Stoxx 50 Index (SX5E) for the 17- nation euro area is up 9.7 percent.

The 34 percent rally for the S&P 500 in 1995 was the biggest gain in 37 years. The U.S. equity benchmark traded at an average 16.6 times reported earnings and rose more than 19 percent annually through 1999 as economic growth boosted profits and investors snapped up new-technology businesses. The index ended last week with a price-earnings multiple of 14.5, data compiled by Bloomberg show.

Equities remain cheap compared with other assets, according to Alan Higgins, who helps oversee $48 billion for Coutts & Co.

Profits for S&P 500 companies represent 6.9 percent of the index’s price, compared with a yield of 2.7 percent on investment-grade U.S. corporate bonds, according to Bloomberg and Barclays data. The spread of 4.2 percentage points compares with an all-time high of 4.6 points in 2011, the data show.

“Equities still stand out either as attractive or reasonably valued, so we are more likely to invest there,” Higgins, the London-based securities firm’s chief investment officer for the U.K., said in a phone interview on Oct. 18. He cut investments in credit last week. “They are more likely to take the lead based on current valuations.”

Published in United States Economy
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