Since our last meaningful market correction (7% decline from mid-June to July 10, 2009), the S&P 500 has risen over 21% in less than 3 months. The best-performing industry segment over this time frame has been the Financials, which are up close to 37%. Since the market low on March 9, 2009, the Financial sector has risen close to 144% and now represents 15.4% of the S&P 500 compared to 8.9% on March 9. We have been confounded by the meteoric rise in a sector so dependent on the health of the consumer and housing market. While things have obviously improved since the dreary days of March, we see a housing market and consumer that continue to be highly dependent on a series of government initiatives designed to plug the holes in the dike. What will the picture look like when the government takes off the training wheels?
- Obama, Lawmakers, Weigh New Steps to Spur Economy
Yesterday we received more data to suggest the consumer remains in hunker-down mode. Consumer credit declined by $12 billion in August to mark the seventh consecutive month of contraction. The Wall Street Journal pointed out in an article yesterday that "credit hasn't contracted for eight months in a row since the Fed started tracking it in 1943." Since the peak in July, 2008, consumer credit has contracted by about $119 billion, or 4.6%. This magnitude of contraction also has never been seen in the history of the United States.