A Strong First Half

Friday marked the close of the first half of 2013, and it was certainly a happy six months for the stock market. The S&P 500 returned nearly 13 percent, giving that index its best first-half returns since 1998, when the dot-com mania was just getting started.

In addition to the good news for the first half, this performance also bodes well for the second half. Since 1946, the S&P 500 index has risen at least 10 percent 23 times in the first six months of the year, according to data from S&P Dow Jones Indices. During those 23 years, the market also rose the second half of the year 19 times. In eleven of those years, the S&P 500 rose at least 10 percent over the second half of the year.

Three of the stocks in the S&P managed the difficult feat of doubling in value over the course of the past six months. They are:

• Best Buy, up 134 percent
• Netflix, up 128 percent
• Micron Technology, up 126 percent

Keeping the Long-Term Faith

After a very noisy drop over a couple of days last week, the stock market has been making a bit of a comeback this week. Through yesterday, the S&P 500 has actually had its best three-day stretch since the very beginning of the year, rising by 2.6 percent.

That doesn't quite make up for last week's slide, after the Fed made clear that its bond-buying program would eventually have to end. The S&P dropped 3.9 percent in two days at that point, and even with this week's rally, it's still down 1.1 percent for June, with one trading day left in the month.

But with 2013 almost exactly halfway in the books, the S&P is still up a strong 13 percent for the year. Even with the plunge over most of the last month - the S&P lost more than 5 percent of its value between May 21 and June 24 - it's been a very good year to be invested. One more lesson in avoiding the short-term roller-coaster movements of the market, and keeping your eye on the long term.

The Rout in Bond Funds

The stock market has stumbled in recent weeks, but the bond market has been faring even worse. With long-term rates climbing by about 1 percent since the beginning of May, bond prices - which, remember, move in the opposite direction of their yields - have been plummeting. In the past month, every single fixed-income category tracked by Morningstar has posed a negative return.

And bond investors have been rushing to get out of the market. Through the first three weeks of June, bond mutual funds and ETFs have had $62 billion pulled out of them. That's already $20 billion more than the previous record for bond outflows in a month, set back in October 2008, in the midst of the financial-sector collapse.

Prior to June, there had been $115 billion deposited in bond funds and ETF this year. So the June withdrawals have already wiped out roughly half of this year's new fixed-income assets.

How Can Consumer Confidence Still Be Strong?

The surprisingly strong June consumer confidence numbers that came out yesterday may seem like a bit of a fresh start after the Wall Street meltdown we suffered through last week, but there's more to this than meets the eye. For one thing, the survey was conducted prior to June 13th, and the market started its steep decline nearly a week later, on June 19.

Nevertheless, a five-year high in consumer confidence is enough to get one's attention. The largest factor was increasing optimism about the job market, as well as the recent growth in the housing market. Add it up, and you get consumer confidence at its highest since January 2008, at the very onset of the recession.

Employment and housing are probably bigger factors in consumer confidence than stock prices, so the June figure might not have been hurt too badly by the market's decline even if it had been factored in. It will be interesting to see if the stock drop has any effect on July's confidence reading.

Dividends Still Growing

With all the bad news that came down from Wall Street last week, it's nice to be able to point to a positive development in the stock market world: Dividend growth continues to be strong. At this point, the vast majority of the stocks in the S&P 500 are dividend-payers, with the 409 such companies in that index representing a 14-year high.

And the amount those companies is paying out keeps growing. The first quarter sum of $319.8 billion paid out in dividends surpassed, by nearly 20 percent, the peak from before the financial crisis in 2008-09. Dividends per share for the first quarter grew 15 percent from the previous year.

The S&P 500 has been very strong in recent years, rising by 26 percent over the past 24 months. But its dividends have been even stronger, increasing by 30 percent over that time frame.

The Shrinking PC Inudstry

The fitful, protracted sale of Dell Computers this year has epitomized what has been a rather sudden downturn in the fortunes of personal computer manufacturers. After months of squabbling and dealmaking, the latest offer to Dell shareholders is to take the company private at $13,65 a share, despite the fact that an asset management firm that is one of the major investors in the company estimates the stock to be worth $24 a share.

Dell's fate is not unlike that of another once-formidable PC giant, Hewlett-Packard, now struggling to find its legs once again. The emergence of tablets and smartphones has greatly reduced the markets for PCs; personal computer sales fell by 4 percent in 2012, and according to Citgroup, they are forecast to fall another 10 percent this year.

As recently as 2010, PC sales grew by 14 percent, a solid if unspectacular number. It remains to be seen if this industry will ever have another year that strong again.

The Market's Plunge

Fed chairman Ben Bernanke, at the conclusion of the Federal Reserve’s meeting on Wednesday, came out and basically said the Fed wasn’t changing any of its policies, either its near-zero interest rates or its asset purchases. Nevertheless, the S&P 500 and Dow Jones Industrial Average  just concluded their worst day of the year.

What happened? Bernanke simply alluded to the fact that the Fed’s bond buying was going to have to come to an end at some point. He even put a bit of a definition on it, saying that when unemployment reaches 7 percent, the economy would have improved enough to warrant a tapering of the asset buying. The unemployment rate is currently at 7.6 percent, and most projections have it falling to around 7.0 percent by the end of the year.

The Fed’s asset purchases have been a great boon to the bull market we’ve enjoyed over the past four years, so any tapering or ending of them is likely to have a dampening effect on stock prices. But investors should have known that the purchases were going to end at some point. The surprise here is mostly that the reaction has been so swift. After all, as Bernanke said, for the moment nothing has changed.