Shoppers Stayed Home for the Holidays

We’re starting to get some impression of how the holiday shopping season went at the end of last year. And the numbers look pretty good: According to ShopperTrak, a market research firm, sales for November and December combined were up 2.7 percent over the previous year. That’s good, although not quite as strong as the 3.0 percent increase in 2012.

One trend seems very clear: People aren’t going to the malls any more. Foot traffic  in retail stores was down 14.6 percent from the year earlier. The average number of stores people visit per shopping outing has dropped from 4.5 to 5 stores in 2007 down to 3 to 3.5 stores this year.

But even though more and more of us are buying online every year, brick-and-mortar shopping remains the cornerstone of the holiday season. According to ShopperTrak, more than 90 percent of all retail purchases are still made in physical stores.

The Cost of the Deep Chill

The deep freeze that we faced over the past few days – along with much of the rest of the nation – has had a major effect on our lives this week, but it also may have longer term ramifications for our economy. Demand for natural gas has peaked to an all-time high, with one firm estimating that Monday would set a record of 125.7 billion cubic feet to be consumed.

Of course, prices are following close behind. Generally, in the wintertime, a contract for a million BTUs of natural gas costs about $20. Last Friday, it was at $13.61. But on Tuesday of this week, a price for one contract in New York reached $99 for a million BTUs – a record.

Fortunately, most natural gas is bought well in advance, so the day-to-day price doesn’t fluctuate as much as that of gasoline. But since the start of November, futures prices for natural gas are up by more than 20 percent overall.

The January Barometer

At the end of last year, we saw the customary December rally in the stock markets. Now in the beginning of 2014, there is a January effect to look for: The January barometer, which suggests that however the market performs in the first month of the year is how it will perform for the entire year.

And there's something to this. Dating back to 1928, when the S&P 500 has been up in January, it has been up for the entire year 80 percent of the time, with an average annual return of 13.0 percent. When January has been a down month, the entire year has been positive just 42 percent of the time, and the S&P shows a modest annual decline on average.

The average performance for the S&P over that time has been an increase of 7.5 percent per year, and the index has risen in 66 percent of those years. So the January barometer appears to be significant.

Unpredictable

Where are the markets headed in 2014? At this time of year, there is no shortage of expert predictions to be found. But those experts don't necessarily know any more than the random investor does.

The market research firm Birinyi Associates recently looked back at the 2013 forecasts of eleven top Wall Street firms like Morgan Stanley and Goldman Sachs. The consensus estimate of those firms was that the S&P 500 would increase by 8.2 percent in 2013. In the end, the index rose by nearly 30 percent.

No one saw that coming. The most accurate of the eleven forecasters was Citigroup, which thought the S&P would finish 2013 at 1615, for a rise of of about 10 percent. In reality, the S&P blew past 1615 halfway through the year, on July 1st.

Everybody Wins

The  stock market rally of 2013 was not only strong,  it was remarkably broad-based as well. Consider that among the 30 stocks that finished the year in the Dow Jones industrial average,  only one of them ended the year down: IBM,  which lost 2.1 percent in 2013.

Standard & Poor's divides all the stocks it covers into ten industry sectors.  All ten of those sectors were up on the year,  from a 9.8 percent increase for telecommunications to a 40.9 percent increase for consumer services.

Within those ten sectors,  there are 104 stock industry groups.  Incredibly,  101 of them gained during the year.  The only losers were three of the basic materials groups: coal,  down 12.1 percent,  platinum and precious metals,  down 31.1 percent, and gold mining, down 52.4 percent.

The Santa Rally Finishes Off a Great 2013

The so-called Santa Rally we discussed at the beginning of December ended up coming through in grand fashion at the end of the year. In the last two weeks of 2013, from December 17 through the New Year, the S&P 500 rose by nearly 4 percent, compensating for a desultory beginning to the month. All told, the index was up 2.64 percent in the month, for a customary winning December.

That meant that for the year, the S&P rose by 29.6 percent. You have to go back to 1997, in the early days of the high-tech bubble, to find a year that did better.  Other than two years in the go-go Nineties, the S&P hadn't had that strong a year since 1975.

The scorecard for the other indexes: the Dow Jones was up 26.5 percent in 2013, and the Nasdaq was up 38.3 percent. The small-cap Russell 2000, which is making a name for itself as another key equity index, finished up 37 percent.

Thoughts for the New Year

"For eleven months and maybe about twenty days each year, we concentrate upon the shortcomings of others, but for a few days at the turn of the New Year we look at our own. It is a good habit." ~ Arthur Hays Sulzberger

"New Year's Resolution: To tolerate fools more gladly, provided this does not encourage them to take up more of my time." ~ James Agate

"New Year's Day is every man's birthday." ~Charles Lamb