Once a week I embrace the adage that a picture is worth a thousand words, and I select a handful of graphics to convey important economic or investment insights. This week, I decided to scour our archives to identify the most important – and telling – charts of 2012. Don't worry, though. I'm not simply copying and pasting my previous work. I went ahead and updated each chart with the most recent data, so you can see how each trend continues to play out.
Dollar Haters, Be Gone!
Wasn't the U.S. dollar supposed to collapse and lose its reserve status any day now? Just curious. I vaguely remember hearing that a few times in the last year or so. Apparently the dollar didn't get the memo, though.
The U.S. Dollar Index, which measures the greenback against a basket of six currencies, is up 10.4% over the last year. If we just focus on the dollar's performance in 2012, it's up 1.6%. Not gangbusters, but definitely not a collapse.
Somebody call Ripley's Believe It or Not!
The Banking Sector (Yes, Banking!) is on the Mend
The banking sector suffered mightily through the financial crisis. Literally hundreds of banks went belly up. But time heals all wounds. And the healing is definitely under way.
More than halfway through the year, the FDIC has only shuttered 40 banks. That's down from 68 failures at the same time last year. And well below the pace in 2009 and 2010. The unofficial list of problem banks is falling, too, according to CalculatedRiskblog.com.
Long story short, since banks got us into this whole mess, they're going to have to lead us out. Although the fundamentals aren't top notch, they're improving. And that, my friends, is reason enough to be selectively bullish on bank stocks. Yes, bank stocks!
The Scariest Jobs Chart Ever
Speaking of things that are on the mend, we're finally witnessing a recovery in the employment market. Unfortunately, it's a mind-numbingly slow and fragile one.
As the chart above reveals, job losses from the start of this recession are far from being recouped in percentage terms. But at least we're headed in the right direction.
Re-Election, Déjà Vu
The stock market has a history of rallying during Presidential Election years, and so far, 2012 is following that script. If we really reach back into the annals of stock market history, and compare this year's performance to 1936, we notice the most striking resemblance.
Of course, the 1936 election year shares fundamental similarities with this year, too. Like the fact that the country was emerging from a steep economic slowdown. And the size of the Federal Government increased dramatically as a percent of GDP.
If the performance parallel with 1936 holds, the S&P 500 Index will be up by 27% at the end of the year. Wishful thinking? Not really, considering the S&P 500 is already up 14% this year.
Giddy up! Giddy up!
China: The Best Investment Opportunity Ever… or Not!
Starting in August 2011, I started warning that a slowdown in the world's fastest-growing economy (China) was brewing. And, in turn, Chinese stocks were a bad bet. Readers accused me of fear mongering. I'll let this chart – showing the price performance for the Shanghai Composite Index – serve as my rebuttal…
Since November 2010, Chinese stocks are down 33.9%. In comparison, U.S. stocks are up about 15% over the same period. The selloff has accelerated recently, too, with the Shanghai Composite down 14.1% since May, compared to a 3% rise for U.S. stocks.
As my colleague, Matthew Weinschenk, recently asked in his column, "Is China actually undervalued – making this the perfect buying opportunity?" Not a chance! As Matthew confirms in his article, I'd avoid any thoughts of bargain hunting or bottom fishing in China. At least until the economic readings start improving. And that's just not happening right now.
Real About Real Estate
Forget LL Cool J and go ahead and call it a (real estate) comeback! As you know, we've been predicting it for months. But now we have undeniable proof that it's actually happening:
The latest reading of the S&P/Case-Shiller 20-City Composite Index rose 2.2% in May, marking the second month of gains. And prices in all 20 cities in the Index experienced monthly gains.
As Bill McBride at Calculated Risk says, "It might be hard to believe, but earlier this year there was a debate on whether housing had bottomed. That debate is over… and the debate is now about the strength of the recovery." Maybe now you'll believe us that a real estate recovery is afoot, too?
I Just Called to Say… I Love My Mobile
Back on March 6, 2011, I declared, "The exploding use of mobile devices promises to be the fastest-growing, and possibly biggest technological trend ever." Hyperbole? Not even a little. As analyst, Chetan Sharma, shows, more people now have mobile phone subscriptions than electricity and safe drinking water. (That's not a typo.)
Forget possibly. Mobile is, in fact, the biggest technological trend. Ever. Invest accordingly.
Disclosure: No positions