The College Investor’s Market Thoughts – October 21, 2011

Sorry about missing my updates for the past couple of weeks – traveling and other commitments prevented actual live updates.  These posts are also something I can’t really pre-write…  But anyway, I’m back at it with this week’s market thoughts.

I thought I would show a very interesting chart this week:

This chart shows the Dow Jones Industrial Average for the last 2 months.  It starts in early August to present, and it shows us going nowhere on a roller-coaster.  In this time frame, the Dow only gained 1%.  But just look at those volatile swings that have been occurring!

So What Drove The Market This Week?

• Industrial Production: To start the week, industrial production numbers for September were announced, and they increased 0.2%.  The category was lead by automotive production and general manufacturing.  It was reassuring news for the market because gains were broad based and seem to be continuing along at a healthy recovery.
• Inflation: On Tuesday, the producer price index was released, and showed a surge in inflation in September, up 0.8%.  This was much higher than expected.  On Wednesday, consumer price index was also release and it also saw an increase of 0.3%.  Both of these inflation readings were higher than expected.  This will most likely spark caution in the Fed, as inflation is not easing as expected.
• Housing: Also on Wednesday, housing starts were released, and came in much stronger than expected.  This comeback, however, was lead by a huge increase in multi-family dwellings, which indicates a swing towards rental markets.  Home builders, however, as still being very cautious as many families are still renting and supply may still be larger than demand in most parts of the country.
• Employment: Jobless claims continued to fall for the past four weeks, which is showing general improvement in the labor market.  However, expiration of benefits is also playing a part as the long-term unemployed fall off government support.

The College Investor’s Thoughts:

• REITs: With the rise of multi-family construction, lack of faith from homebuilders, and still struggling job market, more Americans will be renting.  As a result, REITs that invest in rental properties may be a good play going forward.  Many REITs pay great dividends, and if you get in early, you could see a nice capital appreciation as individuals chase the yield.
• Energy: Energy stocks are currently beaten down quite a bit, and many be at a great potential buying opportunity.  As inflation continues to rise, and the winter demand for heating oil is coming, there should be an uptick in price for oil, and as a result, a price increase in energy companies.
• Insurance Companies: We are getting out of the summer storm season, and it appears to be pretty mild.  Insurance companies have been pretty beaten down as of late, and it could be a great time to snag a few solid companies and a great price.  Also, several of these companies pay solid dividends, and should continue to do so.  Look for dividend paying deals.

Readers, what are your thoughts?

This post was written by...

Robert – who has written 317 posts on The College Investor.

Robert is the founder and editor of The College Investor, a personal finance site dedicated to young adult and college student finances. You can learn more about him here and connect with him on Twitter or Facebook.

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