Obamacare Doesn’t Bring Down U.S. Stocks, 2nd Quarter 2012 Ends With A Bang:
Bullish sentiment rose at the end of the second quarter with stocks posting strong gains on the last trading day of June 2012. One day after Obamacare was deemed constitutional by the highest court in the land, the Dow rose 277.83 points to 12,880 up 2.2 percent, the NASDAQ was up 85.56 to 2,935.05 up 3 percent while the S&P 500 closed the session at 1,362 up 33.12 for a gain of 2.49 percent. Obamacare passing did not cause stocks to fall precipitously as some analysts predicted. June 2012 was the best month for the Dow in more than a decade and the short run impact of new healthcare legislation was well received by stocks.
The increased volume debate that states more people in the healthcare system overall will be a positive for the economy dominated bearish sentiment. It’s clear from basic economics that workers in a healthy nation have positive spillover effects on the economy long run and because stocks move based in certainty, there was a systematic- positive response to the Obamacare passage.
EU Summit News June 2012 Ends On Positive Note
News from Europe also helped U.S. equity performance as market participants realized Angela Merkel will continue to acquiesce on issues such as eurobonds. Merkel and the Germans are outnumbered and a well-timed political revolt from other nations could put the future of the EU in jeopardy. There is strength in numbers and Merkel also risks negative sentiment based on headlines impacting Germany’s economy from her opposition internally.
What We’re Watching
We are watching the euro and our benchmark sectors – financials, tech and small caps. If the euro moves up, this could be evidence that possible solutions to the EU debt crisis are gaining momentum. We believe the euro could have bearish pressure in the short run after jumping significantly and we would consider this a buying opportunity for U.S. equities. We believe sector rotation may occur as investors take on more risk. Sectors that were out of favor may become more popular soon.