The stock market feels awful as we end January on another down note.  The S&P 500 lost over 8% as economic headlines continued to worsen and governments around the globe scrambled to bail out their financial institutions.

It’s wise to look under the covers.  Not all stock portfolios moved together in January.  Large growth portfolios declined less than 3% while large value lost over 11%.  Banks got tanked and companies with reliable earnings growth came through.  End of story.  Owning large banks has been a disaster no matter how you cut it.  Returns were much better in January if you owned some bonds and cash.

The US stock market has traded in a range since September.  Stocks have moved sideways and will until confidence is restored.

Will Obama come through with the magic bullet – a stimulus plan that restores spending?  Will a “bad bank” free up our financial institutions and get things moving again?  It’s hard to know.  What is a better bet is that companies that show earnings strength and make smart decisions will hold up better until the $8 trillion on the sidelines moves the market out of this range.  It will happen. In the next 3-6 months? If anyone knows for sure then they must have a direct line to a higher being or Obama, or both. In the meantime, stay with quality.  It’s tempting to buy beaten down stocks, but as we saw in January, if they don’t recover the punishment can be severe.  Stocks will break out of this range and move higher when confidence improves and jobs are secure and plentiful. It is better to stick with companies that manage their business well in tough times and avoid the beaten down cheap stocks. They may stay that way for awhile.