Markets had a good week

After settling down to the low end of its trading range (above 8K), Dow gained 280 last week. Buyers scented passage of the stimulus package. Longer term, markets continue dragging along in a sideways pattern.


Dow Jones Industrials --- YTD




In the indecisive stock market, 2 groups (MLPs & junk bond funds) stand out this year. The graphs show how they have done well compared to the line for the declining Dow. Meanwhile the Treasury bond rate has risen sharply from 2.1% at the start of the year to almost 3% at present. MLPs & junk bonds are high yield plays & their premium over the 10 year Treasury bond rate has narrowed sharply because of lower yields on high yield products & higher yields on Treasuries. Individual junk bond funds are typically up 5- 10% this year, a far better performance than the Barclays ETF. Another high yield group, REITs, have pretty much tracked the lower values on the Dow, not benefiting from a narrowing yield spread.


Alerian MLP Index vs Dow --- YTD





Barclays Capital High Yield Bond ETF vs Dow - YTD




Markets this week will be heavily influenced by the stimulus package. The Senate is expected to pass a modestly lower amount, around $800B (what's a few $B here & there?), then originally proposed. Then that bill will have to be blended with the House bill, not an easy task! Chances are thoughts about massive amounts of gov spending, assuming it reaches the economy fairly soon, will bring another up week for stocks.