Stock Market Boom?

Stock Market Boom?
I have been off on leave for the last two weeks and it seems that while I was away the local stock market has taken off.  The market index has moved from 92,500 at October 17, 2011 to just under 98,000 at November 4, 2011; this represents an increase of about 6 percent. One might think that the market is booming but further investigation must be undertaken to see if this is so.

Of the 37 stocks listed on the main market, 27 advanced, 3 declined and seven traded firm during this period.  The stocks that didn’t move were either stocks that trade infrequently or companies listed in Trinidad and Tobago.  Cable and Wireless, Gleaner and First Caribbean Jamaica were the equities that declined.  Generally the whole market has advanced so we will have to see if some companies contributed more to the increase than others. An analysis of the advancing stocks revealed that there were 8 companies that advanced by less than 3 percent, 11 that increased by 5-15 percent with 8 companies advancing by more than 20 percent.  Thus the majority of companies saw a price increase at least equal to the overall market increase.

Stocks that saw the largest increases included Caribbean Cement Company and Pulse Investments with increases of about 50 percent.  Nearly all financial companies experienced significant growth in their stock prices with NCB and JMMB leading the way.  This should not surprise anyone given these companies reluctance to take smaller margins.  It seems though that the market is now adjusting to the reality of lower interest rates and this is being reflected in the appreciation of stock prices.  The recent increase in consumer confidence along with improved confidence of those engaged in business has also helped to push prices upward.

There is no doubt that persons are looking for opportunities that exist in the stock market and there are opportunities to be found.  But one needs to approach the market with caution as there are many difficult days ahead.  It is important that one does not simply follow the crowd but instead does the research that is necessary before buying a stock.  .  Another point to remember is that oftentimes stocks tend to go too high when everyone is looking to get a bargain. The Junior market now has some stocks trading at very high prices.  Set a target price for yourself and get out when you have reached your set price.

Remember to consult your local stock broker and get his/her advice on what to buy.  It is important to note that buying equities is a long term investment and whereas one may receive short term gains this is not always the case