Markets "In a Nutshell" for August 15, 2018Aug 15, 2018
Investment Week at a Glance
Stocks fell last week. The Dow Jones Industrial average dropped 0.6%. The S&P 500 was down 0.3% while the New York Stock Exchange Composite (2,000 stocks) declined 0.9%. The “average investor’s index” (Value Line index) dropped 0.02% and foreign stocks (DJ Global ex U.S.) fell 2.3%. Bond yields were down as the 10 year Treasury ended 2.85%. (Data sources: Barron’s Financial, Wall Street Journal)
Crisis in Turkey an investment opportunity?
Last week the currency crisis in Turkey dragged down foreign markets just about everywhere for fear that the crisis would spread around the globe (witness the above mentioned minus 2.3% loss in foreign markets. Turkey has seen its currency, the Lira, tumble by 41% this year and the Turkish stock ETF (TUR) has fallen 55%. U.S. sanctions, in retaliation for the Turkish detention of an accused American citizen, added fuel to the already weakened Lira. Turkey, much like many emerging market countries, relies heavily on foreign investment and a volatile currency can chase away foreign investors. So far many investment pros see the Turkish crisis as contained and the emerging market sell off as a buying opportunity.
Gap between U.S. and foreign stocks widens
As Barron’s (8/11) reports, U.S. stocks have been in a period of outperformance vs. foreign stocks with 5 year U.S. returns logging in 12% annually while foreign stocks have returned 5% annually. This trend is an overall consistent one since the financial crisis in 2008-09 and this year has been no different with foreign stock returns down 4% and U.S. stocks up 5%. . So is this a sign to dump all foreign stock holdings? Not necessarily so. Read on…
Gap widens part II
Many world stock markets are “bargains” compared to the U.S. if looking at price to earnings ratios (which give an indication of how expensive stocks are). The U.S. carries a 10 year p/e ratio of 31 while markets such as Europe are much lower (Europe 10 year p/e is 19, the higher the ratio the more expensive stocks are). Many investment pros believe it is only a matter of time before the return gap shrinks and even reverses.
According to Trading Economics which of the following countries does not carry the highest credit rating of AAA? a. Canada b. Germany c. United States d. Luxembourg ...Answer is below…
Have a good week!
Answer to quiz:
c. United States has an AA+ rating.