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    Markets "in a Nutshell" for October 24th, 2017

    Oct 24, 2017
    Quiz:

    For most of the 1980’s and 1990’s the price of a barrel of oil fluctuated between $20-$40. In the 2000’s there was a speculative mania that drove the price of oil to all time high of which of the following?

    a. $72/barrel

    b. $104/barrel

    c. $147/barrel

    d. $199/barrel

    e. $214/barrel

    Answer is below…

    Investment Week at a Glance

    • Stocks were up last week.
    • The Dow Jones Industrial average gained 2%, the S&P 500 was up 0.9%, the New York Stock Exchange Composite (2,000 stocks) gained 0.6%%.
    • The “average investor’s index” (Value Line index) rose 0.6%.
    • Foreign stocks (DJ Global ex U.S.) were down 0.5 and bond prices (Barclays Aggregate Bond index) dropped last week as the 10 year Treasury yield ended at 2.38%.

    (Data sources: Barron’s Financial, Wall Street Journal)

     

    Global growth rising: Good news for stock investors

    The international monetary fund (IMF) expects global growth to reach 3.7% in 2018, up from 3.5% in 2017. Here are some specific country growth expectations: China 6.5%, Brazil 1.5%, India, 7.4%, Russia 1.6%. In the U.S. growth is expected to be 3.2%. If these growth expectations come true, should be good news for the global stock markets as higher growth can translate into bigger corporate profits which can positively influence stock prices.

     

    Next stop, Dow 30,000?

    In a Barron’s article, Gene Epstein writes that the Dow Jones Industrial average hitting the 20,000 level (and now 23,000) was no fluke. Epstein sees strong corporate profits, an improving economy, and business favorable political situation as fuel to drive the Dow to 30,000 by 2025. Some may see Epstein’s outlook as quite conservative as it projects a mere 4% or so annualized return. If stocks were to repeat the long term average return of 8% a year it would bring the Dow to 39,000.

     

    Time to Buy Energy Stocks?

    We have mentioned the energy sector a few times lately. After a horrendous bear market (in which oil prices dropped 60% and oil related stocks, especially drillers, plunged 70-80%), are energy stocks ready to stage a rebound? A 10/16 article in Seeking Alpha states that while oil prices have staged a recent rally (up 20% since mid June) high quality oil stocks have nudged up only 4%. Companies such as BP Oil (6% dividend yield), Shlumberger (3% dividend) and Transocean Drilling are some that may rebound smartly if the oil recovery continues.

     

    Answer to quiz:

    c. $147 a barrel in 2008.