Markets "In a Nutshell" for January 9, 2018Jan 09, 2018
Investment Week at a Glance
Stocks marched forward last week. The Dow Jones Industrial average was up 2.3%, the S&P 500 rose 2.6%, the New York Stock Exchange Composite (2,000 stocks) gained 2.3%. The “average investor’s index” (Value Line index) rose 2.0%. Foreign stocks (DJ Global ex U.S.) were up 2.7% and bond prices (Barclays Aggregate Bond index) dropped in value last week as the 10 year Treasury yield ended at 2.47%. (Data sources: Barron’s Financial, Wall Street Journal)
Dow 25,000: Where do stocks go from here?
“A Goldilocks Market Barrels Into the New Year,” headlines an article from the 1/8 Barron’s Financial. And indeed what a start to 2018 with stocks up 2% or more already. Manning & Napier portfolio strategist Greg Woodard states in the article, “I get the sense that people are starting to worry they’re missing out on something.” And after record low stock market volatility in 2017 (stocks have not experienced a 3% drop in well over a year, the longest stretch on record) investors are getting used to an only upward moving market. While we are most likely to experience a market drop at some point, most analysts look for continued consistent gains in 2018.
Individual investors sell stocks? Then who is buying?
According to a 1/5 Wall Street Journal article, individual investors have sold over $1 trillion of retail stock mutual funds since 2012. While it is likely (according to EPFR Global) that a good portion of the retail stock fund outflows have been recycled into stock ETF’s (index type funds), individuals as a whole remain somewhat skeptical of stocks. So what has driven stock prices higher? Institutions (ie pension funds), foreign governments and corporations have been big buyers. Stock buybacks (companies that buy their own stock back) have totaled a gargantuan $2.5 trillion since 2009.
Another robust jobs growth year in 2017 but wage growth slow
148,000 jobs were added to the U.S. economy in December 2017. For the year 2.1 million jobs were added, the seventh straight year of 2 million+ jobs gains. The seven years of 2 million + gains is the second longest on record, second only to the booming 1990’s. One glaring weakness of the current economic recovery has been wage growth. During the 1960’s and 1990’s economic expansions, wages grew at 2.5% annual clip. The current recovery has seen only one year, 2014, with 2% or more wage growth. Wages grew by 1.4% in 2017.
While stocks from all over the globe scored gains in 2017, which of the following had a loss of 31% in 2017? a. Orange juice prices b. Japanese Yen c. Energy stocks d. Coffee prices...Answer is below…
Have a good week!
Answer to quiz:
a. orange juice futures prices fell 31.4% in 2017.