Markets "In a Nutshell" for January 23, 2018Jan 23, 2018
Investment Week at a Glance
Stocks marched forward last week. The Dow Jones Industrial average was up 1.0%, the S&P 500 rose 0.9%, the New York Stock Exchange Composite (2,000 stocks) gained 0.7%. The “average investor’s index” (Value Line index) rose 0.3%. Foreign stocks (DJ Global ex U.S.) were up 1.4% and bond prices (Barclays Aggregate Bond index) dropped in value last week as the 10 year Treasury yield ended at 2.64%. (Data sources: Barron’s Financial, Wall Street Journal)
Government shutdowns and the stock market
As I write this the federal government is currently shutdown as Congress fights over a budget. There have been 18 prior shutdowns (since 1974 when the budget process was changed) that have lasted an average of 7 days. According to an LPL Financial analysis dating back to President Gerald Ford in 1976, stocks (the S&P 500) have seen an average decline of 0.6% during federal freezes, with 44% of the freeze time periods resulting in gains. The S&P 500 gained 3.1% during the most recent government shutdown in 2013 under President Obama, and was also positive during the two that happened during the Clinton administration. This shutdown is likely to be over quickly (and maybe done by the time you read this).
Market peak a year away?
There are building signs that the U.S. stock market is reaching frothy levels. Mutual fund managers have reduced cash levels to their lowest in 5 years. Hedge funds have increased equity allocations to the highest since 2006 and cash flows into equity ETF’s have reached a record $16.5 billion in January so far. Yet with all that, it is likely we still have room to run with the stock rally so says fund managers in a Bank of America survey. Fund managers see the market moving upward for another year before peaking. Not all see this however. Billionaire businessman Sam Zell said in a recent interview with CNBC he holds mostly cash right now as he sees “irrational exuberance” in stocks.
Global corporate earnings reach record
According to Factset, their global index of profits (from 20,000 companies around the world) reached a record $9.69 per share, outpacing 2014’s prior high of $9.55. The record profits have added fuel to the global growth story that is behind the record run of stock prices around the globe.
Under which President did the first government budget shutdown occur? A. George H.W. Bush b. Bill Clinton c. Jimmy Carter d. Ronald Reagan...Answer is below…
Have a good week!
Answer to quiz:
c. Jimmy Carter in 1976.