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    Markets "In a Nutshell" for October 16, 2018

    Oct 16, 2018

    Investment Week at a Glance

    Stocks had a rough week as the Dow Jones Industrial average lost 4.2% while the S&P 500 was down 4.1%. The New York Stock Exchange Composite (2,000 stocks) dropped 4.2%. The “average investor’s index” (Value Line index) fell 4.5% and foreign stocks (DJ Global ex U.S.) dropped 3.3%. Bond yields were down (bond prices up) as the 10 year Treasury ended at 3.14%. (Data sources: Barron’s Financial, Wall Street Journal)

     

    Tough week drives many stocks into negative territory for the year

    The sell off last week in world stocks dropped year to date stock returns mostly negative with broader indexes such as the NYSE Composite (all stocks listed on the New York Stock Exchange) and Value Line (referred to as the “average investors index”) down 2.9% and 3.6% for the year respectively. Foreign stocks have fared worse this year with DJ Global ex US index down 11.1% for 2018. Technology stock heavy indexes such as S&P 500 and Nasdaq remain positive for the year (with the S&P 500 up 3.5% and the Nasdaq 8.6%). 

     

    What drove stocks down last week?

    Higher interest rates are being blamed for the stock sell off last week. Rates have been on the rise since July of 2016 when the 10 year Treasury rate hit an all time low of 1.37%. With rates more than doubling since then (the 10 year hit 3.3% last week), lower risk investments (such as bank cd’s and money markets which are paying rates in the 2-3% range) have become more attractive and offer an alternative to stocks. 

     

    What’s next for stocks?

    An article in this week’s Barron’s investigates the question of what is next for stocks. Many differing opinions abide on the subject from “this is IT (“it” meaning the end of the bull stock market) to the belief that a strong economy means more stock gains. While the debate on the short term movements of the stocks will rage on, investors need step back and remember the bigger picture of their long term investment and retirement plan (and if you don’t have one we are happy to help you build one). Proper investment allocation through the market cycles is the way to long term wealth accumulation.  

     

    Quiz:

    According to an American Housing Survey, what percent of Americans own their homes free of debt? a. 8% b. 20% c. 40% d. 53%...Answer is below…

     

    Have a good week!

     

     

     

     

     

    Answer to quiz:

    c. 40%.