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    Markets "In a Nutshell" for August 28, 2018

    Aug 28, 2018

    Investment Week at a Glance

    Stocks finished mostly higher for the week. The Dow Jones Industrial Average was up 0.47%, the S&P 500 rose 0.86%, the New York Stock Exchange Composite (2,000 stocks) was up 0.71% and the average investors index (Value Line Index) was up 1.31%.  Foreign stocks (DJ Global ex U.S.) were up 1.67%. Bond prices were higher for the week, pushing the yield on the 10-year U.S. Treasury down 5 basis point to finish the week at 2.81%. (Data sources: Barron’s Financial, Wall Street Journal)

     

    Longest Bull

    Last Wednesday, August 22nd, our current bull market turned 3,453 days old. This now surpasses the bull market of the 1990’s to becoming the longest bull market in history. Despite achieving a return of greater than 400% since its low, investors continue to be anxious and wonder how much longer this run can possibly continue.  Predicting when this historical bull market will peak is impossible.  Looking back through history we see that, in general, investors are rewarded when taking a long term approach versus attempting to time the market.  The probability of the market rising or falling in a given day is essentially a toss-up, however, investors have a significantly greater probability of experiencing positive returns over the long run as rolling 15 year returns were positive 88% of the time.  Whether this bull market extends for another 5 years or begins to slow down tomorrow, investors can take comfort in the fact that in taking a long term approach, the numbers have historically worked in your favor.

     

    Growth Stocks Lead the Way

    Led by gains in the technology and energy sectors, stocks posted gains for last week.  The tech heavy Nasdaq Composite Index and the small company Russell 2000 Index both outperformed the broad S&P 500 Index.  This resulted in growth stocks again leading the way and continued to widen their performance advantage over value stocks in 2018.  The price of crude oil continued to rise and finished the week up approximately 6% as the market began pricing in sanctions on Iran which could tighten oil supplies globally.

     

    Quiz:

    What’s the difference between a cyclical bull market and a secular bull market?

    a)    Cyclical bull markets end as soon as a bear-market decline occurs.  A secular bull market continues as long as stocks reach “higher highs” in the aftermath of a bear market.

    b)    A cyclical bull market occurs every 4 years

    c)    A cyclical bull market occurs every 8 years

    d)    No difference

     

    Have a good week.

     

     

     

     

     

    Answer to quiz:

    a)    Cyclical bull markets end as soon as a bear-market decline occurs.  A secular bull market continues as long as stocks reach “higher highs” in the aftermath of a bear market.