Markets “In a Nutshell” for January 2, 2019

Investment Week at a Glance

Stocks were up last week. The Dow Jones Industrial average gained 2.8% while the S&P 500 was up 2.9%. The New York Stock Exchange Composite (2,000 stocks) jumped 2.3%. The “average investor’s index” (Value Line index) gained 2.9%. Foreign stocks (DJ Global ex U.S.) were up 0.6%. Bond yields dropped (bond prices up) as the 10 year Treasury ended at 2.74%. (Data sources: Barron’s Financial, Wall Street Journal)

Market gains ahead?

No doubt it has been one of the most difficult quarters in years. In December alone, The Dow Jones Industrial average dropped 15% in just 20 days. But has the selloff gone too far? Sharp quick declines such as the one we have just witnessed have historically been followed by a robust rebound. From a technical view, the stock market is considered to be “oversold” with RSI’s (Relative Strength Index) below 30 (typically a buy signal). Miller Tabak equity strategist Matt Maley says a rally of 8-12% would not be unusual in these circumstances.

12/31/18 investment statements may not be pretty

December’s market drop has driven stock indexes negative for 2018. The NYSE Composite (2,000 stocks) is down 11.9% for 2018, the Value Line (1,700 stocks) down 16.6%, The Dow Jones Industrials (30 stocks) down 6.7%, the S&P 500 (500 stocks) down 7.0% and the DJ Global ex US (foreign stocks) down 16.8%. Bonds look to finish slightly in the red for the year with the Barclays Aggregate Bond Index down 0.3%. Commodities have also had a rough year as the CRB index has lost 11.8%. All this is to say that for many investors, expect to see negative returns for 2018 on your 12/31/18 statements. For many this will be the first annual loss in 10 years.

What’s ahead for investment markets in 2019?

A CNBC article (12/24/18) points out that of the 17 Wall Street bank analysts, none see negative returns in 2019. Some see continued volatility the first half of 2019 and then record corporate profits and a steady economy as lifting stock prices by year end. Other analysts such as Ed Yardeni are more bullish with 20% stock gains predicted from now until 2019 year end. And of course some are more negative such as Zeal Investments which sees the bear market as just getting started. As always, the best course of action for you is to have a sound long term investment plan and stick to it.

Quiz:

According to Social Security, Social Security costs (at $1.003 trillion) will exceed Social Security revenue ($1.001 trillion) for the first time since what year?

a. 2016

b.  1935

c. 1968

d. 1982

Answer is below…

 

Have a good week!

 

Answer to quiz:

d. 1982