Markets “In a Nutshell” for December 3, 2019
Investment Week at a Glance
Stocks were up last week. The Dow Jones Industrial average gained 0.6% while the S&P 500 was up 1.0%. The New York Stock Exchange Composite (2,000 stocks) rose 0.8%. The “average investor’s index” (Value Line index) was up 1.3%. Foreign stocks (EAFE index) were up 0.50%. Bond yields rose (bond prices down) as the 10 year Treasury ended at 1.78%. (Data sources: Barron’s Financial, Wall Street Journal)
4 Reasons Why Stocks Will Race On In 2020
Nationwide’s chief investment research’s Mark Hackett sees 4 reasons why stocks will continue to make gains in 2020. Strong U.S. economy is one. While GDP growth has been below historical averages here in the U.S., it is still positive and better than many developed countries in Europe and Japan. Aggressive monetary policy by central banks around the globe is another reason. Pumping $trillions into world economies, central banks are trying their best to keep stock and bond markets up. Other reasons are improving corporate earnings and trade talk progress.
Election Years Are Good For Stocks
Presidential election years have been good for stocks. According to Ned Davis research, since 1900, the stock market has gained an average 9.5% during presidential election years. This is second best of the election year cycle with pre-election years best at 11.3%. Post election year’s average 3.4% while mid-term years 4.0%.
Could We Have Permanently Low Interest Rates?
In a speech to the New York Association for Business Economics, Federal Reserve Governor Lael Brainard recommended that the Fed set caps on how high interest rates can go. Since 2008, the Fed has enacted a number of unconventional policies to boost economic growth and capping rates would be another new policy. Low rates tend to boost borrowing and spending as people and businesses are more apt to take loans at lower interest rates. Critics, of course, have voiced concerns that setting caps on rates violates free markets and will disrupt the natural flow of interest rate cycles and result in an economic shock.
According to BTN, since the end of World War II (1945), there have been three bear stock markets where the S&P 500 has fallen by 40% or more. Two of those were the 2000-02 and 2007-09 bear markets. What was the third?
Answer is below.
Have a good week!
Answer to quiz:
c. 1973-74 during the oil crisis and surging inflation.