Markets “In a Nutshell” for February 19, 2019

Investment Week at a Glance

Big up week for stocks. The Dow Jones Industrial average gained 3.1% while the S&P 500 was up 2.5%. The New York Stock Exchange Composite (2,000 stocks) rose 2.5%. The “average investor’s index” (Value Line index) gained 3.6%. Foreign stocks (DJ Global ex U.S.) were up 1.3%. Bond yields dropped (bond prices up) as the 10 year Treasury ended at 2.67%. (Data sources: Barron’s Financial, Wall Street Journal)

A good year in a just a month and a half

After a sharp violent drop during the 4th quarter of 2018, stocks around the globe have staged a sharp rebound in 2019. Stocks had dropped 20%+ from their early October 2018 peak to the late December lows. From those December lows it has been almost straight up stock indexes with gains ranging from 15%-20%. Many believe stocks can continue their surge (albeit with an occasional pullback) as the U.S. economy marches upward and hopes for resolution to the trade war. One cautionary note is that the recent surge in stock prices has pushed stocks back into expensive territory with the 10 year Price to earnings ratio now over 30 (historical average is 16).

High on marijuana stocks?

One of the most hotly debated investment topics is the effects of the increasing legalization of the use of marijuana. Over 30 states in the U.S. have legalized medical and/or recreational use of marijuana and it appears like more states will follow. In the 2-18-19 Barron’s, Bill Alpert explains that although many states have legalized marijuana, it is still illegal under federal law. Alpert suggests that investors proceed with caution in investing in pot stocks as profits are so far thin and stocks expensive. Our take is that the marijuana industry is in its nascent stage and for patient and diversified investors, long term returns could prove above average.

Industrial stocks overtake technology

For the first time in 5 years, industrial stocks such as Caterpillar, Boeing and Honeywell are leading the stock market higher. With 2019 gains over 16%, industrials have overshadowed tech stocks which have 12% gains in 2019. Industrials gains have meant more spread out gains for investors vs. the first 3 quarters of 2018 in which technology drove almost all market gains.

Quiz:

According to an EBRI poll, in 1988 16% of workers anticipated working past age 65. In a similar poll taken in 2018, what percent of workers anticipated working past age 65?

a. 48%

b. 16%

c. 33%

d. 55%

Answer is below…

 

Have a good week!

 

Answer to quiz:

a. 48%