Markets “In a Nutshell” for January 21, 2020
Investment Week at a Glance
Stocks were up last week. The Dow Jones Industrial average gained 1.8% while the S&P 500 was up 2.0%. The New York Stock Exchange Composite (2,000 stocks) rose 1.6%. The “average investor’s index” (Value Line index) was up 2.3%. Foreign stocks (EAFE index) were up 0.83%. Bond yields rose (bond prices down) as the 10 year Treasury ended at 1.74%. (Data sources: Barron’s Financial, Wall Street Journal)
In the early 2000’s Robert Zuccaro wrote a book by the title “Dow 30,000 by 2008: Why It’s Different This Time.” While quite wrong on the timing and that “it wasn’t different this time,” Mr. Zucarro can perhaps soon by vindicated. As the stock market continues its torrid pace of increase (up about a percent a week on average since December, annualizing to 52%), 30,000 Dow seems a “stone throws” away. With the Dow sitting at 29,348, it would take less than a 3% upward move to reach the 30,000 level. In his latest column, Barron’s writer Ben Levisohn says given the low rate, low inflation environment, the S&P 500 is a perfectly rational place to park your money. We agree as long as it is part of your overall financial plan.
On the Other Hand …
While most market pundits are painting a rosy outlook for stocks over the next decade, billionaire investor Howard Marks recently remarked that after 11 years of a bull market and the longest economic expansion in history, the odds are not in favor of stock investors. Mr. Marks is not an advocate of bailing out of the market. He does believe some caution is warranted after such a long bull market as stocks have reached relatively high historical valuations. Read on…
On the Other Hand … Part 2 …
Our take is that it is true that stock valuations are historically high (10 year p/e levels at 32 are about twice the historical norm) but valuations have been high for years and can remain that way. So the best course of action is to take risk commensurate with your longer term financial and investment plan. With the recent run up in stocks over the past year or so, it is likely a good time to evaluate your risk and make appropriate changes to your investment allocations.
Since 1928, there have been 23 presidential elections. 14 out of those 23 times have seen the stock market rise the 3 months preceding the election. How many of the 14 times did the incumbent party win the White House?
Have a Great Week!
Answer to quiz:
3. 12. Which proves the theory that the stock market can predict who wins the presidency.