Markets “In a Nutshell” for January 22, 2019

Investment Week at a Glance

Stocks were up last week. The Dow Jones Industrial average gained 3.0% while the S&P 500 was up 2.9%. The New York Stock Exchange Composite (2,000 stocks) jumped 2.6%. The “average investor’s index” (Value Line index) gained 2.5%. Foreign stocks (DJ Global ex U.S.) were up 1.2%. Bond yields dropped (bond prices up) as the 10 year Treasury ended at 2.78%. (Data sources: Barron’s Financial, Wall Street Journal)

Best start to stocks since 1987

Ben Levinsohn of Barron’s writes that stocks are off to their best calendar year start in years. The 5.9% gain for the Dow Jones Industrial Average and the 6.5% gain for the S&P 500 in 2019 are the best starts for the indexes since 1997 and 1987, respectively. As we wrote in late December, stocks were severely oversold and due for a big rebound. We are in the midst of that rebound and may have more to go as many analysts believe stocks bottomed in December and are just beginning the next leg up in the bull market. Others however, see the December decline as the beginning of a larger down market.

Corporate profits estimates declining

One red flag for the stock market has been voiced by economist Lance Roberts. Roberts’ comments that profit estimates for 2019 have been fallen from $170 to $146, a 15% drop that could foreshadow a tougher time for stocks ahead. As stock prices reflect investors expectations of corporate profits, rising profits are critical to increasing stock prices.

Fond farewell to Vanguard Founder John (Jack) Bogle

The founder of the Vanguard Mutual Fund Group, Jack Bogle, died last week at age 89. Bogle founded Vanguard mutual funds in 1974, popularizing the stock index fund and helping build a $trillion money manager. I have been a long time admirer of Mr. Bogle following his sage wisdom and insights since I started in the investment industry 30 years ago. Mr. Bogle had some recent advice for stock investors when he recommended that investors “play it safe,” and to have “a little extra caution.” Mr. Bogle was concerned about the massive buildup of government debt around the world and said he sees “clouds on the horizon.”

Quiz:

As stated above, John Bogle had grown concerned about the buildup of government debt. According to the IMF, what is the total of government debt around the globe?

a. $63 trillion

b. $150 billion

c. $14 trillion

d. $987 billion

Answer is below…

 

Have a good week!

 

Answer to quiz:

a. $63 trillion