Markets “In a Nutshell” for January 7, 2020

Investment Week at a Glance

Stocks finished mostly down for the week.  The Dow Jones Industrial Average was down 0.04%, the S&P 500 fell 0.16%, the New York Stock Exchange Composite (2,000 stocks) fell 0.19% and the average investors index (Value Line Index) was down 0.15%.  Foreign stocks (DJ Global ex U.S.) were up 0.10 %.  Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 7 basis points lower at 1.72%.  (Data source: Wall Street Journal)

Banner Year for U.S. Stocks

The U.S. stock market just completed one of its best years since the financial crisis in 2019, as fears of a recession were alleviated by an easier monetary policy approach by the Federal Reserve and a better outlook for ongoing trade negotiations with China. The S&P 500 finished the year up 28.9%, even in a year where earnings are set to be flat for the year with the majority of 4th quarter earnings being reported in the coming weeks. With inflation still running below the Federal Reserve’s target of 2% and the U.S. labor market still adding jobs despite a record low unemployment rate, stocks in the U.S. should continue to have an optimistic outlook as long as the status quo remains. Unfortunately, the same risks that were at hand at the beginning of 2019 are still present in 2020 and should be taken into seriously given stocks have recovered from the lows of December 2018. (Barron’s)

Oil and Gold Jump on U.S. – Iran Escalation

Oil and gold prices both spiked in the aftermath of the U.S. drone strike on an Iranian general and has resulted in heightened uncertainty for global financial markets. The consequences of the military action are still unclear for markets, but began to weigh on stock market sentiment at the end of the week with the prospect of a potential Iranian response at hand. Oil prices rose on the news given the uncertainty of any reaction that could cause more disruption to an already unstable Middle East and gold, the safe haven asset for the world, rose to highs it hasn’t seen in well over 5 years. While it is impossible to predict what will happen, higher oil prices and escalating geopolitical risks may have an outsized impact on the U.S. economy and stock market in the near term. (Wall Street Journal)

Quiz:

What was the top performing sector in the S&P 500 for 2019?

1.   Communications Services
2.   Information Technology
3.   Industrials
4.   Financials

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

Answer to quiz:

       2.    Information Technology returned 50.29% in 2019. (Morningstar).