Markets “In a Nutshell” for July 9, 2019

Investment Week at a Glance

Stocks gained last week. The Dow Jones Industrial average was up 1.2% while the S&P 500 rose 1.7%. The New York Stock Exchange Composite (2,000 stocks) gained 1.2%. The “average investor’s index” (Value Line index) was up 1.0%. Foreign stocks (ishares EAFE index) were up 0.7%. Bond yields rose (bond prices down) as the 10 year Treasury ended at 2.04%. (Data sources: Barron’s Financial, Wall Street Journal)

More stock gains ahead?

Barclay’s Bank strategist Maneesh Deshpande is looking for a stock market “melt up” which he sees a 65% chance of the S&P 500 rising to 3260, a 9% rise from current levels. Also bullish is Fundstrat strategist Tom Lee who sees his 3125 S&P 500 target (a 5% gain from current levels) too conservative. Lee notes that the S&P 500 has risen an average 18% after the first interest rate cut by the Federal Reserve after a “tightening” cycle (“tightening” is when the Fed is raising rates, “loosening is when they are cutting rates). As most analysts expect an interest rate cut end of July, we could be in for another push up in stocks.

Still looking for dividends?

As the Fed embarks upon a widely expected series of interest rate cuts, rates paid on safer investments such as money market funds, cd’s and savings accounts are likely headed back down. Barron’s (7/8 edition) lists 10 blue chip stocks that offer juicy 4% or more yields. Among the dividend leaders are Dow with a 5.7% yield, Gap at 5.3%, Kraft Heinz at 5.2%, Nordstrom at 4.7% and Exxon Mobil at 4.6%. The other 5 were IBM, International Paper, Tapestry, Carnival, and Wells Fargo, all with over 4% yields.

Jobs aplenty in the U.S.A.

The Labor Dept. reported that 224,000 new jobs were created in June in the U.S. This marks the 105th straight month of job gains in what has now been the longest economic expansion in the history of the U.S. And with the Federal Reserve Bank likely to start a “loosening” cycle (where they cut interest rates) we may very well see the expansion and jobs growth continue. While we know that eventually the economy and stock market will enter a down cycle, the government and the Fed are working hard on policies to keep the economy going and the stock market up.

Quiz:

Which of the following companies have the highest stock return in the S&P 500 this year at 87%?

a. Xerox

b. Amazon

c. Apple

d. Exxon Mobil

Answer is below…

 

Have a good week!

 

Answer to quiz:

a. Xerox