Markets “In a Nutshell” for May 7, 2019
Investment Week at a Glance
Stocks were mostly up last week. The Dow Jones Industrial average dropped 0.1% while the S&P 500 was up 0.2%. The New York Stock Exchange Composite (2,000 stocks) gained 0.4%. The “average investor’s index” (Value Line index) rose 0.5%. Foreign stocks (DJ Global ex U.S.) were up 0.3%. Bond yields increased (bond prices down) as the 10 year Treasury ended at 2.53%. (Data sources: Barron’s Financial, Wall Street Journal)
Have economic downturns been eliminated?
Chamath Palihapitiya, a venture capitalist, whose investments include Facebook and the Golden State Warriors, says that major economic downturns are almost impossible due to central bank (ie the Fed or Federal Reserve) programs. “…the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now.” The Fed has created programs stuffing $trillions into the economy the past ten years and looks to continue this policy indefinitely. Palihapitiya also says that big economic expansion is also not likely as the economy avoids the normal up and down cycles. Given no recession, does it also mean an indefinitely upward moving stock market? Read on…
No down stock market in sight says market optimists
In the 4/8 Barron’s Financial, there is a strong argument made by J.P Morgan analyst Dubravko Lakos-Bujas that the word “cycle” is not relevant any longer in regards to the stock market due the interventions of central banks such as the Federal Reserve. Lakos-Bujas sees continued Federal Reserve support for stocks in the way of low interest rates and money printing as long as inflation remains low. So Barron’s authors Ben Levinson and Nicholas Jasinski proffer the question, “The bull market recently celebrated its 10th birthday. Can it rally for another 10?” We’ll see.
U.S. jobs machine cranks out 263,000 jobs in April
The Labor Dept. reported that U.S. employers added 263,000 jobs in April, pushing the unemployment rate to a 50 year low of 3.6%. The jobs report helped further kill fears of a possible economic slowdown. It was those fears that drove stocks down in the 4th quarter of 2018. A record 10 years of jobs and economic growth has led to a push from the White House to the Federal Reserve to lower interest rates additionally to prevent a slowdown. Lower rates encourage borrowing for items such as cars and houses which boosts economic growth.
According to the National Bureau of Economic Research, the current economic expansion is in its 116th month. Since 1854, how many months has the average economic expansion lasted?
a. 23 months
b. 58 months
c. 77 months
d. 101 months
Answer is below…
Have a good week!
b. 58 months