Markets “In a Nutshell” for November 19, 2019
Investment Week at a Glance
Stocks were mostly up last week. The Dow Jones Industrial average gained 1.2% while the S&P 500 was up 0.9%. The New York Stock Exchange Composite (2,000 stocks) rose 0.7%. The “average investor’s index” (Value Line index) was down 0.1%. Foreign stocks (EAFE index) were unchanged. Bond yields dropped (bond prices up) as the 10 year Treasury ended at 1.83%. (Data sources: Barron’s Financial, Wall Street Journal)
Don’t Fight the Fed?
Investment guru Marty Zweig often said “Don’t fight the Fed,” meaning when the Federal Reserve, the U.S.’s national bank, is cutting interest rates, investors should be heavily invested in stocks. Why? The theory goes that lower interest rates encourage businesses and consumers to borrow more money and spend it. More spending, of course, spurs more corporate profits. Bigger profits have meant higher stock prices. Read on…
Don’t Fight the Fed? – Part II
A funny thing is happening with the latest round of interest rate cuts by the Fed. Instead of further massive buildups of debt, Americans are doing the opposite. A recent CNBC/Acorns invest poll show that just about half those polled are busily paying down debt, 45% are cutting their spending, and about a third are squirreling money away in an emergency fund. Despite this thrift, as well as negative corporate profit growth the past three quarters, stocks are marching regularly to new highs. But perhaps this is a signal to investors to be careful about taking too much risk at this point.
Time to Shift into Foreign Stocks?
According to Barron’s (11-11-19), U.S. stocks have hit a forward p/e ratio of 18. U.S stocks may have gotten a bit ahead of themselves as the average p/e is closer to 14. In contrast, Euro-zone stocks have a forward p/e of 13, right around average while Japanese stocks show a 14 p/e, below their long term average of 19.
According to BTN, since 1950, there have been 11 bull markets in the U.S. The current bull recently hit 10.67 years in length. What is the average length of all 11 bull markets?
a. 3.3 years
b. 5.3 years
c. 7.6 years
d. 11.4 years
Answer is below.
Have a Great Week!
Answer to Quiz:
b. 5.3 years