Markets “In a Nutshell” for November 27, 2018

Investment Week at a Glance

Stocks finished lower for the week. The Dow Jones Industrial Average was down 4.44%, the S&P 500 fell 3.79%, the New York Stock Exchange Composite (2,000 stocks) was down 2.94% and the average investors index (Value Line Index) was down 2.49%. Foreign stocks (DJ Global ex U.S.) were down 1.29%. Bond prices were higher for the week, pushing the yield on the 10-year U.S. Treasury down 2 basis points to finish the week at 3.04%. (Data sources: Barron’s Financial, Wall Street Journal)

Thanksgiving Woes

Domestic stocks had their worst holiday shortened Thanksgiving week in 7 years. Indices fell back to their lows reached late last month, eliminating gains for the year. A decline in the price of crude oil, more weakness in the technology sector, disappointing earnings, and higher spreads in corporate bonds all weighed on stocks. As markets continue to be turbulent it is important to remain diversified; foreign stocks have weathered the storm better than domestic and fixed income positions have helped stabilize portfolios.

Bear Market for FAANG Stocks

After last Tuesdays selloff, every one of the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) had entered bear market territory (falling 20% or more from their highs).  The technology sector seemed to be put on high alert after reports from the Wall Street Journal described internal dissention at Facebook following its recent setbacks as well as heightened regulatory scrutiny.  In addition, the Wall Street Journal reported that Apple had begun reducing orders for iPhone components with suppliers due to sales falling short of expectations.

Trade worries have again weighed on sentiment. Last week at an Asian economic summit there appeared to be a tense exchange between U.S. Vice President Mike Pence and Chinese President Xi Jinping, which diminished hope that progress could be made at the G-20 at the end of the month.

Quiz:

While most “market manias” sent fairly obvious signals in hindsight, some of the greatest minds in history have gotten swept up. Which famous scientist was financially ruined by the South Sea bubble?

a)      Copernicus

b)      Newton

c)       Darwin

d)      Galilei

 

Have a good week!

 

Answer to quiz:

b)    Isaac Newton was one of the many investors of South Sea Co., which rose nearly 10 fold in 1711 only to plunge 80% a few months later.