Three weeks in to 2018, the stock market is up approximately 5% which would be an annualized return of 86%. Yes, this is a great start and yes, this cannot continue indefinitely.
Over the past 15 months, the stock market has come so far, so fast, with very little volatility. I believe this has already affected investor mindset. It is very unusual to not have a negative 10% correction during most calendar years. Normal stock market behavior, even in strong years, would typically have a 5-10% decline over a few weeks. When this occurs, you should not be alarmed. This will happen on an uncertain timeline.
Here’s a quick test for you. If your investments went down 20%, would you live or invest differently than you have for the past year? If your answer is yes, then you would likely benefit from assessing your risk and possibly adjusting. There are clients who cannot lose that much based on their investment decisions and there are clients that can lose more than 20%.
Lastly, if the stock market declined 20% today, the stock market would still be up “double digits” in the past 15 months. Keeping your objectives in perspective matters.
CONSUMER SENTIMENT READING COOLS
The initial January University of Michigan consumer sentiment index came in at 94.4 last week, 1.5 points beneath its final reading of 2017 and 4.1 points under its level of one year ago. Without prompting, 34% of respondents to the latest UMich survey brought up the subject of the recent federal tax reforms; 70% of them felt the reforms would have a positive effect on their lives; 18%, a negative effect.1
WINTER WEAKENS HOUSING STARTS
New Census Bureau data shows groundbreaking decreased 8.2% in December after a (revised) 3.0% November gain. Building permits ticked down 0.1% last month.2
BITCOIN PLUMMETS & RECOVERS; OIL DESCENDS
Commodity investors watched the premier digital currency crest above $14,000 Monday, sink under $10,000 Wednesday, and rebound to a price of $11,400.35 as Wall Street’s trading week ended. Friday, the International Energy Agency predicted U.S. oil output would near a 50-year peak in 2018. That hurt prices and left WTI crude 1.5% lower for the week; it fell to $63.37 at Friday’s closing bell.3,4
DOW REACHES ITS SECOND MILESTONE IN A MONTH
Last week, the blue chips improved 1.04% on the way to a Friday settlement of 26,071.72. On Tuesday, the benchmark closed above 26,000 to complete the quickest 1,000-point climb in its history: it took only eight days. (The previous record was 23 trading sessions.) The Nasdaq Composite (+1.04% to 7,336.38) and S&P 500 (+0.86% to 2,810.30) also logged weekly advances.5,6
Halliburton, Netflix, TD Ameritrade, UBS, and Zions Bancorp issue earnings Monday. Capital One, Fifth Third, Johnson & Johnson, Kimberly-Clark, Procter & Gamble, State Street, Texas Instruments, Travelers Companies, and Verizon join the earnings parade Tuesday. December existing home sales figures appear Wednesday, plus earnings from Abbott Labs, Ameriprise Financial, Comcast, Discover, Ford Motor Co., General Dynamics, General Electric, Grainger, Legg Mason, Northern Trust, Novartis, Rockwell Automation, Royal Caribbean International, Stanley Black & Decker, United Rentals, and Whirlpool. On Thursday, December new home sales numbers emerge, plus the latest initial jobless claims report and earnings from 3M, Alaska Air Group, American Airlines, Biogen, Caterpillar, Celanese, Celgene, Fiat Chrysler, Freeport-McMoRan, Intel, JetBlue, Northrop Grumman, Raytheon, Sherwin Williams, Southwest Airlines, Starbucks, Union Pacific, and Western Digital. The first estimate of Q4 economic expansion arrives Friday, along with earnings news from Colgate-Palmolive, Honeywell, NextEra Energy, and Rockwell Collins.
|% CHANGE||YTD||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||8/11 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.58%||0.43%||-0.66%||1.42%|
Sources: wsj.com, bigcharts.com, treasury.gov – 1/19/186,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS
real yield = projected return at maturity given expected inflation.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1 – sca.isr.umich.edu/ [1/19/18]
2 – investing.com/economic-calendar/ [1/19/18]
3 – marketwatch.com/story/oil-prices-slip-from-3-year-high-as-traders-wait-for-trump-move-on-iran-2018-01-12 [1/19/18]
4 – marketwatch.com/story/oil-prices-sink-1-head-for-biggest-weekly-loss-since-oct-2018-01-19/ [1/19/18]
5 – nytimes.com/reuters/2018/01/17/business/17reuters-usa-stocks-dow-factbox.html [1/17/18]
6 – markets.wsj.com/us [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F19%2F17&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F19%2F17&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F19%2F17&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F18%2F13&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F18%2F13&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F18%2F13&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F18%2F08&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F18%2F08&x=0&y=0 [1/19/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F18%2F08&x=0&y=0 [1/19/18]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/19/18]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/19/18]