Good morning everyone! Here’s what happened in the markets this week...
The S&P 500 ended January up 7.87% and YTD up 7.97%. That marks the best January stocks have seen since the 1980s.
That comes on the heels of the worst December the market has seen since 1931. The S&P 500 down 9% and the Dow down 8.7%. At it’s lowest, the S&P was trading down almost 15%.
The previous two charts illustrate a very important point. The best and worst trading days often cluster together. For a 20 year period ending in 2018, 24 of the 25 best trading days happened within one month of the 25 worst trading days.
While it’s still too soon to tell if this statistic will hold up again, the main takeaway is that if you panicked and left the market on December 24th, your portfolio would be down -14.87%. Had you done nothing at all, you would only be down -2.03%.
When volatility like this occurs, it’s important to ask yourself if you’re positive that a prolonged market correction is coming. Or, if you’re simply nervous because you’re unsure of what is happening in the markets. When in doubt, it can often pay to stay invested.
This article by Andrew Ang of BlackRock talks about how factor investing helps you play defensive in sinking stock markets as one possible risk mitigation strategy.
But enough of that. Here’s the actual news that happened this week. Donald Trump celebrated the Dow crossing the 25,000 milestone for the second time on Thursday. The first time this happened was on January 4th of last year. Almost a year to the day...perhaps this will become a new annual tradition? Like Super Bowl Sunday, or Government Shutdowns.
On Wednesday, Chairman of the Federal Reserve, Jerome Powell, announced he would take a wait-and-see stance to interest rate hikes. Powell said, "The case for raising rates has weakened somewhat." Why does this matter? Raising interest rates is often used as a tool to slow down an economy the Federal Reserve fears might be growing too fast. At the moment, the Fed has been raising rates simply to return them to a “normal” level. But a nervous market fears that if rates rise too fast it could put a stop to what is now the second longest bull market in history. And a pause in rate increases could give the market the chance it needs to find its footing again. This decision was welcomed by the market with the S&P 500 ending the day up 1.55%.
And he would have gotten away with it too, if it wasn’t for those meddling jobs reports: ‘Blowout’ jobs report further evidence of strong growth, economists say
Apple shares are on a tear this week. However, much of this has to do with the fact that Apple CEO Tim Cook had already set the bar for low quarterly earnings earlier in January. This is similar to the first bit of job advice I ever received…”the lower you set the bar, the faster you’ll get promoted”. I left soon after, preferring the “own your own business and set the bar as high as a possible” mindset.
For Apple, this strategy paid off. And Tim Cook put on a clinic in expectation management as it’s extremely difficult to report your first fourth-quarter decline in both profit and revenue in over a decade and see the price of your shares rise. Apple is not most stocks. So what’s the bottom line?
Apple is struggling to boost revenue from sales of iPhone’s which fell 15% from last year.
Oh, and there was that whole discovery on Monday that a software bug allowed people to eavesdrop on other users FaceTime calls: Apple Says It Has Fixed FaceTime Security Bug
And finally, it appears the fallout from the Government Shutdown is not over as A national park flooded during the shutdown and now it's overrun with elephant seals
Have a great weekend everyone! We’ll see you next week.
*These are the general views of Stanton Burns and they should not be construed as investment advice for any individual. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Stanton Burns does not maintain positions in any securities mentioned as of the writing of this article. Past performance is historical and does not guarantee future results.