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    Markets "In a Nutshell" for April 10, 2018

    Apr 10, 2018

    Investment Week at a Glance

    Stocks dropped last week. The Dow Jones Industrial average lost 0.7 while the S&P 500 fell 1.4%. The New York Stock Exchange Composite (2,000 stocks) was down 0.8% and the “average investor’s index” (Value Line index) dropped 0.7%. Foreign stocks (DJ Global ex U.S.) bucked the trend gaining 0.1%. Bond yields rose a bit as the year Treasury yield ended at 2.77%. (Data sources: Barron’s Financial, Wall Street Journal)

     

    Another volatile week for the stock market

    According to MarketWatch, 2017 was the least volatile year in stock market history. 2018 has been the opposite with big swings in market value day to day and week to week. While this can be disconcerting, ups and downs in the stock market are more the reality than the exception. Market cycles (ups and down cycles) occur on average every 5-7 years with the ups lasting 4-5 years and the downs around 2 years. Given the fact that this up cycle has been unusually long (9 years), we are likely at the later stages of the cycle. The recent volatility is a good reminder to make sure your risk is appropriate for your longer term life and financial situation. 

     

    Jobs recovery extends its record streak

    With 103,000 new jobs added in March, the jobs recovery is now at 90 months and counting (the longest recovery on record). According to the Wall Street Journal (4/7-8) 17 million jobs have been created since the Great Recession of 2008-09. Wage growth held steady at an annualized rate of 2.7%.  

     

    Do bearish investors signal a market rally ahead?

    After wild optimism in late January (right before the recent correction started), a number of different investment measures have turned bearish and may signal upcoming gains in stocks. For example, the AAII Journal measure of investor sentiment now reads only 30% bullish (down from the 60% high in January). The NAAIM stock exposure Index has money manager exposure to stocks at 55%; down from the late December high of 121% (using leverage exposure can be over 100%). Often extreme bullish readings can be harbingers of market downturns while bearish readings just the opposite.

     

    Quiz:

    It is no secret that the U.S. stock market is currently among its highest levels of “expensiveness” in history (with a 10 year p/e of about 33). Which country’s stock market has the lowest p/e at 6.5? a. Russia b. Czech Republic c. Brazil d. Germany...Answer is below…

     

    Have a good week!

     

     

     

     

    Answer to quiz:

    a. Russia.