U.S. stocks rallied Wednesday. The most they’ve leapt in eight months. The dollar fell. Emerging-market assets surged. Responding like Pavlov’s dog to the dovish tone from Fed chairman Powell. One that fueled speculation that the central bank is closer than thought to pausing rate hikes.
Stocks that had fallen the most during the six-week slump led the gains. Aggressively responding to Powell’s comments that rates are “just below” a neutral-policy range. Potentially removing one of the markets biggest drags.
Powell added that the economic outlook remains “solid.” Which underscored expectations for a December rate hike. But he added that the effects of higher rates take time to show up in data. Which led investors to surmise that the Fed is likely to reduce the number of hikes, if not outright pause them, next year.
Rough month for global equity indices. Yet, we remain above the March lows. At which time the S&P 500 fell to 2,588. three percent beneath today’s level. For now, the primary uptrend remains higher. Though pragmatic market observers must recognize that the trendline could be in jeopardy should this month end with lower lows.
This places investors in a waiting game. As we believe the current bout of volatility to be like the many others incurred throughout this bull market. Providing, in the end, to be a healthy, “Scare-all-the-weak-hands” correction. Separating the wheat from the chaff. So long as indices reverse course — then the current fireworks simply set the stage for the next run higher. Just when such a move is least expected.
Of course, that just happens to be how Mr. Market operates. One minute? Your best friend. The next? A stone-cold killer. Continue reading
Following the previous week’s four percent decline, and the ten percent overall correction, the S&P 500 managed to climb 2.47 percent this week. Shaving some of the October losses. And lending an air of optimism to a pervasively ominous sentiment.
As of last Wednesday, more than 75 percent of stocks in the S&P 500 were 10 percent or more below their highs of the past year. Marking an official correction. The second of the year following February’s -10.02 percent decline. Such circumstances whereby 75 percent of index stocks are in correction has occurred five times since the 2009 bull market began. Three of which quickly formed bottoms. The other two saw further selling in the near term. Ultimately, however, they recorded solid gains over the following two, three and 12 months.
Interestingly, S&P 500 returns went temporarily negative for the year. This has happened after at least 100 days in positive territory only five other times since 1929. In all cases, the benchmark index was up solidly three and six months later. With the best result being an 11 percent gain in three months following the October 19, 1987, Black Monday crash.
Ouch? Easily an understatement. The recent sequence of events has had global investors screaming like a gaggle of teenage girls at the Haunted Insane Asylum.
The last two weeks have been a classic Halloween Horror Show. The S&P 500 closed Friday at a shockingly oversold level. More than 3.7 standard deviations below its 50-day average. For context, one standard deviation below the 50-day average is considered a normal oversold condition. Two standard deviations are considered extreme. So, when you go to almost two times extreme, you’re into adjectives like colossal, apocalyptic and ridiculous.
Weakness in U.S. stocks these past two weeks can be traced to multiple factors. Trade issues with China. The risk of an Italian debt blow-out. Brexit or not. The risk of a spike in oil prices exacerbated by the Saudi situation. Together, they’ve given rise to enough uncertainty to explain the sudden decline in stocks. Historically, the uncertainty of a mid-term election is also enough for stocks to fall into Election Day and then start to rise as uncertainty lifts. Add in the Fed’s interest-rate hikes and, presto! A ready-to-order souffle of fear and uncertainty. Continue reading
Beware October 10th. Historically, 10/10 has been to stocks what The Bogeyman is to children’s nighttime affairs. Downright spooky.
10/10 has been the nexus of many historical highs and lows. In 2002, it served as the nadir of the dot-com bust. In 2007, it proved the apex of the bull market. And the start of a year-long descent into the steepest bear market of our lifetime.
This year, 10/10 yet again refused to recede into the calendar year without making its presence known.
Accordingly, yesterday saw the S&P 500 fall for the sixth straight day. Plummeting 3.29 percent. While the Nasdaq completely gave up the ghost, losing 4.08 percent. U.S. equities fell the most in a single day since February. When markets experienced a 10.02 percent pullback. Today, more of the same. With the S&P 500 and the DJIA falling 2.06 2.13 percent respectively.
Mercifully, the stock market continues to ignore the Goat Rodeo transpiring in Washington D.C. A testament to the power of markets. And to the strength of the current fundamentals. Granting investors opportunity to focus on that which remains most important — health, wealth, family and friends — despite the fuliginous pettifoggery in which both sides of our political duopoly are engaged.
The S&P 500 lost -0.51 percent last week. While the DJIA dropped 1.07 percent. And small caps gave up -0.86 percent. Only the Nasdaq managed to move higher. Adding 0.76 percent to its impressive YTD tally. Continue reading
Last week saw stocks finish higher. Though small caps lost ground. The Dow Jones Industrial Average finished its strongest two-week stretch since February. A sign that the inflation and trade-related anxieties that caused the index to stumble have abated.
Nor do we believe things will change in the near term. Empirical evidence reveals too many economic tailwinds occurring to douse the lights on this party.
Two weeks ago, I joined three friends in completing the Rim-to-Rim Grand Canyon hike. A 25-mile affair exposing us to some of the most beautiful scenery in the country. We camped and hiked. And ended the trip by spending one celebratory evening in Las Vegas. Continue reading
Welcome to September. A month in which seasonality works against us. Ranking historically as the worst month of the year for equity performance. In fact, September stands as the only month that, since 1928, has seen more negative than positive returns. Further distinguishing itself by posting the largest average monthly loss over that time frame.
September is to stocks what playoff games are to the Bengals. Historically losing affairs.
If last week offered any evidence, this year shall be no different. Every session last week finished lower. Pushing the Nasdaq 100 down 2.5 percent. The S&P 500 down one percent. And the Russell 2000 down 1.6 percent. Notably, it was the worst start to September for the Nasdaq since 2008. Which was the worst September in my memory.