Weekly Market Commentary

The Markets

Back to reality...

After months of eerie calm, stock market volatility has returned. The CBOE Volatility Index (VIX) – a measure of how turbulent investors expect stock markets to be during the next 30 days – appeared to fall asleep in November 2016. For more than a year, a level of serenity that is rarely associated with stock markets prevailed and U.S. share prices moved steadily higher.

It appears that time is behind us. Barron’s wrote:

“With February’s swift stock market correction, volatility has arrived and will probably stay awhile. The downturn last week ended a streak of 404 trading days without a 5 percent drop in stock prices from the previous high – the longest such streak in market history.

The last correction came in February 2016, when stocks dropped 15 percent. Investors then fretted that Chinese economic growth might be slowing, which turned out to be a false alarm. Long term, the latest nose dive might yet become just a bull speed bump, but there’s already been plenty of pain.”

Weekly Market Commentary

The Markets

It was not a good week for stocks.

Last week, stock markets around the world lost value. In the United States, the Standard & Poor’s 500 Index (S&P 500), Dow Jones Industrial Index (Dow), and NASDAQ all finished lower.

Some pundits have been drawing comparisons between the performance of the Dow last Friday and Black Monday, the memorable day in 1987 when the index shed 508 points in a single day.

They may be barking up the wrong tree. 

Yes, the Dow lost more than 600 points on Friday. That was about 2.5 percent of its value. On Black Monday a lesser drop equated to a 22 percent loss for the Dow. In addition, Black Monday was widely attributed to program trading gone awry. The culprit behind last Friday’s fall is likely to be bonds, according to Barron’s.

A Decision Not Made Is Still a Decision

Whether through inertia or trepidation, investors who put off important investment decisions might consider the admonition offered by motivational speaker Brian Tracy, “Almost any decision is better than no decision at all.”¹

Investment inaction is played out in many ways, often silently, invisibly and with potential consequence to an individual’s future financial security.

Let’s review some of the forms this takes.

Weekly Market Commentary

The Markets

The numbers are coming in.

Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter’s sales and earnings are reported during the first quarter of the year, and first quarter’s sales and earnings will be reported during the second quarter, and so on. 

Through last week, about one-fourth of the companies in the Standard & Poor (S&P)’s 500 Index had reported actual sales and earnings for the fourth quarter of 2017. As far as sales go, a record number – 81 percent – of companies sold more than expected during the fourth quarter. 

Weekly Market Commentary

The Markets

Last week, the United States government might as well have hung a sign on the front door of the Capitol that read, “Gone negotiating. We’ll be back in…however long it takes.”

In 2013, the U.S. government closed for 16 days. About 850,000 federal workers were furloughed and 6.6 million workdays lost. The shutdown affected private companies that worked with the government, too, and the U.S. economy took a hit.

The prospect of kicking off 2018 with a government shutdown didn’t appear to concern investors too much. Barron’s reported the Dow Jones Industrial, Standard & Poor’s 500, and NASDAQ indices all finished the week higher.