Market Update

Each quarter we offer an update on the performance of the financial markets and the economy.  Please check out the articles below.

Market Update 2017 Q2:  Continuing the climb we analyzed in our last quarterly report, the Dow Jones Industrial average and S&P 500 each rose 3% in a second quarter that was notable mostly for its lack of volatility. There were provocative headlines, to be sure, including the dropping of the “Mother of All Bombs” on ISIS and the allegation by former FBI Director James Comey that he was asked by the President to drop his investigation of Michael Flynn. Just last week, North Korea successfully tested an intercontinental ballistic missile apparently capable of reaching Alaska and Hawaii. Each time, the market wobbled, and then quickly recovered. By historical standards, the wobbles were both small and rare. Last quarter there were only three days (highlighted in chart) in which the Dow traded up or down more than 1%, and two of those were successive days of gains following Emmanuel Macron’s victory in the first round of France’s presidential election. Since 2010, a typical quarter has had 13 days with gains or losses greater than 1%; there have been no such days in nearly two months. This figure and every other measure of volatility have been trending down since last year’s US presidential election.

Market Update Q1 2017: The stock market’s love affair with the Republican agenda endured the rocky start to the Trump presidency, and finished up 5% for the first quarter. The Dow Jones Industrial average breached two milestones – crossing 20,000 for the first time ever on January 25, then topping 21,000 on March 1. In surging to that record close, the market looked past a number of events that most Americans found unsettling – massive protests against the new President, the courts’ rejection of his unpopular travel ban, the resignation of the National Security Adviser under suspicions of colluding with the Russians in the 2016 election, and the recusal of the Attorney General a day later from that investigation. Whew!

Market Update 2016 Q4: No year ever demonstrated better than 2016 the most important principle of investing – no one can predict the short-term direction of the stock market and the best way to make money in the long-term is to stay invested. The year offered nervous investors numerous opportunities to bail out of stocks, and many did. After the Dow dropped 1200 points (7%) in the first week of 2016 – the worst ever start to a year – many analysts predicted a crash. Donald Trump himself said that stocks were in a bubble, and Mad Money’s Jim Cramer agreed. But as so often happens, the markets regained their footing, at least until Brexit triggered the next crisis of confidence. Once again, markets bounced back quickly. Then came the election. As investors eyed what was arguably the most discouraging presidential campaign in history, the market trended downward.

That brings us to the fourth quarter, when suddenly, just days before the election, stocks reversed course and started climbing. Analysts suggested this was due to improving odds of a Clinton victory. This assessment seemed to be validated on election night, when Trump’s apparent victory was accompanied by an 800 point drop in the Dow on the overnight futures market. But by morning the Dow was down only 200 points. And it kept climbing, ending the day up 250 points. By year’s end the Dow finished up 12%, a dramatic advance of 28% from its February low.

Market Update 2016 Q3: In the aftermath of June’s Brexit vote and with potentially earthshaking elections looming over the US and Europe, global financial markets advanced to their biggest gains of the year in the third quarter. As we know through sports, however, the fourth quarter is where much of the important action occurs. Such may be the case with the stock market in 2016.

Market Update 2016 Q2: Just a couple of weeks ago the 2nd quarter was shaping up as a quiet one for financial markets; global stock indexes were flat to slightly up and volatility was at its lowest levels in a year. That was before most of the world became familiar with (or tired of) the word “Brexit”.

Market Update 2016 Q1:  Despite being down 10% halfway through the quarter, the S&P managed to eke out a small gain over the first three months of the year. Though the market proved resilient, many of the trends we observed in 2015 appear to be long in the tooth and early signs of reversals seem to be budding in many sectors of the market. Please click the link to read more…

Market Update 2015 Q4:  China kicked off the New Year with a 7% drop on the first trading day and global sentiment has yet to recover.  U.S. stocks ended the week off to their worst ever start to a year.  Some investors may be concerned that this could be a harbinger of things to come, but history tells us that negative first weeks predict a loss for the full year only 50% of the time.  This reminds us that no matter what the current sentiment, markets remain inherently unpredictable in the short-run.  In the latest market update we focus on the fundamentals that will drive long-term investment performance and ultimately determine whether returns will meet our expectations.

Market Update 2015 Q3:  As we wrote this market update over the past few days, stocks were staging a mini-rally from the third quarter’s market correction, a drop of more than 10% that occurred in August. The correction was notable for its suddenness as well as for being the first in four years, an unusually long interval between pullbacks.  While markets remain well below their recent highs and broadly down for the year, long-term returns remain solid.  Over trailing 3, 5 and 10 year periods U.S. stocks have advanced 13%, 13% and 7% per year, respectively.

In the Q3 Market Update posted here we discuss the factors currently moving markets and the leading indicators we look at to understand where we might be headed

Market Update 2015 Q2:  Market volatility returned with a vengeance over the last two weeks.  As if the Greek crisis weren’t enough to excite investors, shares on China’s mainland exchanges soared, crashed and rebounded, with the Chinese government seemingly unable to positively influence, much less control, events.  In the midst of all that, the New York Stock Exchange suffered an unprecedented four hour shutdown of trading activities that investors initially feared might be attributable to cyber hacking.

And yet investors have proven remarkably resilient, with stock markets world-wide up solidly for a second straight day.  Now that Greece has largely accepted creditor conditions for a bailout, hopes for an interim agreement have risen and the markets have rebounded. As we discuss in the latest market update posted here, the underlying problems are substantial and no agreement will keep the Greek issue out of the headlines for very long.

Market Update 2015 Q1:  Though it was a close call, the S&P 500 stock market index notched its ninth straight quarterly gain.  Other U.S. indexes were mixed; the technology-laden NASDAQ also extended its winning streak to nine quarters while the Dow Jones Industrial Average fell for the second quarter in the last five.  Overall, it was a lackluster quarter as investors grew more anxious about the market’s ability to continue to advance in the face of new headwinds.

Market Update 2014 Q4:  The dominant theme this quarter is how strong U.S. economic and stock market performance stands in contrast to relative weakness in the rest of the world.  As investors, we need to understand the fundamentals supporting this trend:

  • Consumer confidence rebounding from an improving job market;
  • A stronger dollar reflecting global investor preference for U.S. assets; and
  • A new paradigm in the oil market driving prices sharply lower.

In this newsletter we discuss what these trends mean for your portfolio.

Market Update 2014 Q3:  A 1% advance in the headline S&P 500 index belies a far more turbulent and unprofitable quarter for nearly every corner of the financial markets.  As the market moves to a new phase less dominated by Federal Reserve policy we can expect more volatility.

Market Update 2014 Q2:  With the S&P 500 advancing 5% in the second quarter the stock market bull keeps going like the Energizer bunny.  This bull market has now run for more than 5 years, making it the fourth longest of the past 100 years.  It has also been more than 1000 days since the last stock market correction (a decline of more than 10%), the longest such streak in nearly 30 years.  We again contemplate the obvious – whether the age of the bull portends its imminent demise.

Market Update 2014 Q1: Despite an up and down first quarter the five year-old bull market remained intact as the S&P 500 Index eked out a 1.7% gain. As economic data in the US and China softened simultaneously, the possibility of a global economic slowdown drove global stocks down more than 5% in mid-January. Still investors shrugged this off and stocks rebounded by the end of February. Even Russia’s annexation of Crimea and the possibility of increased confrontation with the West failed to roil markets to any significant degree. This seeming indifference to negative news has bears suggesting that we have entered a period of exuberance that makes a hard landing inevitable if not downright imminent.

Market Update 2013 Q4:  The year 2013 will go down as a banner year for the US stock market with its best overall performance since 1995 and second best showing since 1958.  Prosperity was broadly shared with the S&P 500 and Dow indexes up almost 30% and the NASDAQ index up nearly 40%.  The market gained steadily with very little volatility and no significant pullbacks.  All of this has many people wondering whether stocks are just a bit too frothy.

Market Update 2013 Q3:  Financial markets ended the third quarter up strongly amid plenty of headlines out of Washington. The ride for stocks was a bit like a roller coaster for small children. The market moved gently upward as the market digested the second quarter’s news that Fed easing of stimulus was imminent. Soft economic data contributed to a dip in the middle of the quarter, but was then moved upward by the Fed’s decision to postpone said easing of stimulus. At the very end of the quarter focus turned to the looming government shutdown and dipped accordingly. The whole time market volatility remained extremely low, indicating that investors have become a bit harder to excite than a couple of years ago.

Market Update 2013 Q2:  Most asset classes struggled as volatility returned to the market in the second quarter.  In fact, US stocks were the only major asset class to post gains and those gains were in the low single digits.  The big news for the quarter, which we discussed in last month’s Market Perspective, was Ben Bernanke’s announcement that the Fed would likely slow its bond buying program later this year.  We discussed how the market’s initial reaction was overblown and, indeed, US stocks have bounced back the past couple of weeks to recoup most of the losses.

Market Update 2013 Q1:  US stocks marched upward in the first quarter with more conviction than seemed warranted by the facts.  The 10% gain in the S&P 500 came despite weakening economic data and the implementation of automatic budget cuts in federal spending.  Even as Cyprus brought back the specter of the Euro crisis the market responded with little more than a hiccup.

Market Update 2012 Q4:  The S&P 500 stock index reached a milestone in 2012 closing at its high level in five years.  For enduring withering volatility, index investors were “rewarded” with 2% average annual gains, including dividends. More impressively, with a 15% return in 2012 the index has performed strongly in 3 of the last 4 years.

Market Update 2012 Q3:  Seemingly oblivious to all worries, stocks marched steadily upwards in the 3rd quarter while experiencing the lowest volatility since 2006.

Market Update 2012 Q2:  After several months of relative calm, stock markets once again reacted fretfully to both global economic data and developments in Europe’s financial crisis.  By mid-May we were back to a full “risk-off” position, with investors retreating from stocks to the safe haven of Treasury bonds.

Market Update 2012 Q1:  Stock markets world-wide posted strong gains in the first quarter on mostly positive economic news, but expect two steps forward and one step backward and, occasionally, two steps backward and only one forward.

Market Update 2011 Q4:  US stocks bounced back strongly in the final quarter of 2011. The S&P 500 gained 10% to finish the year approximately flat and the Dow did even better, finishing the year up over 5%. Volatility also subsided. All in all, it was a very different stock market from what we saw earlier in the year.

Market Update 2011 Q3:  Stock markets world-wide experienced their largest declines since the 4th quarter of 2008. Fear gripped the market, volatility spiked and investors fled to the relative safety of U.S. treasury bonds and cash. For investors with any faith remaining in rational, efficient markets, it was a rough ride.

Market Update 2011 Q2:  The financial markets provided another exciting, albeit less rewarding, ride in the 2nd quarter of this year.  While the headline Dow Jones Industrial index inched up 0.76%, most stock indices declined slightly for the quarter.  Total returns for most other asset classes were moderately positive, reflecting a general aversion to risk.  The overall trend, however, obscures the fact that the 2nd quarter contained three very different markets.

Market Update 2011 Q1:  The public financial markets were an exciting, and rewarding, place to be in the 1st quarter of 2011.

 

 


 

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