“These kinds of markets test the mettle of investors,” according to a quote in the Wall Street Journal. “You have to step away from the monitor so you don’t do anything stupid, like hit a sell button.”
Instead, investors are well advised to think long term and monitor the factors that generally support the stock market: consumer spending, the FED, and business profitability. All three of these are strong as further described immediately below in the “Heat Map”.
Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.
THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.
BUSINESS PROFITABILITY: This factor’s grade is a B+ (above average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the risk of an EBOLA pandemic to the “powder keg” in the Middle East to the situations to be watched. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 2. Risks continue to lurk, and they deserve our ongoing attention.
NOTE: There is no change from the prior week.
Last week, Bonds increased. US Stocks and Foreign Stocks declined. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 12-12-2014 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.7 |
6.0 |
5.9 |
2.9 |
4.3 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
-3.5 |
10.5 |
15.1 |
20.0 |
15.0 |
7.6 |
|
Foreign Stocks- MS EAFE Developed Countries |
-3.5 |
-5.4 |
-.5 |
11.1 |
5.5 |
4.9 |
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week, Join host, Laurie as she discusses: “Year-end tax tips and what can wait and what cannot wait”
Laurie will take your calls on this topic and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
Last week, good news coming from economic reports far outweighed bad news. Here is a bullet point listing of the good news:
On the negative side, Producer prices fell 0.2%, bigger than the 0.1% expected decline.
“Go as far as you can see and you will see further.”
– Zig Ziglar
Thanks to all of you referring great new restaurants to my wife Jo Anne and me to try. Most recently, we tried “Saranda’s on Broadway” and we were impressed! I am adding it to my list of FAV’s. Here is what YELP says: http://www.yelp.com/biz/sarandas-on-broadway-fountain-hill
Thomas M. Riddle
President, VNFA
U.S. equity markets suffered their largest point declines in more than three years last week, as investors, spooked by oil’s decline, went on a broad-based selling-spree. The Dow Jones Industrial Average gave back 678 points, and dropped more than 100 points in the last 30 minutes of trading on Friday.
The Dow dropped 678 points, or 3.8%, last week, to 17,280.83, its largest point and percentage drop since 2011. The Standard & Poor’s 500 index 500 fell 73 points to 2002.33, its largest point drop since 2011 and largest percentage drop since 2012. The tumble came after seven consecutive weeks of gains. The Nasdaq Composite index fell 127 points, or 2.7%, to 4653.6.
European markets also plunged, with major indexes including the FTSE 100 and the DAX registering their largest losses since 2011. Oil led the market lower, with crude futures dropping $8.03 per barrel, or 12.2%, to $57.81, the lowest price it has settled at since May 2009. Oil hit its 52-week high of $107.26 in June, and has since fallen 46%—24% just in the past three weeks.
Oil bulls got bad news on both the supply and demand fronts. The International Energy Agency cut its estimate for oil demand growth Friday. Saudi Arabia’s oil minister said Thursday he had no intentions of cutting production amid the recent price plunge, adding to oil’s skid. “The story for crude remains the same—slower global growth, excess supply, and an unwillingness of OPEC and others to cut production as they continue to vie for market share,” wrote Yousef Abbasi, the global market strategist at JonesTrading.
(Source: Barrons Online)