Last week, we described October as being, on average, a very good month for the U.S. stock market. And, October, 2015 is turning out to be better than good – it’s great. What about November and the U.S. stock market? November has been the 3rd best performing month for the S&P 500 since 1990. During that period (1990-2014), the S&P 500 has gained an average total return of +1.6% during November. Over the entire period, 18 of 25 Novembers have been up.
Monthly Archives: October 2015
The “Heat Map”
Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans coming into the all-important Holiday shopping season.
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. The FED kept interest rates unchanged last week. The next big milestone is Fed meeting will occur Oct 27-28.
BUSINESS PROFITABILITY: This factor’s grade is a C (average). Earnings reporting season is upon us – early reports are favorable.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.
The Numbers
Last week, U.S. Stocks and Foreign Stocks increased. And, Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 10-23-2015 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
-.1 |
1.5 |
2.1 |
1.8 |
3.1 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
2.1 |
2.4 |
8.6 |
16.1 |
14.3 |
8.1 |
|
Foreign Stocks- MS EAFE Developed Countries |
.8 |
2.4 |
2.6 |
8.2 |
4.9 |
4.3 |
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, Laurie and guest host Valley Nationals’ Executive Vice-President Matt Petrozelli, will discuss: “What’s new for investment accounts?”
Laurie and Matt will take your calls on these topics 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– 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.
Motivational Quote of the Week
“Whether you think you can or you think you can’t, you’re right.”
– Henry Ford
The Markets This Week
Quiet markets perked up Thursday, when European Central Bank President Mario Draghi said the ECB would revisit monetary stimulus moves in December. That drove European stocks higher and ignited a rally in the U.S. Friday’s surprise rate reductions by the People’s Bank of China stoked the fire and helped global stocks end higher.
Third-quarter earnings reports from Google owner Alphabet (ticker: GOOGL), Microsoft (MSFT), and Amazon.com (AMZN) topped Wall Street expectations. Struggling McDonald’s (MCD), like Microsoft, a member of the Dow, gave the index a boost when it announced the first quarterly U.S. same-store sales increase in two years.
Last week, the Dow Jones Industrial Average jumped 2.5%, or 431 points, to 17,646.70. The Standard & Poor’s 500 index tacked on 42 to 2075.15. The Nasdaq Composite soared 3%, to 5031.86.
American and Chinese economic reports were decent. China reported Monday that its economy grew by 6.9% in the third quarter, the slowest since 2009. But it was good enough, says John Canally, investment strategist at LPL Financial, to help allay the fears of a “hard economic landing” that had set off the market correction in August. It helps that so far there has been no big profits miss blamed on China, he says.
“Good reports from leading tech names always bolster investor psychology,” says Joseph Amato, chief investment officer of Neuberger Berman. “There’s a better tone in the market now.”
Earnings growth remains mixed due to problems in the energy patch. In general, revenue growth continues to disappoint, though earnings somehow have managed to overcome that. Analysts’ expectations of 10% profit growth next year for companies in the S&P 500 “feels aggressive,” but that doesn’t mean the market will turn down, Amato says. Something modestly below 10% can still support equities, which remain a better alternative than fixed-income assets, he says.
A rate rise isn’t expected from the Federal Reserve’s Open Market Committee, which meets Tuesday and Wednesday. Should the market stay strong in the fourth quarter, that, together with improved credit-market spreads and lower joblessness, might give the Fed a chance to raise rates, says John Brady, an institutional sales trader for broker R.J. O’Brien.
Sentiment has improved and the rally has put the market back into positive territory for the year. Given that stocks are entering a seasonally positive quarter, the default is rally mode.
(Source: Barrons Online)
Heads Up!
October is, on average, a very good month for the U.S. stock market. But it is also a volatile month: Stock market veterans will recall the S&P 500 Index fell 20.5% on Monday 10/19/87 (28 years ago today), the largest single-day drop, in percent, in the history of the stock index. Keep in mind, in spite of tumbling 20.5% on the single trading day of Monday 10/19/87, the S&P 500 gained +5.3% for the entire 1987 calendar year.
The “Heat Map”
Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans coming into the all-important Holiday shopping season.
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. The FED kept interest rates unchanged last week. The next big milestone is Fed meeting will occur Oct 27-28.
BUSINESS PROFITABILITY: This factor’s grade is a C (average). Earnings reporting season is upon us – early reports are favorable. A large number of companies will report earnings in the coming week.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.
The Numbers
Last week, U.S. Stocks and Foreign Stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 10-16-2015 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.4 |
1.6 |
1.8 |
1.8 |
3.2 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
.9 |
.4 |
11.5 |
14.2 |
14.0 |
7.8 |
|
Foreign Stocks- MS EAFE Developed Countries |
.3 |
1.6 |
5.4 |
7.4 |
4.5 |
3.9 |
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, Laurie and guest host Attorney Judith Harris, of Norris, McLaughlin & Marcus, will discuss: “Estate Planning Awareness Week”
Laurie and Judy will take your calls on these topics 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.