It was a whirlwind week for the stock market, where doom-and-gloom continue to trip off the lips of mavens and commentators while major indices edge higher.
Underscoring the difference between hype, hysteria, fear-mongering, and reality, the best performing index last week had the greatest exposure to China and the escalating tariff battle. The Dow Jones Industrial Average rallied more than 2% and joined its brethren in the plus column for 2018.
I continue to stress that investors need to be careful of all the experts that continue to spread anxiety and fear. Some of these concerns are run-of-the-mill things that we always think about – especially when an economic expansion has run this long, and the stock market rally is this long in the tooth. These experts know rallies don’t perish from old age, but for other reasons.
Most of these experts, however, are part of the large crowd of elites hoping the economy takes a hit; mainly to prove that their criticism of the tariff battle was right. And their attempt to reassert their voices as the sole source of policy. Their voices have always drowned out the voices of the masses. Never forget that.
I saw this on Twitter about the current issue of Barron’s:
“Closer to recession”— Gundlach
“Tougher times ahead”—Abby Joseph Cohen
“Utilities worth a second look”— Barron’s staff
“Is recession ahead”— Panel topic
I want these folks to tell the world when they sell their entire portfolio.
For a long time, I have watched and read these articles and saw the brokerage ratings that have spooked individual investors out of the market. Still, the authors of doom-and-gloom prophecies stay long in the market that they say they fear.
- Of course, recessions are inevitable
- Of course, bear markets are inevitable
- I don’t think we are there yet- by a long shot
Real Investor Sentiment
Equity Index Performance | Week | 2018 |
Dow Jones Industrial Average | +2.3% | +1.2% |
S&P 500 | +1.5% | +4.8% |
NASDAQ | +1.8% | +13.4% |
Russell 2000 | -0.4% | +9.9% |
Investors have to look at Dow components for deep-value investment opportunities. Consider this: in January, the NASDAQ Composite was up 104% since 2013, and the Dow was up 69%. On Friday, the NASDAQ closed at an all-time high, up 116% since 2013, and the Dow was up only 61% since that time. This is why industrial names like Cummins Inc (CMI) and Parker-Hannifin (PH) found buyers last Friday. A close above 25,322 should spark a stampede of blue-chip buying.
Message for the Broad Market
For the broader S&P 500, all sectors rallied except safe havens of utilities and real estate. Technology was the biggest winner last week, but Netflix (NFLX) bounced around a lot ahead of its earnings release today.
Ironically, Netflix is one of the few companies seen as Amazon-proof. And yet, there is growing doubt coming into this earnings release.
S&P 500 Index | +2.25% | |
Consumer Discretionary (XLY) | +2.65% | |
Consumer Staples (XLP) | +0.65% | |
Energy (XLE) | +0.86% | |
Financials (XLF) | +2.11% | |
Health Care (XLV) | +2.89% | |
Industrials (XLI) | +2.03% | |
Materials (XLB) | +0.77% | |
Real Estate (XLRE) | -0.09% | |
Technology (XLK) | +3.39% | |
Utilities (XLU) | -0.44% |
The stock of the week is the stock of the year which also happens to be the stock of the decade. Amazon, also known as the wrecking ball, surged again this time leaving tire tracks on Cisco Systems (CSCO) and others, as reports surfaced the company will get into the high-tech switches business next year.
Technology (XLK) seizes the spotlight this week, and the stakes are high.
Meanwhile, considering the obstacles and negative press coupled with all the calls for doom last week, I think this was one of the best weeks of 2018.
I implore individual investors to stop listening to what Wall Street mavens say and warn you about and watch where they’re putting their money.
Satch where they’re putting their money.
Today’s Session
China’s second quarter GDP number was less than expected, which isn’t great for the global economy, but it is important with the ongoing trade battle. Interestingly, the market held after this data was released. Normally, this kind of news sends the market lower.
Maybe it’s because all eyes are on Helsinki and the Trump Putin Summit.
Meanwhile, there has been a slew of economic data released in America this morning and all of it great. We’ll have detailed analysis of the news later in the afternoon note.
- Retail Sales
- Empire State Manufacturing
- National Association for Business Economics
- Corporate earnings
There are several bigger names that posted financial results this morning, but nothing tells me more about the U.S. economy than the numbers from JB Hunt. The trucker saw improved metrics across all its business segments as the US economy continues to fire on all cylinders.
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