Article of Interest

April 1, 2020: Market DataBank: 4Q 2019


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S&P 500 SURGES SHARPLY IN 4Q2019

The Standard & Poor's 500 stock index posted a +9.1% gain in 4Q 2019.?? That's nearly as much as the average return historically earned in a full one-year period!??Stocks returned +1.7% in 3Q2019 after gaining +4.3% and +13.7% in the previous two quarters and losing 13.5% in 4Q2018.


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U.S. STOCKS TROUNCED FOREIGN AGAIN

The S&P 500 gained +73.9%, more than double the return on European stocks, in the five years ended Dec. 31. 2019. The +14.8% average annual return on the S&P 500 was nearly 50% more than the 10% return averaged for 200 years, according to Prof. Jeremy's book, "Stocks for the Long Run."


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ALL SECTORS TURNED IN BIG 2019 GAINS

While your eye may be drawn to the 50.3% return on tech stocks, the bigger story for diversified investors was that the poorest return among the 10 S&P industry indexes in 2019 was the 11.8% on energy industry shares. All of the other industry sectors returned more than 20%!


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INDEXES TRACKING 13 ASSET CLASSES

Notable in this bar chart of 2019 returns of a diverse group of 13 assets is that there was only one loser - agriculture commodities, which suffered a fractional loss of one-third of 1% for the year. The other 12 asset classes showed positive returns. Even asset classes not highly correlated with U.S. stocks gained strongly.


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QUARTER BY QUARTER

The is what a roaring bull market looks like. In looking back 20 quarters, the superlative returns in the last four quarters stand out. While this indicates a reversion to the mean could be in the cards soon, the fundamentals of the economy remained strong as 2020 began.


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CONSENSUS FORECAST

The 60 economists surveyed in early December by The Wall Street Journal expected growth to average +1.8% over the five quarters ahead, which is line with Bureau of Economic Analysis actual quarterly gross domestic product data shown in black. Barring a "black swan" event, the expansion was poised to continue in 2020

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.

 

 

 

 

 

December 31, 2019: Market DataBank: 3Q 2019


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S&P 500 SURGES SHARPLY IN 3Q2019

For the quarter, stocks posted a +1.7% gain. It followed a +4.3% gain in the second quarter.

 

 


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U.S. STOCKS TROUNCED FOREIGN

American blue-chip companies were the winners among major global share markets.

Since the financial crisis of 2008, the U.S. has led major world economies in its growth, and that's propelled large-cap S&P 500 companies as well as U.S. small- and mid-sized companies to outperform stock indexes of the other major economies of the world.

Europe over the past five years was stuck in slow-growth, a condition that may not change in the years ahead.

China's fledgling stock market showed the strongest returns of the foreign stock markets. However, Chinese control over the share market makes Chinese stocks subject to unusual financial as well as political risk.

 

 


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INTEREST RATES DROVE SECTORS

This five year snapshot of returns on different industry sectors of the S&P 500 stock index shows the tech sector - dominated by Apple, Amazon, Facebook, and Netflix - showed an astounding +131% return in the five years shown. These higher-risk growth companies paid off in a big way!

Of the 10 sectors, energy shares actually lost 23% of their value in these five years of bull market returns.

If you are employed in the tech sector, it's wise to examine your overall exposure personally to its risk. If you work in the tech sector, your job is obviously tied to the continued growth of the sector. Plus, you also may receive shares or incentives to buy your company stock as part of your compensation plan.

The growth in value of your tech investments could lead you to concentrate too much of your wealth in one sector.

It's just a risk that is often overlooked.

Longtime workers in the energy industry who concentrated their wealth on the oil economy for the past five years are undoubtedly regretting that they overlooked that risk.

 

 


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INDEXES TRACKING 13 ASSET CLASSES

The 13 asset classes shown here ranked by returns make a case for diversification.

The risk of being overweighted in shares of commodities-related companies, that make the raw materials of tangible goods we buy and food we eat, were huge losers.

Shares in crude-oil-related companies in the five years ended September 30th, 2019 lost a stunning two-thirds of their value.

MLPs mostly own energy-related investments, which explains why they fell in value.

 

 


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WORKING-AGE POPULATION

Investors could be in for permanently lower yields on bonds because the low-yield trend is tied to slow-moving demographic trends.

In contrast, however, the U.S. baby boom will spawn an echo-boom generation that is unique among the world's major economies. That's a strong positive fundamental economic factor to consider for long-term American investors.

 

 


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MANUFACTURING DIPS

Since September 2018, manufacturing activity plunged from a record-high of 61.3%. Last week's manufacturing activity report showed further deterioration, from 51.2% in July to 49.1% in August, and the press covered it widely.

This monthly manufacturing data series from the Institute of Supply Management, which certifies purchasing management professionals employed across the U.S. and globally, is designed to signal a recession when it falls to less than 50%. In the last three decades, it has predicted six of the last three recessions.

Over the last three economic cycles, the ISM Manufacturing Index dipped below 50% six times and was not followed by a recession three out of those times; rather, it soared again and after it dropped to less than the 50% recession signal.

 

 

 

 

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.

 

 

 

 

 

 

 

September 4, 2019: Market DataBank: 2Q 2019


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S&P 500 SURGES SHARPLY IN 2Q2019 Stock returned +4.3% in 2Q2019, after a +13.7% gain in 1Q 2019, and a 4Q2018 loss of -13.5%. The S&P 500 stock index posted a +7.7% total return in 3Q2018, +3.4% in 2Q, and a -0.8% loss in 1Q2018. Share prices broke a new all-time record high, retreated sharply, and surged again to a new all-time high in a volatile quarter.

 

 


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PLUNGE ENDED 9-YEAR 11-MONTH BULL RUN

U.S. stocks, over the 12 months ended June 30, 2019, returned +10.4%. But the one-year period was interrupted by a bear market drop - a 19.8% drop, qualifying as the first bear market in nine years and 11 months. World stock markets were rocked in this 12-month period by a looming U.S. and China trade war.

 


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INDEXES TRACKING 13 ASSET CLASSES

The S&P 500 index's total return of +68% over the five years shown was almost four times the S&P Global ex-U.S. stock market's return of +18%. Relative to the rest of the world and a broad range of asset classes over the five years ended June 30, 2019, the U.S. economy and stock market have performed exceptionally.

 


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INDEXES TRACKING 13 ASSET CLASSES

The S&P 500 index's total return of +68% over the five years shown was almost four times the S&P Global ex-U.S. stock market's return of +18%. It is testament to how resiliently the U.S. economy came out of the last severe global recession and U.S. growth outpaced other world economies and asset classes.

 


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VOLATILITY & REALITY

Stocks were more volatile in the 12 months ended June 30, 2019. The trade war with China and yield curve inversion threaten to end the longest economic expansion in U.S. post-War history and a bull market. Consumers are spending, and wages after taxes and inflation stayed strong.

 


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EQUITY RISK PREMIUM

The equity risk premium - the extra return annually averaged for investing in America's 500 largest publicly-held companies in the 21??-years was + 5.36%. The difference between the 7.3% return averaged annually on the S&P 500 and the 1.94% return on a "risk-free" T-Bill was 5.36%. Stocks were a risk that paid off.

 

 

 

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.

 

 

 

 

 

 

 

May 28, 2019: Market DataBank: 1Q 2019


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S&P 500 SURGES SHARPLY IN Q12019

Stocks posted a surprising +13.7% gain in Q12019 after a 4Q2018 loss of -13.5%. The S&P500 stock index posted a +7.7% total return in 3Q2018, a +3.4% return in 2Q, and a -0.8% loss in 1Q2018. As the quarter ended, investor psychology showed signs of a change, and stock market indexes hovered near all-time highs.

 

 


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PLUNGE ENDED 9-YEAR 11-MONTH BULL RUN

Over the one-year period ended March 31st, 2019, China was the laggard among bourses worldwide, as prospects of a trade war with the U.S. mounted. While China’s economy would shrink materially if exports to the U.S. were stopped, U.S. GDP was expected to suffer only fractionally from a China trade war.

 


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INTEREST RATES DROVE SECTORS

The yield on a 10-year Treasury bond plunged, from 2.69% to 2.41% in Q1, which boosted utilities to income investors. The yield curve — the difference between 10-year T-bonds and 90-day T-Bills — inverted at the end of 2018, hurting bank and financials stocks.

 


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INDEXES TRACKING 13 ASSET CLASSES

The S&P 500 index’s total return of +68% over the five years shown was almost four times the S&P Global ex-U.S. stock market’s return of +18%. It is testament to how resiliently the U.S. economy came out of the last severe global recession and U.S. growth outpaced other world economies and asset classes.

 


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S&P 500 AND POST-WAR EXPANSIONS

At 118-months old, this expansion, following on the 2008 Global Financial Crisis is highly likely to exceed the longest boom in post-War history, the 120-month long stretch in the 1990s. Unless a black swan event were to occur, continued strong fundamentals may make this the longest expansion in modern history.

 


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EQUITY RISK PREMIUM

The S&P 500 hit a record all-time high on September 20th, 2018, then dropped -19.8% to a Christmas Eve low. Rounding makes it qualify as a bear market drop of 20%. But it was a short bear run. The plunge occurred after the Fed’s December 19th decision to raise lending rates a quarter of 1%.

 

 

 

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.

 

 

 

 

March 20, 2019: Market DataBank: 4Q 2018


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S&P 500 DROPPED SHARPLY IN 4Q18

The Standard & Poor’s 500 stock index posted a -13.5% loss in 4Q 2018, following a huge +7.7% total return in 3Q2018, a +3.4% return in 2Q, and a -0.8% loss in 1Q 2018. It was the worst quarterly performance for stocks since 2011. Riskier small-caps, meanwhile, lost about 20% of their value in the quarter.

 

 


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PLUNGE ENDED 9-YEAR 11-MONTH BULL RUN

The plunge followed a spectacular bull run: nine consecutive calendar years of positive returns and a +10.8% return through the first 11 months of 2018. On December 19th, the Fed hiked interest rates a quarter-point, and 2018 ended amid heightened fear the Fed would keep raising rates and cause a recession.

 


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SECTORS SHOW GROWING APPETITE FOR RISK

Though the S&P 500 lost 4.4% in 2018, health care stocks gained 6.5%. The biggest losers were companies related to natural-resources, as slowdown fears caused share values in economically sensitive sectors to suffer the worst damage among industry sectors.

 


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INDEXES TRACKING 13 ASSET CLASSES

Atop this list of 13 asset classes sit U.S. stocks, which outperformed every other asset class in the five years through 2018. The S&P 500 index’s total return of +50% was more than six times the S&P Global ex-U.S. stock market’s return of +8%. U.S. financial economic measures were strong versus other liquid asset classes.

 


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S&P 500 AND POST-WAR EXPANSIONS

At 116-months old, this expansion, following on the 2008 Global Financial Crisis, is highly likely to exceed the longest boom in post-War history, the 120-month long stretch in the 1990s. Unless a black swan event were to occur, strong fundamentals could make this the longest expansion in modern history.

 


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EQUITY RISK PREMIUM

In the 21 years and 11 months through November 30th, 2018, the risk-free 90-day U.S Treasury Bill averaged an annual return of 2.1%, compared to a 7.2% annualized return on the S&P 500 stock index. This period encompassed two financial economic cycles illustrating the current equity risk premium.

 

 

 

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.