Stocks continued higher last week, as the S&P 500 rose by 1.97 percent to 3,329.62. That was another record close and it left the benchmark index up 3.06 percent 2020-to-date. Clearly it has been a great start to the new year for equities, but with the rapidly approaching primary elections and a myriad of other unknowns (risks) for the markets still to overcome, many institutional traders continue to expect 2020 will see an uptick in volatility compared to 2019. Regular investors should always be prepared for such potential market swings so that they can avoid panicking at a potentially inopportune time. For example, from 1999 through 2018, a $10,000 investment in the S&P 500 would have grown to $29,845 (total return excluding fees), according to J.P. Morgan calculations.
That gain, though, assumes you were invested throughout the whole 20-year period, and missing just the 10 best performing days for the market during this horizon would see your ending balance shrink to only $14,895. In fact, failing to participate in just the top 60 trading days would result in a final balance of $2,144, a 79 percent loss. For some investors missing these few days out of the 5,031 that occurred during the two-decade sample seems more than possible since the largest gains in the market often occur during periods of heightened volatility that can shake out weak hands. Moreover, stock investing benefits from long-term participation in the market, but if simply the thought of large fluctuations in prices causes you to lose sleep your equity exposure could be too high and you should therefore consider consulting with a professional financial advisor. Even better, rather than waiting for the markets to experience another correction, take advantage of the latest run up in stock prices to work with an advisor ahead of time and make sure your positioning is properly aligned with your risk tolerance, nearness to retirement, and other unique variables. As always, we are here to help with any questions you may have.
To recap a few of the things we learned about the economy last week, the positives included that mortgage applications jumped, housing starts surged, regional manufacturing activity rebounded, household and wholesale inflation pressures remained muted, retail sales exceeded forecasts, and the number of Americans making first-time claims for unemployment benefits fell to one of the lowest readings of the past half a century. As for the negatives, homebuilder optimism moderated, building permits slid, industrial production contracted, capacity utilization decreased, small business owner confidence cooled, total job openings declined, and consumer sentiment slipped. This holiday-shortened week the pace of economic data slows down but there are still a few important reports on housing, manufacturing, and employment scheduled to be released.
What To Watch:
- US Holiday: Martin Luther King Jr. Day
- Markets closed
- Nothing scheduled
- MBA Mortgage Applications 7:00 AM ET
- Chicago Fed National Activity Index 8:30 AM ET
- FHFA House Price Index 9:00 AM ET
- Existing Home Sales 10:00 AM ET
- Jobless Claims 8:30 AM ET
- Leading Indicators 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- Kansas City Fed Manufacturing Index 11:00 AM ET
- EIA Petroleum Status Report 11:00 AM ET
- 2-Yr Note Announcement 11:00 AM ET
- 5-Yr Note Announcement 11:00 AM ET
- 7-Yr Note Announcement 11:00 AM ET
- 10-Yr TIPS Auction 1:00 PM ET
Sources: Econoday, J.P. Morgan, FRBSL
Post author: Charles Couch