Markets, Economy

Weekly Kickstart (05/20/2019-05/24/2019)

5/20/19 8:00 AM

iStock-626627280.jpgStocks remained under pressure last week, as the S&P 500 fell by 0.76 percent to 2,859.53. That still left the benchmark index up 14.07 percent 2019-to-date, and just 2.93 percent below the all-time closing high. Most of the damage was done on Monday when the S&P 500 plunged by 2.41 percent, the largest 1-day decline since the start of the year. However, equities recouped a good chunk of those losses during the rest of the week, which is not surprising because Monday’s drop was a “90% downside day,” i.e. at least 90 percent of the NYSE’s total volume was in declining shares. These rare occurrences can be viewed as signs of investor panic (or euphoria when to the upside), and forward returns both in the near-term and over the next twelve months have historically been overwhelmingly positive.


Despite the encouraging statistics it is also important to point out that even after last week’s wild swings, market volatility so far in 2019 remains unusually low (but “feels” high due to availability heuristics). Add to all of this the uncertainty (risk) still surrounding the trade negotiations, debt ceiling, and numerous other issues and it is easy to envision further large intraday market fluctuations this year. Fortunately, many investors appear ready for such an environment, because 61 percent of respondents in a new Charles Schwab survey said that they anticipate an increase in volatility over the next six months. These investors were also more likely to say that they intend to utilize ETFs that can help weather or even capitalize on higher market volatility, perhaps a better strategy for non-professionals than stock picking or trying to time the market. A somewhat newer tool that can provide additional assistance is a robo-advisor, which we learned earlier this year can, among other things, help investors avoid making emotional and possibly detrimental portfolio adjustments when stock prices are falling.


To recap a few of the things we learned about the economy last week, the positives included that trade-related inflation pressures moderated, regional manufacturing activity finally started to rebound, homebuilder sentiment strengthened, housing starts increased, small business owner optimism improved, consumer confidence surged, and the number of Americans making first-time claims for unemployment benefits retreated. As for the negatives, home purchase applications slid, single-family building permits dropped, industrial production decreased, capacity utilization fell, and retail sales unexpectedly declined. This week the pace of economic data slow down but there are still a few important reports on housing, manufacturing, and employment scheduled to be released, along with the potentially market-moving minutes from the last Federal Open Market Committee (FOMC) meeting due out on Wednesday.


**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:








Sources: Econoday, Pension Partners, Charles Schwab, Twitter, FRBSL

Post author: Charles Couch