For the week ending Jan. 16, 2016
- Capitulation: A known unknown.
Funny thing about Wall Street, those in the know have a way of saying stuff that those who don’t know much about Wall Street don’t exactly get. It’s kinda like Donald Rumsfeld’s famous “known unknowns” comment. Remember hearing that and thinking “Huh?”
So instead of addressing this year’s market performance by saying something like the market is on a slippery slope that appears to be heading really fast into bear territory, or, that market corrections and bear markets are natural market occurrences, Wall Street’s talking heads are talking capitulation.
Capitulation is an action word and a fancy way of saying that lots of folks are selling their stocks because they are worried. According to Investopedia, capitulation is “derived from a military term which refers to surrender.” Synonyms include cede, succumb and cave in.
The plus side of a caving market is the opportunity lower prices afford investors —particularly those who consider themselves to be value buyers.
From where I sit, no matter what’s going on with stocks–whether prices in the indices are heading up or down—it’s always smart to buy value. A good deal is a good deal no matter if you’re buying a house or a car, a designer handbag or stocks. That said, all value buying comes with a caveat of buyer beware.
In the stock market what’s unknown about the knowns, is how stock prices are going to perform one day to the next, one year to the next.
- Market Quick Glance
Here are the YTD performance figures for the major indices through January 15, 2016, according to CNN Money:
-S&P 500 -8.00% YTD
-Dow Jones -8.25% YTD
-NASDAQ -10.36 YTD
-Russell 2000 -11.28% YTD
The good news is that the average U.S. diversified Equity Fund in Lipper’s universe of 8,441 funds was down 6.89 percent year-to-date through Thursday, January 14, 2016. But, that was through Thursday and if you recall Friday was a horrible day for stocks. So take that and other YTD average return figures with a grain of salt— and an aspirin.
With that in mind, here two extremes: Dedicated Short Bias Funds were up 13.38 percent YTD on average and Equity Leverage Funds down 14.61 percent.
If you’re looking for plus-side YTD returns on funds, pretty much the only place to find them is in the fixed-income arena. The average Intermediate US Govt. Fund was up almost 0.78 percent while, hold on to your hat, the average General Treasury US Fund was up 1.70 percent. Again, through Thursday.
Every investor— stock, bond, mutual fund, ETF— needs to keep grounded all through his or her investing career. The best way to do that is by staying abreast of performance returns.
To that end, http://www.allaboutfunds.com is the only site I know of that offers an opportunity for you, dear investor, to see how the world of equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.
You will find all of Lipper’s weekly performance figures on both stock and fixed-income funds at http://www.allaboutfunds.com in the left column on the home page.
Take some time to click on the various performance link headings. You’ll be glad you did. Plus, you’ll learn something.
For instance, between Oct. 21, 2010 and Jan. 14, 2016 the SPDR S&P 500 ETF was up 12.01 percent while the Vanguard 500 Index; Adm was up a bit more at 12.09. The big long-term winner however has been Health/Biotechnology Funds. The average fund in that group, over that same time frame, was up 19.44 percent.
Friday was a lousy day for most companies but in the spirit of looking on the sunny side, three stocks that enjoyed plus returns on that day (each up from their 52-week lows) include Tiffany’s (TIF) it was up 79 cents, Macy’s (M) up 24 pennies and the big winner Revlon, (REV) up $2.91.