POCKETBOOK: Week ending Jan. 19, 2018

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  • Government shutdowns

It’s Monday, January 22, and  Day 3 of our government shutdown.

Based on history, and likely your common sense, the longer the shutdown, the more impact it has on everything from stock market returns to the economy and perhaps even your life.

Looking back, CNN.com reports that the 16-day shutdown five years ago, in 2013, was the costliest in our history: “$20 billion, according to an estimate from Moody’s Analytics.”

That said, should the current shutdown go on for that same amount of time, the pros don’t think the results would be as costly because our economy is in much better shape than it was in 2013.

We shall see.

  • Market Quick Glance

And more high scores for stocks prices last week as three of the four indices followed below hit new all-time highs on Friday and one—the DJIA—on Thursday.

I’ve heard from more than one professionally reliable source that stock prices are likely to continue their current upward trend through earnings season—like May. Provided, of course, nothing out of the ordinary happens.

But something already out of the ordinary has happened—a government shutdown. So, take that projection with the mixture of a grain or two of salt and reality.

Re the current market environment, another source reminded me of the huge impact a rising interest rate environment has on stocks. In short, the higher interest rates move, the more unattractive stocks become.

In other words, an increase in interest rates translates into fixed-income returns with  higher yields positively impacting income-focused investors. It also means less attractive returns on things like utility and dividend paying stocks and more money to financial institutions.

Given that change is the current and future name of the investing game, the stock market has been living in a low-interest rate heaven for years now and rewarding stock investors delightfully for longer than anyone could have imagined eight or nine years ago.

Below are the weekly and 1-year index performance results for four major indices— including the dates each reached new highs—according to CNBC.com based on prices at the close of business on Friday, Jan. 19, 2018.

DJIA +5.47% YTD up from last week’s 4.39%

  • 1 yr Rtn +32.13% up from last week’s 29.72%

Ho hum, a new high for the DJIA was reached again this year on January 18, 2018 of 26,153.42. The previous high was reached on January 12, 2018 then 25,810.43.

-S&P 500 +5.11% YTD up from last week’s 4.21%

  • 1 yr Rtn +24.15% up from last week’s 22.72%

A new high for the S&P 500 Index was reached on January 19, 2018 of 2810.33. The previous high was reached on January 12, 2018 of 2,787.85.

-NASDAQ +6.27 YTD up from last week’s 5.18%

  • 1yr Rtn +32.42% up a pinch from last week’s 30.89%

Nasdaq hit another new high on January 19, 2018 of 7,336.38. The second new high for this index was reached on January 12, 2018 of 7,265.26.

-Russell 2000 4.05%YTD up lots from last week’s 3.68%

  • 1yr Rtn +16.97% up a lot from last week’s +13.71%

The Russell 2000 reached another new all-time high on January 16, 2018 of 1,604.02. The previous high was reached on January 12, 2018 of 1,598.18.

 

-Mutual funds

More gains.

On Thursday, January 18, 2018, the year-to-date average cumulative total reinvested returns for equity funds that fall under the broad U.S. Diversified Equity Funds heading was 3.87% at the close of business on Thursday, January 18, 2017, according to Lipper. That’s up from the previous week’s figure of 3.33%.

Three fund types enjoying a positive new year under that broad heading include:

-Equity Leverage Funds, +8.37 %

-Large-Cap Growth Funds, +6.06%

-Multi-Cap Growth Funds, +5.59%

Visit www.allaboutfunds.com for more information about how various 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.

 

  • ETF Investing 24 hours a day

Once upon a time, when I was a broker and for decades before that, the stock exchanges had fixed hours that they were open. Investing on Internet platforms didn’t exist back then. Neither did things like dot com stuff, iPhones or anything “i” related.

Today things have changed dramatically  and investors can purchase shares before and after traditional market hours, currently 9:30-4:00

Now, TD Ameritrade has changed all that and beginning today that online brokerage firm offers 24-hour trading possible for ETFs.

While that may sound super-duper to some, the most important part of this story is that it comes with a caveat worth remembering: “The problem with trading equity around the clock is there’s not that much demand to keep a natural supply-demand balance, “ Larry Tabb of The Tabb Group says. “Small amounts of supply and demand can really move prices, so you have to be careful.”

Again, remember that.

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