Tag Archives: Merrill Lynch

POCKETBOOK: Week ending Feb.9, 2018

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  • Corrections and bears a good thing

As uncomfortable as it can be listening to all the talking heads sound as though the world is coming to an end with respect to the very natural movements of stock prices going down, the truth is—and always has been—stock prices go up and down. Bears and bulls, while the don’t live in the same pen, are typically natural occurrences within the investing arena. So instead of reaching for that second bottle of Jim Beam, get a paper and pencil out and do some math.

Figuring out how your portfolio(s) has weathered this current nearly 10% fall in prices has impacted your wealth is the best thing you can do under these market conditions. In fact, that’s the best thing you can do no matter which animal is roaming Wall Street, the bears or the bulls.

With that in mind, here are three market-related points to ponder:

  • From Goldman Sachs comes this  posted at TheStret.com: “Most equity market corrections recover without developing into bear markets or presaging recessions. Of 16 drawdowns of 10% plus since 1976, only five occurred around a recession. S&P 500 typically declined by 15% during the 11 non-recession corrections.”
  • For the second week in a row, the Merrill Lynch bull-bear indicator is flashing “sell”. This indicator has been correct in predicting 11 out of the 11 U.S. stock market corrections since 2002.
  • To be called a “bear market”, broad market indexes have to fall 20% or more from their peak over a two-month period.

 

  • Market Quick Glance

See-sawing from down a 1000 points to up 500 then down again. Go figure.

Every index followed here is underwater with respect to its year-to-date returns. And that’s the bad news. The good news happens when you take a longer term look. Then you will learn that three of the four indices have just fine double-digit 1-year performance returns. The exception is the Russell 2000.

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, Feb. 9, 2018.

DJIA -2.14% YTD down and in minus territory from last week’s +3.24%  

  • 1 yr Rtn +19.92% down from last week’s 28.34%

Most recent DJIA all-time high was reached on January 26, 2018 of 26,616.71. The previous high was reached January 18, 2018 was 26,153.42.

 

-S&P 500 -2.02% YTD down and in minus territory from last week’s 3.31%

  • 1 yr Rtn +13.51% down from last week’s 21.10%

The S&P 500 reached its most recent all-time high on January 26, 2018 of 2,872.87. The previous high was reached on January 19, 2018 of 2810.33.

 

-NASDAQ -0.42 YTD down and in minus territory from last week’s 4.89%

  • 1yr Rtn +20.28% down from last week’s 28.47%

Nasdaq latest new all-time high of 7,505.77 was reached on January 26, 2018. The previous high was reached on January 19, 2018 of 7,336.38.

 

-Russell 2000 -3.76%YTD down and in minus territory from last week’s +0.77%

  • 1yr Rtn +7.20% down a pinch from last week’s +13.99%

The Russell 2000 reached an all-time high on January 24, of 1,615.52. The previous high was reached on January 16, 2018 of 1,604.02.

 

-Mutual funds

After up comes down. And then more down.

For the first time this year, the year-to-date average cumulative total reinvested returns for equity funds that fall under the broad U.S. Diversified Equity Funds heading was underwater: On Thursday, Feb. 8, 2018, it stood at -3.40%. had That’s down from the +4.44% posted one week earlier.

Of the 20 different fund types that fall under the umbrella heading of U.S. Diversified Equity Funds, only one had a positive year-to-date return. It was the Dedicated Short Bias Funds of which Lipper tracks 164. The average return for funds under its heading was +3.08%

The broad umbrella headings’ y-t-d performances though 2/8/18 were as follows:

  • U.S. Diversified Equity Funds, -3.40%
  • Sector Equity Funds, -4.82%
  • World Equity Funds, -2.16%
  • Mixed Asset Funds, -2.47%
  • Domestic L-T Fixed Income Funds, 0.93%
  • World Income Funds, 0.22%

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.

 

  • Gold not so golden

Once thought as a safe haven for whatever crapola is going on with stock prices, investing in gold was thought of as a no-brainer. This precious metal has always been pitched as an asset investors ought to commit about 5% of their portfolio to.

The thinking for that suggestion has been— when stock prices fall the price of gold would increase. And the proof was in the past-performance pudding.

From CNBC.com comes this: “During the 2008 crisis when the S&P 500 Index lost 57 percent in market capitalization, gold rose 24 percent. Earlier in the bear market from 2000 to 2002, theS&P lost 49% while gold added nearly 13 percent.”

The performance numbers in that paragraph are good to remember.

Nonetheless, gold prices haven’t behaved as expected and have fallen by about 2% so far this month, according to that same source.
 

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POCKETBOOK: Week ending Feb.2, 2018

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•2.5%—ya buy 2% milk, don’t ya?

Readers of this site know that I’ve been posting “be careful”  kinds of blogs for more than a year now. Well, maybe forever. That might be making me a glass half-empty kind of gal but I see it as being realistic more than anything else.

Why? Because if anyone tells you that there is no risk to investing in equities they’d be lying and you’d be a fool to believe them.

Investing in stocks has always been risky with no guarantees of making a profit no matter what any mountain charts look like.

A mountain chart, in case you’ve forgotten, is a chart that looks at the performance of  say a stock or  popular index such as the DJIA  over an extended period of time—like since 1920, or 1990 or 2000 or 2008 until now. There’s no standard begin time when designing a mountain chart but the end is typically now.

The purpose of a mountain chart is to show that yes indeedy stock prices have increased over the long haul. And, yes indeedy trends both up and down can be seen on it. And yes indeedy markets do recover.

That said, the 2.5% fall of the DJIA on Friday, Feb 2, 2018 is no big deal if it’s a onsey. If that fall is the beginning of a trend, unfortunately, that’s something no one knows ahead of time.

So, who knows what this week will bring? But, if Merrill Lynch’s bull-bear indicator —which has been correct in predicting 11 out of the 11 U.S. stock market corrections since 2002—is correct again, it’s now sending out a “sell” signal.

We shall see.

 

  • Market Quick Glance

All four of the indices followed here saw their year-to-date returns suffer seriously—like nearly halved– when the markets closed on Friday. The worst hit was to the Russell 2000—it lost nearly all the positive ground  made this year.

The DJIA dropped nearly 666 points on Friday, Feb. 2, 2018—a rare occasion and the sixth-worse decline in the Dow’s nearly 122 year history.

A closer historical look reveals that a decline of over 500 points for the DJIA in one day has happened 17 times since 1993, according to Kensho, a hedge fund analytics tool CNBC referenced in a story.

Using that same tool, the Dow rose 1.5% on average, the day after that kind of fall with a 65% chance of recovery.

If you’re looking for some investment advice here, I’d suggest remembering that, as with all things in life, everything changes. And profits are best taken for real and not merely seen on paper.

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, Feb. 2, 2018.

 

DJIA +3.24% YTD down seriously from last week’s 7.28%  

  • 1 yr Rtn +28.34% down from last week’s 32.42%

No new high for the DJIA. The last one was reached on January 26, 2018 of 26,616.71. The previous high was reached January 18, 2018 was 26,153.42.

 

-S&P 500 +3.31% YTD down seriously from last week’s 7.45%

  • 1 yr Rtn +21.10% down from last week’s 25.09%

No new high for the S&P 500 Index. The last one was reached on January 26, 2018 of 2,872.87. The previous high was reached on January 19, 2018 of 2810.33.

 

-NASDAQ +4.89 YTD down seriously from last week’s 8.73%

  • 1yr Rtn +28.47% down from last week’s 32.72%

Nasdaq latest new all-time high of 7,505.77 was reached on January 26, 2018. The previous high was reached on January 19, 2018 of 7,336.38.

 

-Russell 2000 0.77%YTD down bad from last week’s 4.72%

  • 1yr Rtn +13.99% down a pinch from last week’s +16.90%

The Russell 2000 reached its latest all-time high on January 24, of 1,615.52. The previous high was reached on January 16, 2018 of 1,604.02.

 

-Mutual funds

After up comes down.

As you would expect, on Thursday, Feb. 1, 2018, the year-to-date average cumulative total reinvested returns for equity funds that fall under the broad U.S. Diversified Equity Funds heading stood at +4.44%. That’s down from the +5.32 % posted one week earlier.

To show how quickly things can change, below are the three fund types that have enjoyed positive y-t-d return so far this year under the U.S. Diversified Equity Funds broad heading. Here is how their y-t-date average returns have changed from one week to the next to the next to the next:

-Equity Leverage Funds: +9.43% (2/1/18): the week before it, +12.08%: and the week prior, +8.37 %.

-Large-Cap Growth Funds: +7.64%(2/1/18); the week before, +8.00%; and the week prior, +6.06%.

-Multi-Cap Growth Funds:+ 6.96% (2/1/18); the week before, +7.47%; and the week prior, +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.

  • REPEAT: Consider a stop-loss

A few weeks ago I wrote about how a falling dollar isn’t typically a great economic indicator, nor is the fact that credit card balances are increasing and savings rates declining. Throw in a rising interest rate environment and all can point to a not-so-hot performing stock market.

Last week I wrote about using stop-loss orders—a subject  worth repeating. So here goes: “When it comes to the ups and downs of investing in stocks, don’t forget that one way to protect yourself when the market turns south is to place a stop-loss on the stocks you want to preserve gains in.

From investopedia.com:”A stoploss order is an order placed with a broker to sell a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss on a position in a security.””

And don’t forget, locking in the gains made from your stock investments is what investing is all about.

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