The Markets
The stock market, as represented by the S&P 500 Stock Index (“SPX”) continued in a classic “correction” behavior. Also, the dollar fell to its lowest point in three years.
The stock market, as represented by the S&P 500 Stock Index (“SPX”) continued in a classic “correction” behavior. Also, the dollar fell to its lowest point in three years.
For anyone who missed the action, the stock market as measured by the S&P 500 Index (SPX) dropped into a classic correction at the close on Thursday, February 8, as it ended the day down 10.16 percent from its record high reached at the end of January. So far, it appears to be one of the shorter corrections in recent history as it closed on Friday at 2619.55, up 1.5 percent for the day, still down 8.8 percent from the high but out of the -10 percent range that is informally considered a “correction.” That put the index down just over 2 percent year-to-date but still up over 13 percent from a year ago.
The S&P 500 Stock Index (SPX) along with the rest of the equity indices proved as February began that they can move downward as well as up. The SPX ended the week down 3.85 percent to close at 2762.13. The Index remains up over 20 percent for the last 12 months and is up 3.31 percent year-to-date and those are still impressive numbers.
The Markets
For the week ending on Jan. 26, the S&P 500 (SPX) set another record, its 14th this month, closing at 2872.87, up 2.23 percent for the week. As January draws to a close, the SPX is up 7.45 percent just for this month! Even that pales with the one-year rise of over 25 percent. Gross domestic product reports show growth of 2.3%.
[Read more…] about Gross domestic product growth increase 2.3%
The S&P 500 Stock Index (SPX) closed out the third week of the year with a solid gain of 0.86 percent putting the index up 5.11 percent in 2018 and a whopping 23.73 percent since this time last year, closing at 2810.30, an indicator of continued growth.
[Read more…] about Long-term indicators still point to continue growth
The S&P 500 Stock Index (SPX) started off 2018 with a bang, rising 2.60% for its first week of the year to close at 2743.15. That puts it up 20.47% for one year. Simultaneously, the Dow Jones Industrial Average closed over 25000 for a new landmark. The good news is that the rises, records though they may be, are well justified by the underlying economy. Another piece of good news is that individual investors have yet to join the party and have been selling equities and apparently still are. Bull markets generally have not come close to maturing until individual investors jump on board, and they haven’t.
Meanwhile, the dollar continued its slow decline against other currencies and both gold and oil, purchased mostly in those foreign currencies, rose accordingly. Interest rates were fundamentally unchanged with the 10-year T-note yielding 2.467%.
There are more than a few economic indicators to report on this week, including the Index of Leading Economic Indicators themselves, but they all are telling the same story we have been hearing for the past six months or more: the U.S. economy is on a roll. Here at the beginning of 2018, almost all the indicators are for fair economic weather and favorable winds for at least six months into the year and possibly longer. Rather than bore you with more of the same. This week let’s hit something longer-term.
We are almost certainly well into the third industrial revolution modern history. The “first” industrial revolution had its roots in mechanical inventions beginning in the 1700s and really hit its stride from 1820 to 1840. It upended the established order of about everything in Western society. It was a central cause of the civilization-wide economic depression of the 1830s and the U.S. Civil War.
The next major industrial revolution had its roots in the 19th century but emerged as the defining factor of the early 20th. Once more, mainly rural workers were forced to change occupations and locales. We experienced economic booms, increases in worker output, a massive economic depression, and a couple of world wars. Then, following World War II, things settled down to a steady-state growth environment as we refined what we already had and global stability was the norm.
The last decade of the 20th century saw the widespread introduction of the digital computer, and with it came the beginnings of the third industrial revolution. Once again, it looks like almost every occupation that existed at the beginning of the revolution will be eliminated, and other, more technically demanding occupations will take their place.
What does all this mean to us here and now? First, from a very practical perspective, it means that the traditional domestic business cycle that dominated post-WWII, 20th century America is probably gone.
The post-WWII business cycle became well understood as producers produced based on last year’s demand and sellers ordered according to the same data. That led to an excess of inventory when consumers reached their limits, followed by a relatively sudden reduction in orders that would persist sometimes for a couple of years followed by a boom as producers and businesses rushed to fill the demand when consumers again started buying.
As the 21st century has unfolded, that cycle appears to have been disrupted. Just as in the 1830s, and again in the early 20th century, new transportation capabilities have opened both markets and suppliers that were previously too far away to affect local markets. Again, as in those two previous events, that reduction in the cost of transportation has been accompanied by dramatic technological advances that are disrupting the traditional wage sources and relationships.
If history is a guide, we are likely to see the result in the form of an economic boom that depopulates rural areas and creates greater income disparity. It also means that many of our traditional economic indicators of where we are in the business cycle are no longer reliable. In short, we are likely to be in for an interesting ride with much opportunity and reward for the flexible investor, and potential pain for those who refuse to adapt to change.’
In an unusual end to an unusual year, the S&P 500 Stock Index (SPX) declined 0.36% for the week, ending the year at 2673.61.