Weekly Update

Week in Review

The Nasdaq Composite is officially in bear market territory as it tumbled 8.4% this past week – its largest drop since 2008. The index is also down about 22% from its August high. The Dow Jones Industrial Average dropped 6.9%, or 1,655 points to 22,445.37, while the S&P 500 slumped nearly 7.1%, to 2,416.58, leaving them down 16% and 18%, respectively, from their all-time highs and zeroing in on bear market ground. Of note, the Dow is on pace for its worst December since 1931. All the major market sectors took hits, with energy stocks giving back 8.1% as oil prices fell $5.61/bbl. to $45.59. All other sectors were negative between 3%-6%. Gold climbed $16.80/oz. to $1,253.80 as investors ran to more safe-haven assets, including fixed instruments. Many gold mining stocks were also the exception to last week’s rout. 

       On Wednesday, stocks rose, then plunged after the Fed announced a rate increase, and lost more through Friday. The Fed raised rates by a quarter point, to a range of 2.25% to 2.5%. Perhaps more important, projections for next year suggested two, not three, increases. The market, however, sold off with the Dow going from nearly a 400-point gain to negative 352 after Chairman Powell’s press conference. While the chances of a recession in 2019 are growing, there remains a larger number of economists that are forecasting no-such downturn is in the cards for next year. Moreover, corporate earnings, after likely surging by an eye-catching 25.8% in 2018, earnings for 29 of the 30 Dow components are forecast to rise in 2019 as well, albeit at a slower-than-this-year’s rate. 

       Adding everything up and balancing out the likelihood of modestly additional Federal Reserve interest-rate hikes; lingering fiscal policy uncertainties in a politically charged Washington; and growing concerns on the domestic economic and political fronts, the market should start to once again factor in fundamentals and correct on the plus side as we move into next year – but not without a struggle. It should be noted, however, that the recent painful pullback in the stock market probably was somewhat constructive (if not outright overdone) as it reduced any possible frothiness that could have made future progress more problematic. 

       Markets will close early on Monday and will be closed on Christmas Day. Wishing all my loyal readers a very happy and safe holiday. 

Here is the answer to last week’s trivia question: Japan’s Takeda Pharmaceutical Co. is in the process of closing on its $62 billion acquisition of rival Shire. Shire, specializing in drugs for rare diseases, has its headquarters in? Basil, Switzerland; Kenilworth, NJ; Kyoto, Japan; or Dublin, Ireland. Answer: Dublin, Ireland.

Today’s Trivia Question: Berkshire Hathaway’s class A common stock is the most expensive name on the New York Stock Exchange, closing Friday at $288,000 per share. The least priced stock on the NYSE is Navios Maritime Holdings, Inc. It closed on Friday at? $0.09, $0.22, $0.98 or $1.33.

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