It was a wild ride this holiday-shortened week as pre-Christmas day trading was the worst since 1918, with the Dow Industrials falling 653 points on Monday. It was followed by an after-Christmas explosion of 1,086 points as traders rushed in to take advantage of what appeared to be an over-sold condition in equities. For the week, the Dow added 2.75% and the S&P 500 was higher by 2.9% to 2,485.74. The Nasdaq composite gained nearly 4.0%, as tech stocks led the sector race. Except for utilities, all market sectors were in the green for the week. Monday will be the last trading day of the year, but as of Friday’s close the Dow Jones Industrial Average is negative by 6.7% for the year; the S&P 500 off by 7.0%; and the Nasdaq is down to the tune of 4.6% – all far from what market watchers predicted last year at this time.
There was little headline news to blame for the raucous trading other than a partial government shutdown and more administrative chaos in the White House. Hence, the volatility was all technical. Year-end mutual fund and pension portfolio re-balancing along with tax selling forced margin calls that set off computer-driven algorithms, which in turn drove stock prices every-which-way. The normally slow trading week of the year was then without the abundance of buyers and sellers to mitigate the rowdy moves.
December, an historically positive month for stocks, has so far been the worst on record since the Great Depression. Initially, the market’s late 2018 swoon was fueled by concerns about the festering trade war between the United States and China. Thereafter, worries began to evolve about a moderation in GDP growth at home and a broadening slowdown globally. Then, late in the month, the selling accelerated following suggestions from the Federal Reserve that additional interest rate hikes might be needed in 2019.
In all, this is a good time to reflect on one’s portfolio but avoid being panicked. The recent setbacks have indeed been distressing, but often manic sell-offs such as we’ve seen are part of an aging bull market. So, with the economic and fiscal fundamentals still largely in place, renewed price gains in what can be viewed as an over-sold market situation, are reasonable to expect as we head into 2019. Therefore, I believe it would be prudent to stay the course and attempt to ride out these periodic storms, which are likely to continue as we move ahead.
Markets will be closed on Tuesday for the holiday.
To all my subscribers and supporters, wishing you a happy and healthy New Year.
Here is the answer to last week’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. Answer: $0.22
Today’s Trivia Question: TRESemmé hair care products are owned by Anglo-Dutch conglomerate Unilever, which acquired the brand from what company? Wyeth Consumer Products, Revlon, Helen of Troy or Alberto-Culver.