Another week of new highs as equities marched ahead despite a number of political and economic headwinds. Big-cap stocks took the lead with the Dow Industrial Average advancing 1.2%. The S&P 500 gained 0.9% to 3,120.5 and the Nasdaq was higher by 0.8%. Once again, small and mid-cap stocks lagged with the Russell 2000 closing negative on the week. Except for energy and basic material stocks, all major market sectors were positive led by health care and technology with respective gains of 2.4% and 1.4%. Utilities were also high on the list with a comeback of 1.4%.
Stock market volatility as measured by the CBOE Volatility Index, or VIX, closed at its lowest level since April. Such investor complacency may be a precursor of a short-term correction, however. There are still several wild cards that can spook traders including the upcoming election, trade, the Federal Reserve and the U.S. economic picture in general. While the Fed is likely to remain supportive and whispers of hope on a deal with China are again creeping back, companies are still struggling with tariff and slow global growth concerns.
On balance, this uneven backdrop of good and negative news continues to favor equities. The road higher will not be easy, however, as stocks already are in record territory and valuations are stretched. Still, the case for further moderate gains is stronger than the argument for a meaningful pullback. Hence, holdings in positions of quality stocks with favorable earnings and dividend prospects remains prudent at present.
Here is the answer to last week’s trivia question: Which of the following companies is not a component of the S&P 500? Hess Corp., Goodyear Tire & Rubber Co., Paychex, Inc., or Tractor Supply Co. Answer: Goodyear Tire & Rubber. Wabtec Corp. replaced Goodyear in February 2019. Goodyear was simultaneously added to the S&P Mid-Cap 400 Index.
Today’s Trivia Question: In what year did the “Wall Street Journal” begin publication? 1889, 1897, 1902 or 1912.