Big news over the weekend was President Trump picking a fight with a few people and organizations. We won’t get into that because it won’t have much of an effect on the market, at least in the short term.
Last week’s stock market score board was mixed. The Dow was down (22,349.59, -9.64, -0.04%), S&P 500 was up (2,502.22, +1.62, +0.06%), and the NASDAQ was up (6,426.92, +4.23, 0.07%). Stocks earned a small gain for the week after a mostly quiet day of trading for the three main indexes. Health insurance and hospital stocks gained following news that the GOP’s latest attempt to repeal Obamacare appears doomed.1 For more on the economy take a look at our Weekly Economic Update.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||9/22 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.42%||0.08%||-0.71%||2.31%|
Sources: wsj.com, bigcharts.com, treasury.gov – 9/22/17
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.2
The Fed’s unwinding of their balance sheet will be gradual. Last Wednesday, the country’s central bank detailed how it would shrink its mammoth balance sheet. During the fourth quarter, the Fed will unload $10 billion of maturing bonds per month; in each subsequent quarter, the monthly runoff will increase by $10 billion until reaching a limit of $50 billion. Fed chair Janet Yellen said that this schedule is set in stone, barring a “sufficiently great” economic threat. The Fed made no interest rate move last week, but 12 of 16 Fed officials do project a hike before 2017 ends.2
This bull market is getting older every day. The average bull market lasts just under 5 years. Stocks price to earnings ratios are getting really high, which is an indicator that a correction could be coming. Historically volatility tends to be lower before corrections.3
The S&P 500 has had a lot of turnover in the last 10 years. With mergers, failures, and newcomers the S&P 500’s membership has changed a lot in the last 8 years. Companies that have entered the S&P 500 over the past eight years: Dollar General, Facebook, Regeneron, Accenture, Fossil, Level 3 Communications, Activision Blizzard, Trip Advisor, PayPal, Universal Health Services, Altera, Under Armour, Illumina, Seagate Technology, NRG Energy, Netflix. Companies that have exited the S&P 500 over the past eight years: Family Dollar, Eastman Kodak, Covidien, Computer Sciences, Abercrombie & Fitch, Sprint, International Game Tech, J.C. Penney, National Semiconductor, Safeway, HJ Heinz, US Steel, Radio Shack, Dell Computer, Avon, The New York Times.5
Life Hack of the Week: Having trouble falling asleep? Rapidly blink your eyes for about 60 seconds. Physically tired eyes will make you fall asleep faster.4
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