Market News – December 3, 2018

TEN YEARS AGO:  On December 1, 2008, the Dow Jones Industrial Average dropped 7.7% in one day, the 12th worst day for the index ever.  Globally, stocks were down close to 50% for the year, and the downward trend would continue for a few more months.  Chrysler, Ford and General Motors were actively seeking a lifeline from the U.S. Congress.  Federal officials had just announced an agreement to pour $20 billion of capital into Citigroup and absorb as much as $249 billion in potential losses on real estate loans and securities held by the bank.

U.S. MARKETS SURGE, BUT INVESTORS ARE EDGY:  U.S. markets had a very strong week.  Some of this was just a natural bounce from the prior market drops.  This was buoyed later in the week by calming comments by Fed Chair Jerome Powell.  He said on Wednesday that interest rates are “just below” broad estimates of a neutral level.  This was interpreted to mean that increases in rates might stop sooner than had been anticipated.  The stock market responded by climbing over 2% in one day.  After a rough October, November saw markets stabilize, growing over 2%.  What will markets do in the last month of the year?  Watch for continued news, which lately has been positive, on trade deals between the U.S. and a variety of other countries, especially our North American neighbors and China.  Watch for continued news and data regarding economic growth (or lack thereof) in Europe, China and other important areas.  Watch technology stocks which took a major part of the recent beating in stocks.  Will their current, lower, stock prices be supported by earnings and sales data?  Investors will continue to be edgy, and volatility is almost certain, but where stock prices will be in a month is far from certain.

INCOME AND SPENDING INCREASE IN OCTOBER:  Personal income in the U.S. increased 0.5% in October.  Personal consumption expenditures increased by 0.6%.

SALES OF NEW HOMES IN THE U.S. ARE DECREASING:  Sales of new homes in October were reported to be at an annual rate of 544,000.  This is 8.9% below September and 12.0% below October of last year.  Even with the increased sales since the recession, new home sales are still somewhat low historically.  Of late, housing prices have increased faster than wages have increased, inventories remain insufficient, and interest rates have risen to about 4.8% for a typical 30-year mortgage.

REFERENCES:

TEN YEARS AGO:  https://www.wsj.com/articles/SB122809060101167711;  https://www.wsj.com/articles/SB122840102318379327#articleTabs%3Dinteractive?mod=article_inline; https://www.wsj.com/articles/SB122753629931853007#articleTabs%3Dinteractive?mod=article_inline; http://www.wsj.com/mdc/public/page/2_3024-djia_alltime.html
INCOME AND SPENDING INCREASE IN OCTOBER: https://www.calculatedriskblog.com/2018/11/personal-income-increased-05-in-october.html
SALES OF NEW HOMES IN THE U.S. ARE DECREASING: https://www.calculatedriskblog.com/2018/11/new-home-sales-decrease-to-544000.html; https://www.reuters.com/article/us-usa-economy-housing/u-s-new-home-sales-drop-to-more-than-2-1-2-year-low-idUSKCN1NX1WU
U.S. MARKETS SURGE, BUT INVESTORS ARE EDGY:  https://www.wsj.com/articles/stocks-push-higher-on-hopes-for-easing-trade-tensions-1543395871?mod=searchresults&page=1&pos=1
WHEN YOU HAVE ENOUGH:  https://www.whitecoatinvestor.com/6-tips-for-those-who-have-enough/