Do Investors Care about Anything?

An administration in a seemingly constant state of chaos, escalating threats with North Korea, uncertainty over Iran, the potential unwinding of NAFTA, the dismantling of key components of the Affordable Care Act…and stock markets continue to rise. The MSCI World Index of large and mid-cap stocks from 23 countries hit an all-time high on Friday, as stock indexes in the US, Japan, Hong Kong, Taiwan, Germany, the UK and New Zealand all reached multiyear or record highs last week.

Do investors care about anything? Evidently not, because they poured a record amount of money into global equity funds in the week ended Oct. 11 on the hope that improving global economic data and strong corporate earnings will propel stock markets even higher, at least in the short term. According to Factset, third quarter earnings for companies in the S&P 500 are expected to increase by 2.1 percent from a year ago.

And yet, consider this warning from the IMF: “While the waters seem calm, vulnerabilities are building under the surface [and] if left unattended, these could derail the global recovery.” It went on to say that the economic bounce back was breeding “complacency,” that was “spawning financial excesses.” Amazingly, these words could have been the exact same warning from ten…or thirty years ago.

This week marks the thirtieth anniversary of the Crash of 1987, aka “Black Monday,” which occurred on October 19, 1987. That day, the Dow Jones Industrial Average cratered by 508 points or 22.6 percent, making it the single worst one-day percentage loss Wall Street has ever suffered -- the next closest was a 12.8 percent loss in 1929. To put that in today’s terms, that would be as if tomorrow, the Dow fell by more than 5,000 points in a single session.

MARKETS: Last week, the President tweeted that the “Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase.” Indeed, since November 8th, the Dow is up 25 percent, the S&P 500, a broader index is up nearly 20 percent and the tech-heavy NASDAQ is up 27 percent. Of course this recent leg up is just part of the story. The current bull market in stocks started in March 2009 (the S&P 500 us up 277 percent since then) and it is now 103 months old, making it the second longest bull on record. Trump can claim credit for 11 months - the other 92 months occurred under President Obama.

DJIA: 22,871, up 0.4% on week, up 15.7% YTD
S&P 500: 2553, up 0.2% on week, up 14% YTD
NASDAQ: 6605, up 0.2% on week, up 22.7% YTD
Russell 2000: 1502, down 0.5% on week, up 10.7% YTD
10-Year Treasury yield: 2.28%, from 2.37%
Nov Crude: $ 51.42
Dec Gold: $1,306.10
AAA Nat'l avg. for gallon of reg. gas: $2.48 (from $2.51 week ago, $2.25 year ago)