The Closing Bell: Yesterday The Market Giveth : Today The Market Taketh Away FYI: The S&P
500 ended at -1.7% to 26
58, after earlier falling nearly 3% and breaching the 2637.68 level that would place it 10% below its last record. That would put it in correction territory for the first time since February’s selloff.
The Nasdaq Composite fell 2.0%, paring much of Thursday’s rebound and putting it down about 10% for the month, while the Dow Jones Industrial Average declined 1.1% to 24688. A close below 2414
5.
55 would put the blue-chip index in correction territory.
Markets around the world have been caught up in a whirlwind week marked by intraday drops and sharp rebounds. Worries about corporate revenue slowing and whether a slowdown in China and Europe growth could spill over into the U.S. economy have sent U.S. stocks into a tailspin, putting major indexes on course for their worst month in several years.
The recent stampede by investors has erased about $
5 trillion in value from global stock and bond markets in October alone. But that shouldn’t be severe enough to affect the economy, for now, according to economists at Deutsche Bank.
Still, unless the markets regain their footing soon, the pressure for the Federal Reserve to reassess their monetary policy will continue to mount, they said.
“Academic studies of the wealth effect find that households and companies don’t react to short-term fluctuations in their wealth but instead react to a moving average of where their wealth levels are,” said Torsten Slok, chief international economist at Deutsche Bank Securities, said in a note to clients.
Regards,
Ted
Bloomberg Evening Briefing:
https://www.bloomberg.com/news/articles/2018-10-26/your-evening-briefingBloomberg:
https://www.bloomberg.com/news/articles/2018-10-25/asia-stocks-set-to-rally-on-u-s-gains-bonds-slip-markets-wrap?srnd=premiumWSJ:
https://www.wsj.com/articles/global-stocks-resume-declines-1540541081MarketWatch:
https://www.marketwatch.com/story/us-stock-futures-under-pressure-after-amazon-google-disappoint-2018-10-26/printIBD:
https://www.investors.com/market-trend/stock-market-today/stock-news-today-amazon-earnings-alphabet-earnings/Reuters:
https://www.reuters.com/article/us-usa-stocks/wall-street-resumes-selloff-sp-flirts-with-correction-idUSKCN1N01JNCNBC:
https://www.cnbc.com/2018/10/26/stock-market-us-futures-show-drop-for-dow.htmlU.K.:
https://www.marketwatch.com/story/ftse-100-tumbles-to-near-2-year-low-as-global-stock-rout-resumes-2018-10-26/printEurope:
https://www.marketwatch.com/story/european-stock-markets-tumble-sharply-lower-to-end-an-ugly-week-2018-10-26/printAsia:
https://www.cnbc.com/2018/10/26/asia-markets-wall-street-ecb-currencies-in-focus.htmlBonds:
https://www.cnbc.com/2018/10/26/us-bonds-treasury-prices-higher-amid-market-volatility.htmlCurrencies:
https://www.cnbc.com/2018/10/26/forex-markets-dollar-yen-stock-markets-in-focus.htmlOil:
https://www.cnbc.com/2018/10/26/oil-markets-saudi-arabia-crude-supply-in-focus.htmlGold
https://www.cnbc.com/2018/10/26/gold-markets-stock-markets-ecb-in-focus.htmlWSJ: Markets At A Glance:
https://markets.wsj.com/usMajor ETFs % Change:
https://www.barchart.com/etfs-funds/etf-monitorSPDR's Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-trackerSPDR's Bloomberg Sector Performance Pie Chart:
https://www.bloomberg.com/markets/sectorsCurrent Futures:
https://finviz.com/futures.ashx
Ben Carlson: When Stocks Fell 10% FYI: As of the market’s close yesterday the S&P
500 was down 9.4%. Not quite a 10% correction but it’s a stone’s throw away.
The question all investors would like to know is how much further this downturn has to go.
The answer is I don’t know and neither does anyone else.
But we can look back historically to see how many corrections turned into bear markets or crashes to get a better sense of the potential range of outcomes.
Regards,
Ted
https://awealthofcommonsense.com/2018/10/when-stocks-fell-10/
Calendar Years Are Arbitrary FYI: Investors use calendar years as a period of measurement. How did the market do last year? Most of us view our investment performance “year-to-date” meaning how the investments have changed in value since January 1. Advisors conduct annual (or quarterly) reviews comparing investment returns to benchmarks which are sometimes appropriate but often are not.
Below are two lists of annual returns for a 60/40 portfolio that is hypothetically invested 60% in the S&P
500 Index and 40% in the Bloomberg Barclays U.S. Aggregate Bond Index. The author removed the calendar years on purpose. Take a look at the series of returns and try to imagine experiencing them in succession.
Regards,
Ted
http://blairbellecurve.com/calendar-years-are-arbitrary/
Jonathan Clements: Ignore The Signs? FYI: IF THIS IS THE START of a bear market, share prices have a lot further to fall: The S&P
500 is down just 9.4% from its all-time high—and yet one of the most important lessons may have already been learned.
Regards,
Ted
https://humbledollar.com/2018/10/ignore-the-signs/
Sick Of REITs? Check Out The Yield On Justin Bieber FYI: It's been often said that music never dies. Now investors are taking notice of one other fact: Music revenues also last a darn long time.
Although still a niche market, investments in music royalties are growing, helped along by online marketplace Royalty Exchange of Denver. The company, which acts as the middleman for buyers and sellers of royalties, has raised close to $
50 million in investment capital through mostly music royalties since 2016, including a $3.4 million sale of private syndicate shares last month that gave investors royalty rights to the catalog of British rock group Dire Straits.
Regards,
Ted
https://www.fa-mag.com/news/sick-of-reits--check-out-the-yield-on-justin-bieber-41555.html?printRoyalty Exchange Website:
https://www.royaltyexchange.com/about-royalty-exchange
M*: 3 Emerging-Markets Equity Funds That Have Handled Volatility Well: (NEWFX) - (PRMSX) - (ODMAX) Hi
@bee: Years back I did at one time own ODMAX but sold it as I aged and got more conserative. Back then, I also owned NEWFX and retained it. Also, back then, my neutral allocation in the growth area of my portfolio was about 2
5% today it is 1
5%. In addition, years back I also owned DEMAX. These three funds comprised my emerging markets sleeve. Now, I am down to one emerging market fund NEWFX but thinking of adding DWGAX in the growth & income area of my portfolio in my global equity sleeve as it pays a quarterly dividend.
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U.S. Representatives Favorite Stocks Date Back To The Gilded Age: (AGTHX)
Ben Carlson: A Lost Decade Of Dollar Cost Averaging
2018 Dogs Of The Dow FYI: Below is a check-up on the performance of the “Dogs of the Dow” strategy so far in 2018. For those unfamiliar with the strategy, it’s a simple portfolio allocation and re-balance at the start of each year into the 10 highest yielding stocks in the Dow Jones Industrial Average.
As shown in the table, the 2018 Dogs are currently up an average of 4.77% YTD on a total return basis compared to a total return of
5.11% for the 20 non-Dogs. Coming into the month, the non-Dogs were outperforming the Dogs by a much wider margin, however. With investors shifting out of cyclicals and into more defensive names, the lower-yielding non-Dogs have fallen 4.61% in October, while the Dogs are down just 0.61%. If it weren’t for IBM’s 13.91% drop this month due to another bad earnings report, the Dogs would actually be up 87 basis points MTD.
Merck (MRK) and Pfizer (PFE) have been the best performing Dogs of the Dow this year with total returns of more than 2
5%. Apple (AAPL) and Microsoft (MSFT) have been the best performing non-Dogs with gains of more than 30%.
If we were to re-balance the strategy now, Merck (MRK) would be removed and JP Morgan (JPM) would enter the Dogs. Note that IBM is now the highest yielding stock in the Dow at 4.82%!
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/2018-dogs-of-the-dow/
Big Bets Are Great, When They Are Right: (AOFAX) - (AMAGX) - (TARKX)
M*: 3 Bond Funds You May Be Tempted To Buy But Shouldn't: (THOPX) - (NHMRX) - (LSFYX) For buy-and-hold investors, I don’t see the problem with THOPX. I owned it for a while, including its swoon a few years ago, but its returns over 1, 3, 5, 10 years have been excellent. I don’t understand why M* bashes funds like THOPX but continues to tout funds like MWTRX that have had miserable returns in recent years while becoming bloated with assets. Many so-called quality bond funds have gotten killed by rising interest rates and have seemingly done little or nothing to ease the pain for investors. As long as interest rates continue to rise, investors seeking quality apparently would be better served by ultrashort bond funds, money markets or CD ladders.
Ben Carlson: A Lost Decade Of Dollar Cost Averaging "By way of comparison, simply investing that same $500/month in one-month t-bills would have given you more than $67k"...without the volatility and sleepless nights. Entering these two scenarios into Portfolio Visualizer produced slightly different, but similar results...along with a lot of other interesting data such as not a single negative yearly return for ST Treasuries.
RPSIX TRP "Spectrum" ? Good analysis by several. I like the ultra-short (TRBUX) mentioned above. Use it as a “cash equivalent” (Not all ultra-shorts are managed as well.). Yet, even over the shorter 5 year period, it lags RPSIX by about a point and a half. So, if willing to tolerate a little more volatility, investors would have been better off in RPSIX.
Another income fund I own is DODIX. i’ve long allowed a smaller portion (no greater than 50%) to count as part of my “cash equivalent” holdings. Of course it’s not really cash - but for allocation purposes I’m willing to include it. DODIX has a longer history than TRBUX. So a 10 year comparison is possible. Here RPSIX still wins with a 6.28% return while DODIX netted 5.61%. Again - you need be willing to accept more volatility to reap the additional income with RPSIX.
While I’m not “married” to TRP (borrowing Crash’s words), it’s my single largest fund manager and has 100% of my Traditiinal IRA. So, I’ll stick with the 15% allocation to RPSIX. We’ve known for 10 years that bonds would suffer when the emergency Fed easing slowed or stopped and rates normalized / rose. Nothing too startling here. Yes, the foreign securities have taken a toll on the fund. I thought PRELX a brilliant idea when introduced. Unlike most of their international / EM bond funds, Price does not hedge this one against currency fluxuations. So the strong dollar has really hurt it. I’ve owned it before but doubt I will again.
M*: 3 Bond Funds You May Be Tempted To Buy But Shouldn't: (THOPX) - (NHMRX) - (LSFYX) FYI: It’s easy to identify funds with strong records. But as my colleague Russ Kinnel noted recently, it takes more than a strong record to earn a Morningstar Analyst Rating of Gold, Silver, or Bronze. Those medals reflect our expectation that a fund will be a standout performer in the future, and that requires a deeper investigation into a fund’s fundamentals to determine whether it has a sustainable competitive advantage. If our analysts aren’t convinced that a fund can continue to deliver strong results, they’ll assign it a Morningstar Analyst Rating of Neutral or possibly Negative.
When a fund with a great record earns a Neutral rating, we get questions. In the world of bond funds, the reason our analysts take a skeptical view of past performance often comes down to risk. We ask ourselves the following questions:
Regards,
Ted
https://www.morningstar.com/articles/883540/3-bond-funds-you-may-be-tempted-to-buy-but-shouldn.html
Ben Carlson: A Lost Decade Of Dollar Cost Averaging FYI: (The Linkster has never been a fan of DCA.)
Investors who dutifully put money into the stock market on a periodic basis over the decade ended in 2009 would have felt dejected when looking at their statements.
If you started dollar cost averaging $
500/month into the S&P
500 in January of 2000, by December of 2009 you would have invested $60,000 in total. This strategy would have netted you a whopping $64k and change, not much more than the amount saved. By way of comparison, simply investing that same $
500/month in one-month t-bills would have given you more than $67k.
Regards,
Ted
https://awealthofcommonsense.com/2018/10/a-lost-decade-of-dollar-cost-averaging/
2018 Mutual Funds preliminary capital gain distribution estimates
RPSIX TRP "Spectrum" ? I’ve owned RPSIX for 15+ years because it seemed like the best option available at TRP and provides a broadly diversified income exposure. This is its worst year I can remember in comparison to comparable funds and it seems to be due to its large stakes in PRCIX (New Income) and foreign/EM bonds. As a result, it has performed poorly as interest rates have risen. So, for the first time ever, I shifted about two-thirds of my holding in RPSIX to other less interest-rate sensitive bonds funds — namely TRBUX (ultra short) and PRFRX (floating rate). When interest rates finally seem to be stabilizing, I will probably move the money back into RPSIX.
In the past, RPSIX’s primary weakness was its 10-20% stake in dividend stocks, which hurt returns in bear markets. However, this year has shown that it’s also vulnerable to rising interest rates.
Robot ETF leaves pros in dust, scoring wins on small-cap fliers
RPSIX TRP "Spectrum" ? Hi Derf. Thanks. Not sure what your numbers reference. M* breaks down the credit quality of RPSIX’s bond holdings. (If you include the fund’s 10% equity holding in the total, the following percentages would be a bit lower.)
Here’s the non-investment grade percentages from M*
BB 11.4%
B 15.76%
Below B 4.4%
Not Rated 1.4%
Total 33% (+ -)
So, in addition to the 10% equity position, it appears that close to 30% of the fund’s total holdings are in non-investment grade bonds. The puzzle remains as to why it hasn’t performed a little better.
