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Weekly Market Commentary April 16, 2018

| April 16, 2018
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What do you think?

  • Are you bullish, bearish, or neutral about the U.S. stock market?
  • Are U.S. stocks undervalued, overvalued, or fairly valued?
  • What is the biggest threat the U.S. stock market faces this year?

During the first four months of 2018, U.S. stocks have experienced not one, but two, 10 percent declines. These short-term reversals are known as corrections. They occur relatively often, helping to wring out investor exuberance and, sometimes, to create buying opportunities as share prices drop.

The current twinset of corrections appears to have created a fair amount of uncertainty, according to Barron’s bi-annual Big Money Poll of professional investors. The ranks of the bullish have diminished, and the bearish remain relatively unchanged, but the number of those who are ‘neutral’ has swelled:

                                     Fall 2017            Spring 2018

           Bullish            61 percent            55 percent

           Bearish           12 percent            11 percent

           Neutral           27 percent            34 percent

Professional investors say their clients are also unsure about stock markets. They indicated 60 percent of clients were neutral about stocks, while 23 percent were bullish and 17 percent were bearish.

When asked about market valuations, a majority thought U.S. stocks were fairly valued (57 percent) after the corrections. Thirty-five percent believe stocks remain overvalued, and 8 percent believe stocks have become undervalued.

If either ‘political/policy missteps’ or ‘rising interest rates’ was your answer to the biggest threat to U.S. stocks, then you’re thinking like a professional investor. Their list of worries included:

           Political/policy missteps              35 percent

           Rising interest rates                     32 percent

           Earnings disappointments            7 percent

           Geopolitical crisis                          7 percent

Last week, the Dow Jones Industrial Average gained 1.8 percent, the Standard & Poor’s 500 Index was up 2.0 percent, and the NASDAQ Composite rose 2.8 percent.

 


Data as of 4/13/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

2.0%

-0.7%

14.1%

8.3%

11.3%

7.2%

Dow Jones Global ex-U.S.

1.2

-0.2

16.4

3.4

4.3

0.6

10-year Treasury Note (Yield Only)

2.8

NA

2.2

1.9

1.7

3.5

Gold (per ounce)

0.9

3.6

4.6

3.9

-0.8

3.8

Bloomberg Commodity Index

2.7

1.3

3.5

-3.4

-7.2

-8.2

DJ Equity All REIT Total Return Index

-0.9

-7.9

-4.1

3.3

6.0

6.6

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT DOES YOUR PLAYLIST SAY ABOUT YOU? Your preference for pop, country, opera, classic rock, or some other type of music may provide clues to your personality, according to an article in Psychological Science entitled ‘Musical Preferences Predict Personality.’

Psychologists have been studying ‘personality’ for a long time. Their goal is to understand why people think, feel, and behave differently in the same situation. The prevailing personality model is called the ‘Big Five.’ It holds there are five factors that describe a broad range of personality traits and characteristics. No single factor describes personality by itself:

  • Extroversion includes people on two ends of a spectrum, introverts and extroverts. Extroverts thrive on interactions with others while introverts thrive on solitude. This factor reflects a person’s tendency to be sociable, assertive, talkative, and friendly.
  • Agreeableness describes how well people get along well with others. This factor encompasses altruism, trust, tact, and loyalty.
  • Conscientiousness describes how well people control their impulses and act in socially acceptable ways. It encompasses persistence, ambition, energy, and resourcefulness.
  • Neuroticism describes how comfortable and confident people are with themselves. It encompasses awkwardness, pessimism, insecurity, and wariness.
  • Openness to experience describes willingness to try new experiences and think outside the box. This factor reflects perceptiveness, curiosity, insightfulness, and imagination.

As it turns out, musical preferences are pretty good predictors of some personality factors, especially openness, extroversion, and agreeableness. Openness is associated with a preference for ‘sophisticated’ music (classical, operatic, world, and jazz), extroversion is associated with ‘unpretentious’ music (country and folk), and, as you might expect, agreeableness is associated with liking all types of music.

It’s notable that musical preferences fail to predict conscientiousness.

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