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The Best of What They Said and I Read Week Ending 12/16/18

Short excerpts from articles I found interesting

I may not agree with the author and the following material is not intended as investment advice

Barron’s – December 14, 2018 – All Three Stock Indexes Hit Correction Territory - by Ben Levison

  • “…This year began with a bang, but ended with a whimper…Too much pessimism could mark the end of this year. The S&P 500 is off 5.8% in December, its worst start to the month since 1980. Some 48.9% of respondents to the latest American Association of Individual Investors Sentiment Survey called themselves bearish, the most since April 11, 2013. They also pulled a record $39 billion out of stocks last week, according to Bank of American Merrill Lynch.”
  • “…Surprisingly, the market damage isn’t that bad, even if all three major indexes are now in correction. After dropping 1.3%, to 2599.95 last week, the S&P 500 is down 2.8% in 2018, while the Dow, which just entered a correction, is off 2.5% after falling 288.44 points, or 1.2%, to 24,100.51. The Nasdaq Composite has gained 0.1% this year after falling 0.8%, to 6910.66, last week.”
  • “With all that, the market hasn’t experienced the capitulation that typically signals the end of a correction, says Ed Clissold, chief U.S. strategist at Ned David Research. Clissold…expects the selloff to continue, possibly entering a bear market before it’s over. That sounds scary, except for one thing: Clissold predicts that the S&P 500 will finish at 2950 next year, up 13.5% from Friday’s close. The reason? “We’re looking for a slowdown, not a recession,” he says.”

The Wall Street Journal – December 14, 2018 – Sharp Decline Puts Dow in Correction Territory by Corrie Driebusch and Riva Gold

  • “…The Dow Jones Industrial Average tumbled into correction territory Friday as disappointing economic data from China and the eurozone sparked a retreat by investors…The blue-chip index declined nearly 500 points, putting all three major U.S. stock indexes simultaneously in correction territory—typically defined as a fall of at least 10% from a recent high—for the first time since March 2016…The S&P 500 is down more than 11% from its recent high, hit in September, while the Nasdaq is off nearly 15% from its August high.”
  • “…The damage has come at a time when markets tend to be calm. Stocks typically rise in December, but this month has proved to be an anomaly. All three major U.S. stock indexes are down 5.5% or more, their worst starts to December since 1980, according to Dow Jones Market Data.”
  • “…The selloff came as data showed China’s economic downturn deepened last month more than economists expected, as Beijing works to halt a slowdown while grappling with a trade conflict.  Official figures showed a November slowdown in industrial production amid issues among auto makers and property markets, while growth in retail sales dropped to its lowest level in more than 15 years.”
  • “…In the week through Wednesday, investors withdrew record amounts from global equity funds, according to EPFR Global…Many economists expect the trade conflict to continue despite a 90-day tariff truce that Mr. Trump and his Chinese counterpart, Xi Jinping, reached in early December.”

The Kiplinger Letter – December 14, 2018

  • “…Not all that much is changing in the new North American free-trade pact, the United States-Mexico-Canada Agreement, or USMCA. It keeps an estimated 80% of the 1994 North American Free Trade Agreement it’s replacing. It’s still designed to permit duty-free trade within North America for $1.2 trillion of business each year.  Canada and Mexico are ready to sign off, but expect problems in the U.S. Congress.”
  • “For carmakers…more of the content of each car will have to be manufactured in North America to get duty-free treatment. The new amount is 75%, up from 62.5%.  Plus, 40% of production must be in plants with an average hourly wage of at least $16.  For farmers…Canada opens its dairy market a tad. U.S. farmers gain access to 3.6% of Canada’s tightly regulated milk market after years of being nearly shut out.  Good news for U.S. makers of milk protein concentrate, skim milk powder and the like.”
  • “There’s also more protection for intellectual property for financial services, biotech and digital exports, as well as for more traditional patents and trademarks. USMCA will be reviewed every six years to see whether problems have arisen.  If the three parties agree all is well, the trade deal starts anew for a full 16-year term.”

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