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The Best of What They Said and I Read Week Ending 2/9/2020

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 – February 7, 2020 – Coronavirus?  Slower Growth?  The Dow Just Had a Spectacular Week. – Ben Levisohn

  • “… The Dow Jones Industrial Average advanced 846.48 points, or 3%, to 29,102.51 last week, while the S&P 500 index rose 3.2%, to 3327.71. The Nasdaq Composite gained 4%, to 9520.51, its biggest weekly gain since November 2018. All three hit record highs before a Friday swoon knocked them from their lofty perches.” 
  • “To some, those big gains look like evidence of complacency, Friday’s 277.26 point drop in the Dow notwithstanding. There was plenty of bad news to go around. The number of coronavirus cases continued to grow, while estimates of China’s economic growth continued to fall. J.P. Morgan’s economists see real gross-domestic-product growth of just 1% during the first quarter of 2020 in China. Germany’s industrial production, meanwhile, fell 3.5% in December, its largest post-financial-crisis drop.”

The Wall Street Journal – February 7, 2020 – Bond Funds Are Hotter Than Tesla – Jason Zweig

  • “Nearly four decades into a bull market for bonds, investors still have a ravenous appetite for them, even though interest rates are near historic lows around the world…Yes, individual investors have been buying bonds like never before. Last year, taxable-bond mutual funds and exchange-traded funds took in a record $414 billion, estimates Morningstar Inc. Meanwhile, investors sold $72 billion in mutual funds and ETFs holding U.S. stocks.”
  • “This shift, under way for years, has become gargantuan. From 1990 through 1999, bond funds and bond ETFs accounted for only 10% of the cumulative $2.37 trillion that flowed into funds, according to the Investment Company Institute. From 2000 through 2009, bond funds made up 26% of the $3.5 trillion in total inflows. Over the 10 years just ended, however, 74% of the total $2.68 trillion that investors added went into bond funds…As of the end of 2018, fund investors in the aggregate had 62% of their assets in stocks, and 31% in bonds and money-market funds, estimates Ms. Antoniewicz. The U.S. stock market did so well in 2019 that they would have ended up with 66% in stocks and only 27% in bonds and cash at year-end unless they rebalanced by buying bonds, she says.”


Bloomberg – February 8, 2020 – What Markets Get Right (and Wrong) About Campaigns.  – Lu Wang

  • “… Simply put, the market’s knee-jerk reactions to political news are notoriously volatile and often wrong. And in the end it’s never clear if politics is influencing stocks, stocks are influencing politics or if everything is getting pushed around by something else entirely.”
  • “But obviously Donald Trump has been good for stocks, right?  It’s certainly true that equities have been buoyant under the 45th president, rising 56% since election day, but arguments that they have been exceptional under him are a little shaky. Here is a list of administrations that saw three-year advances in the S&P 500 close to or greater than this one:
    1. Bill Clinton’s second term. (99%)
    2. Franklin Roosevelt’s first term. (98%)
    3. Dwight Eisenhower’s first term. (82%)
    4. Clinton’s first term. (51%)
    5. George H.W. Bush’s term. (49%)
    6. Reagan’s second term. (47%).”
  •  “…There is one lens through which the S&P 500 has a record of prescience that perhaps no human forecasters can match. Since 1928, the benchmark index has correctly signaled who will win, the candidate of the incumbent party or challenger, 20 out of 23 times, according to data compiled by Strategas Research Partners LLC. That is, when stocks are higher during the immediate three-month span before a vote, the sitting party has won 86% of elections.”

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