Excerpt from Louis Navellier's Marketmail - 1/2/2019
I hope everyone had a wonderful New Year’s Day. From a market perspective, Christmas Day came as a relief after the annual lows set on Monday, Christmas Eve Day, when the S&P fell just two ticks (-19.8%) short of closing down 20% from its recent peak – the general definition of a “bear market.” After a lower opening last Wednesday, the major indexes gained about 6% in the three days after Christmas, but most indexes remain down about 7% for 2018 as a whole, as December wiped out all 2018’s hard-fought gains.
I did a podcast last Monday that explained why we are now grossly oversold, based on the S&P 500’s dividend yield of 2.22% vs. the 10-year Treasury bond yield of 2.72%. Since most stock dividends are taxed at a maximum Federal rate of 23.8%, while Treasury interest is taxed at a maximum Federal rate of 40.8%, the stock market yields more (after taxes) than getting out of the stock market, for most investors.
The wild stock market gyrations last week may have been complicated by tax selling. Specifically, last Monday’s dramatic sell-off seems to be largely attributable to record ETF redemptions, which adversely hit many stocks due to light holiday trading volume. Then Wednesday’s record one-day surge seemed to be propelled by short covering and “smart money” that was bargain hunting. Finally, Thursday’s intraday pullback was complicated by year-end tax selling, as well as quarter-end window dressing.
As I said in my Thursday podcast, these daily oscillations will likely persist into January, when trading volume typically picks up. The analyst community was largely absent last week (many were out skiing), but when they get back later this week, I will be on the lookout for any analyst upgrades and downgrades.
After a rough 2018, I am expecting that we’ll see a more prosperous New Year!
The year ends with some volatility, so 2019 has to basically dig us out of last year’s December “hole” in the market. Bryan Perry discusses some of the technical hurdles the S&P 500 must face, along with the many unresolved political threats lingering over Washington, DC. Gary Alexander uses the year-end to review last year’s best books, not only on the market but on the major mega-trends of global growth. Ivan Martchev reviews the manic-depressive market, along with some advice for the rookie Fed Chair and President. Jason Bodner looks deeper into the ETF algo-traders and how they may be subverting this market. Until the government opens for business again, most economic statistics will not be released, but I look at the latest economic trends (and market rates) to argue that the Fed need not raise rates again.
Shifting Winds of Sentiment Greet the New Year
By Bryan Perry
Reality Check for the Reality-Show President
The Top 10 Books of 2018
By Gary Alexander
Give Good Books to the Next Generation – to Build Their IQ and Civilize Them
2018 Was the Year of Manic Depression for the Stock Market
By Ivan Martchev
The Rookie Fed Chairman Faces the Rookie Politician
The ETFs are in Control Now
By Jason Bodner
Look for Today’s Hated Stuff to be the Bright Spots of 2019
A Look Ahead:
Why the Fed is Not Likely to Raise Rates in 2019
By Louis Navellier
The Stock Market Decline Hit Consumer Confidence Hard