Market Digest – Week Ending 12/5
Markets were calm in the week following Thanksgiving, but the S&P 500 managed its 7th straight weekly gain. International stocks dropped modestly after the European Central Bank failed to announce definitive new stimulus measures. A very strong jobs report in the US showed the economic expansion domestically is continuing to accelerate. Bonds fell as a result.
S&P 500: 2,075 (+0.4%)
FTSE All-World ex-US: (-0.5%)
US 10 Year Treasury Yield: 2.30% (+0.10%)
Gold: $1,192 (+1.9%)
USD/EUR: $1.229 (-1.1%)
- Monday – Moody’s downgraded Japan’s credit rating to A1.
- Tuesday – Sprint escalated the wireless price war by saying it would let new subscribers pay half of what they pay to AT&T or Verizon.
- Wednesday – Pentagon officials said Iran conducted air strikes against Islamic State in Iraq.
- Thursday – The European Central Bank alluded to future actions but failed to take new steps to ease monetary policy in a widely anticipated announcement.
- Friday – US employers added 321,000 jobs in November, the highest since 1999.
In the US, things are good. The economy is adding jobs at a fast rate and there is evidence wages are starting to rise. Meanwhile inflation (at least the official version) remains in check. Here in San Francisco, new skyscrapers are going up seemingly everywhere you look, and restaurant reservations are increasingly harder to get. The S&P 500 is at an all-time high and relatively new companies like Uber, Airbnb and Lending Club are getting fantastic valuations in the public and private equity markets.
But it is important to remember that many of the same things could be said in 1999 (with different names of course). We’re not expecting any kind of crash, but when it comes to stocks the time to be aggressive is usually not when things feel best.
The rest of the world isn’t as happy. Japan experienced a much deserved credit rating downgrade and Europe can’t seem to figure out how to attack its economic stagnation. This sounds similar to what was happening in the US just a few years ago when domestic stocks were much lower.
Market cycles come and go. It is important to enjoy the good times and capitalize on them financially. But when it comes to investing it is equally important not to get caught up in the emotion.