This week we saw more drops in the market, but is this a sign of a bear rearing its head? Read on to get the details on this and more…
Another Wednesday, Another Steep Drop for Stocks – there’s been something about Wednesdays this October. On Wednesday, October 10 the S&P 500 and Nasdaq endured steep drops which arguably set the current downside volatility in motion, and investors everywhere were raising concerns about the trade war, rising interest rates, and slowing economic growth. On this past Wednesday, October 24, we saw a near repeat of the market action on the 10th. The S&P 500 fell 3.1% and the tech-heavy Nasdaq led the way down with a 4.4% drop, putting it down over 10% from its recent high. The usual tech suspects felt pronounced declines, with Netflix plummeting 9.4% and Amazon, Google, Facebook, and Microsoft all falling at least 5%. Zacks Investment Management’s position on this downside volatility is unchanged from our position two weeks ago and throughout this year – volatility is normal and naturally occurring, and we view the current action as a classic symptom of a market correction, not a bear market. We would urge investors again to remain patient and focus on the economic fundamentals, which remain strong.1
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The challenge that equity investors face is not in finding a way to eliminate volatility—it is in
developing a mental approach to dealing with it. This guide will provide you with insights and
tips to do just that. Get answers to questions like:
If you and $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!
Download Zacks Volatility Guide, “Helping You Manage Market Volatility.”2
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President Trump Steps-Up Rhetoric Against Fed Chairman Powell – in an interview with the Wall St. Journal this week, President Trump continued his streak of negative comments regarding Federal Reserve Chairman, Jerome Powell. President Trump remarked that “every time we do something great, he raises the interest rates,” adding that Fed Chairman Powell “almost looks like he’s happy raising interest rates.” President Trump noted to the Wall St. Journal that he acknowledged the Fed’s independence in establishing monetary policy, but he also made it clear that he intended to send a message to Mr. Powell perhaps in hopes of influencing future interest rate decisions. The Federal Reserve declined to comment on the matter.3
Huge Profits, Tiny Stock Gains – the biggest players in the oil business – which include Exxon, Chevron, Royal Dutch Shell, Total, and Equinor – are set to post their best profits in five years. While one might expect that reaching such a milestone would imply strong or at least firm stock price performance, it simply has not been the case. Shares of the energy giants are fairly flat on average since the beginning of the year, even while the price of crude oil has surged some 20%. Energy stocks have historically been fairly tightly correlated to the price of crude oil in the past, but some believe that the lag this time around may have to do with energy companies having a history of misappropriating cash when profits are running high. Oil executives may be wising up to this tendency, as instead of increasing capex they are seen upping shareholder payouts, reducing debt and ratcheting share buybacks.4
Your FICO Score May be Changing Soon (For the Better) – For most of the time we’ve known credit scores, they’ve been based on payment histories. American borrowers know it as the FICO score, created by the Fair Isaac Corp., which has served as the foundation for lending and credit-related decisions for decades. But perhaps the biggest change since the inception of the FICO score is on the way, with a new scoring system set to land in early 2019. The new system will be designed to factor-in how consumers manage cash in their checking and/or savings account (your choice), and early reports show that consumers who maintain an average balance of at least $400 and haven’t overdrawn in three months could get a credit score boost. It will be known as the “UltraFICO Score,” with ultimate design to increase the number of approvals for credit cards, personal loans and other debt. The traditional FICO score will not necessarily go away, and may continue serving as the standard bearer. But applicants who perhaps get rejected for a line of credit or a loan using simply their FICO score may see lenders offer to calculate an UltraFICO score, in an effort to reconsider – and recalibrate – someone’s credit worthiness.5
This week once again shined a light on a challenge many equity investors face – how to react to volatility. In our view, it is important to remember that volatility is a normal part of the ebb and flow of the markets. We believe the key is not to look for ways to eliminate it, but developing a mental approach to dealing with it.
Our Volatility guide, “Helping You Manage Market Volatility,”6 will provide you with insights and tips to do just that. Get answers to questions like:
If you and $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!
Disclosure