DOW Down about 800 Points
So, here’s my rule on writing my “Market Update”: If two or more major U.S. stock indices are down >3% on the same day, I will write a Market Update. Today, they all were. And, not just the major indexes. With the NASDAQ down nearly 4%, and both the DOW and the S & P 500 down about 3.25%, the S & P 600 sold off 4% and the Russell 2000 index sank 4.4%.
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If the five stocks that make up the “FAANG stocks” were an index, it would have been down close to 5% today (they are Facebook, Apple, Amazon, Netflix & Google). See chart…
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This chart of the “FAANG” stocks is over the trailing 12-months. As you can see, with only one exception (Facebook), they are outperforming the S&P 500 over the last year. So, despite a sharp sell-off since October 1, there has still been a bite with the FAANGs this year.
Back to today’s major sell-off in the major indexes…
Overall, it was a serious slide for stocks. As noted above, all U.S. stock indices were down at least 3%. The 800 point DOW drop more that erased the over 600 point gain from last Wednesday. It was just slightly less bad than the 810 point decline in the DOW October 10th, and a lot less bad than the 1175 point free-fall we saw on February 5th. Essentially today was a buyer’s strike. No drum-beating, sign carrying disgruntled types marching while screaming their chants…just an absence of buying. Demand for stocks stepped aside and let sellers trigger more selling. Nearly 95% of all NYSE listed securities closed down today. That’s almost a record. The rapid (and seemingly rabid) reversal in the market’s trend was stunning. By the close, all major U.S. indexes saw a breach in their key support levels, falling below their 200-day moving average (AGAIN). This quick reversal erased the rally attempt sparked last week and made the Trump Tariff Truce look like a one-day-wonder.
What Happened/What Now? ?
As note above, there was a whole lot more selling than buying in the U.S. stock market today. The absence of buyers triggered even more selling. The buyers strike set off enough sell programs created by algorithms (generated by computer rules-based procedures) that the market sell-off went right into the closing bell. If you want a little “Wall Street speak”, here’s what the analysts pin the down day to; “An inverted yield curve.” Well, that basically means a short term interest rate is higher than a longer term rate. Today that happened with the “2’s and 5’s”. That is, the 2-year Treasury yield became greater than the 5-year. The fear is that is a precursor to an economic recession.
Now, cool heads prevail as usual. Prudent portfolio management requires proper perspective. Defensive game plans should be an integral part of all game plans…including an investment portfolio management effort. BAM’s (Blackhawk Asset Management) portfolios remain balanced, inclusive of a sound defensive strategy. Today’s market drop and spike in volatility boosted one of BAM’s positions, the VIX, by nearly 14%.
As one portfolio manager colleague of mine said, “We’re not panicking. We’ve seen down days before and will see more down days in the future.” That’s well said. Here’s to not panicking.
Enjoy a moment of silence during tomorrow’s National Day of Mourning for George H.W. Bush.
Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account.
Please call anytime you have a question or I may be of help. I am always happy to be of service.
Sincerely,
John