Friday, November 16, 2018 - Insight after the bell from Investopedia's Editor in Chief
*Currency markets and Bitcoin trade 24 hours, the figures here indicate movements between 9am and 4pm ET #1 Tracking fund flows We made it to Friday! The DJIA and S&P 500 rallied into the weekend, but the damage was done earlier in the week through painful sell-offs on Monday and Tuesday. Tech stocks are the culprits again, and today it was Nvidia's turn, as the stock fell more than 18 percent.
Here's how the major markets ended the week and where we stand year to date: Click here for a full recap of today's market action.
Money Flows
We like to keep an eye on money flows to see which asset classes it is going into. Investor sentiment is one thing, but tracking fund flows paints the real picture of where investors are committing their assets.
Bank of America Merrill Lynch tracks that in this handy chart:  The big takeaway is that money continues to flow into stocks and ETFs, particularly in the health care and utility sectors, and out of bonds. Health care and utilities are generally considered to be less volatile sectors and appeal to value investors. The other big takeaway is that money has been moving into money market funds, which have been outperforming the stock and bond markets for the first time since 1992!
Let me say that again… Money markets, or Cash, have been outperforming stocks and bonds this year, and that hasn't happened in 26 years!!!
Why it Matters: Let's face it. Most people are not invested in the stock market. Less than half of Americans own stocks and an even smaller percentage own them outside of this country. Most people keep their money in the bank in a savings, CD or money market account. With interest rates so low (at least in the U.S.) for the past 10 years, savers have been punished as inflation eats away at their paltry returns. As interest rates have been rising, money markets and plain vanilla savings accounts have become a viable option for people to store and grow their cash, albeit a little at a time. That option looks even cozier in times of market volatility or extended sell-offs like we have been experiencing of late.
Learn more about the difference between money markets and capital markets here.
What's Next: As always, there are a multitude of factors impacting the largely mixed results of the market heading into the end of the week. Hedge funds across the U.S. released their Form 13F filings in recent days, providing investors with insight into how the biggest money managers in the country moved their assets around in recent months. News that gurus like Warren Buffett were making big buys could be enough to inspire a broader trend among individual investors. Still, it's likely that we're in for turbulent times ahead, and the impact of individual investors relative to institutions and Wall Street firms is minuscule. In spite of all of the volatility, though, the S&P 500 is almost exactly even with its levels at the start of the year. No one we follow is expecting a blowout end of the year. Let's just hope we don't blow up.
Happy Weekend! #2 Chart of the Day: US crude oil slips for sixth week
Last week, we wrote about how the price of U.S. crude oil had been falling for its ninth consecutive day and had entered into bear market territory – generally defined as a decline of 20% or more from the most recent major peak. Well, it's gotten significantly worse since last week. The price of light crude oil futures has now fallen more than 25% from early October's nearly four-year high of 76.90. In the process, price established a new one-year low this week and also tentatively broke down below a major uptrend channel going back almost three years, as shown on the chart below.
With both domestic and international output consistently on the rise, and global demand forecasted to decline, the slide in crude oil prices has been no major surprise. Though price was down overall again this week, however, crude prices received a small lift in the latter half of the week as expectations that OPEC may cut its output next month to deal with the oversupply situation. Oil traders are not entirely convinced, though, as to: 1) whether OPEC will cut supply by a significant enough amount, and 2) if such cuts will make any appreciable dent in the global supply glut.
The chart tells the whole bearish picture – U.S. crude oil fell into a correction (-10% or worse from the most recent peak) on October 18; crossed below its key 200-day moving average on October 23; fell into bear market territory (-20% or worse from the most recent peak) on or around November 8; and then tentatively broke down below its three-year rising trend channel, as mentioned, just this week on November 13.
What may happen next? Crude oil has already shown all technical signs of a breakdown. Barring any drastic output cuts by OPEC next month, pressure on oil prices is likely to continue building.  Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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