foxex: MINI RALLY: GIVE THANKS

The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Wednesday's headlines

1. Some greens to go with the stuffing

2. Chart of the Day: ETF Returns over 10 years

Markets Close

Dow
24,464.69 +0.00%

S&P
2,649.93 +0.30%

Nasdaq
6,972.25 +0.92%

VIX
20.80 -7.47%

INV Anxiety Index
101.34 +0.00%

US 10-Yr Yield
3.065% +0.01%

MINI RALLY: GIVE THANKS

Headline: Volume was light today, but those trading stocks were in a buying mood, at least until 10 minutes before the market closed. The DJIA gave up a 200 point rally and closed down one point, while the S&P 500 and the Nasdaq both ended the day higher.

The FAANG stocks, which are all down at least 20 percent from their highs, ended the day mostly unchanged, since there was no news to keep selling them for at least a day. The short time frame from which the leading tech stocks went from all-time highs to bear territory was shocking, but not as shocking as the depth of the selloffs. We've added Nvidia (NVDA) to the mix since it was one of the most widely traded tech stocks that climbed to dizzying heights before losing half of its value. As of this morning, this was the tale of the tape:

The selloff has not been relegated to tech, obviously. While healthcare, utilities and some consumer stocks like McDonalds (MCD) and Starbucks (SBUX) have rallied as investors flock to value and relative stability, banks and asset managers have been clobbered. Their margins are compressing and selloffs keep investors away from their accounts, which reduces trading commissions and account opens. Here is a sample of the pain they are feeling so far this year:

Of the bulge bracket firms, Goldman Sachs (GS) has really taken a hit. The stock is at a 2 year low and has plunged 43 percent since its highs of late March of this year and around 25 percent year to date. We are at the point in this cycle where the other bulge bracket firms are downgrading one another in their research notes. Ugly.

Bitcoin? It was the topic of conversation at many Thanksgiving meals a year ago as it climbed north of $26,000. It trades below $5,000 today and the enthusiasm around it and other tokens has left the building. 2019 will be an interesting year for cryptocurrency now that the mania is over.

Why it Matters: Big losses are what we should expect in selloffs and corrections and we are getting them in spades. It's times like these where it doesn't pay to be a stock picker unless you have the time and discipline to do it with the right risk management practices in place. The prevailing sentiment is that the selloffs will continue for awhile with some people predicting another 10 percent drawdown, at the least. We have no idea if they are right or where stocks will end up as we close 2018, but these are volatile times and the overwhelming trend is down.

What's Next: U.S. markets are closed tomorrow and open half day on Friday. The rest of the world is business as usual, and that matters. This selloff is hardly isolated to the U.S., although there are a few rare markets like Brazil that have been rallying.

We are getting closer to the G20 Summit in Argentina (November 30th - December 1st), where President Trump and President Xi of China are supposed to meet to discuss the tariff war. That has been on the minds of company leaders, economists and investors, to say the least. The results of those conversations will likely be a big driver of sentiment for the rest of the year and beyond.

Buckle up and Happy Thanksgiving to those of you celebrating the holiday.

Other Headlines:

How Investors can Respond to a Market Selloff

Why Amazon Stock Could Be Black Fridays' Best Deal

Stubborn Bull: Why Goldman is Optimistic about Stocks

Chart of the Day: ETF Returns over 10 years

We've been writing a lot about selloffs and this market decline since we changed format. It's not lost on us that we've been swimming in a sea of red since we made the change and our readers like to remind us about that.

Still, investors need to have long term horizons unless you are a day trader. That's a different game, altogether. When you zoom out, it's worth noting that the 10 year cumulative returns for stocks looks pretty good. Commodities, emerging stocks, bonds (both corporate and government), and cash have suffered. It has been a decade for stocks, period.

We borrow a lot of research from Charlie Bilello from Pension Partners, and we will do it again today. The type is small, so zoom on in and take a look at the ETF performance across asset classes over the past ten years. If you were offered an 8 percent annual return in stocks for the next ten years, would you take it? Sign me up!