Let’s Try This Again

After the Christmas Holiday provided a welcome timeout to a relentless market decline, US equity futures are indicated higher (if we had a penny for every time that was the case this month). It’s not often that a sitting US President comments on the stock market, but this is no ordinary President, and over the holiday Trump weighed in on the market’s decline by saying, “We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.” More than that, though, investors were encouraged by the fact that the President also expressed confidence in his Treasury Secretary easing concerns that he would be the latest member of the administration to hit the chopping block.  

There’s really no shortage of charts we could show this morning to illustrate just how crazy the last several days/weeks of trading have been, but we’ll keep it at three for now. For starters, check out the chart of how the S&P 500 and each sector are trading relative to their trading ranges. As shown, the S&P 500 and four sectors are literally off the charts oversold!

 

One sector that has been especially weak is Consumer Staples. Normally a defensive sector, given the sector’s relatively high dividend yields and stable businesses, the Consumer Staples sector has been down over 1% for seven consecutive trading days now. The last time that happened? Never!

 

Finally, with stocks tanking and treasuries rallying to close out 2018, the S&P 500’s dividend yield is starting to look a lot more attractive relative to long-term Treasuries. Through Monday’s close, the S&P 500’s dividend yield was 2.32%, which is just 41 basis points (bps) below the yield on the 10-year.  From a long-term investor’s perspective, that’s an increasingly attractive yield for equities.

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