Vista Partners’ Friday Weekly Market Wrap For January 24, 2020

The broad markets overall declined this week after hitting new record highs. The S&P 500 ended the week at 3,295.47, representing a -1% weekly decline and now up +2 % YTD. The energy, -4.3%, materials, -2.3%, & financials, -2.2% sectors weighed heaving on the S&P 500 this week.  The Dow Jones Industrial Average ended at 28,989.73 representing a -1.2% weekly decline and is now up +1.6% YTD. The Nasdaq Composite closed at 9,314.91 on Friday, representing a weekly -.8% decline and is up +3.8% YTD. The Russell 2000 moved lower closing at 1662.23 representing a weekly -2.2% decline and is now down -.4% YTD.

With the “Phase One” US-China trade war Agreement in the books now for over a week it felt like the market might continue on its flight higher, and it did early on this week, but then another form of China-related news, the spreading of the deadly coronavirus,  brought forth renewed fear into the markets. This led to a renewed fear of global growth concerns. Even though The World Health Organization declined to declare an international public health emergency with regard to the coronavirus on Thursday, which many had expected, the fear persisted as stories of additional infected people sprung up in China, Seattle, Chicago, and NY and the selling in the markets sold off at the end of the week. You can certainly taste the uncertainty in the air, to say the least as the Chinese Lunar New Year holiday begins. According to the BBC a few minutes ago, “As millions go home for the holidays, travel restrictions have been expanded to 13 cities – home to more than 36 million people – in Hubei province, the centre of the outbreak. There are currently 830 confirmed cases in China, 26 of whom have died. The virus has now spread to Europe, with three cases confirmed in France.”

By the way, the “fear gauge” Vix (TVIX) ended at $44.75/share up +11.32% today & up from $39.36/share last Friday’s close.

The FAANG stocks closed as follows on Friday:

• Facebook (FB) $217.94/share, -.83% ($222.14/share a week ago)
• Amazon (AMZN) $1861.64/share, -.1.22% ($1864.72/share a week ago)
• Apple, Inc. (AAPL) closed at $318.73/share, +1.11% after hitting a new all-time high of $323.32/share this week ($318.73/share a week ago), Bloomberg reported Apple will begin producing low-cost iPhones in February
• Netflix (NFLX) $353.16/share, +1.02%, ($339.67/share a week ago), Comcast reported that video subscriber losses will rise in 2020 and it may benefit Netflix
• Alphabet (GOOG) $1466.71/share, +1.98%, ($1480.39/share a week ago)

Economic Reports

On Monday we did not receive any economic data as we observed the MLk Day holiday.

On Tuesday we did not receive any economic data.

On Wednesday, we received the existing home sales report which rose +3.6% month/month in December to a seasonally adjusted annual rate of 5.54M units while total sales rose +10.8% y/y. The FHFA Housing Price Index report confirmed a move higher by +.2% in January while the weekly MBA Mortgage Applications went down by -1.2%.

On Thursday, we received the Initial claims report for the week ending January 18 which rose by 6k to 211k while continuing claims for the week ending January 11 dropped by 37k to 1.731M. The Conference Board’s Leading Economic Index (LEI) dropped by -.3% month/month in December.

On Friday, we did not receive anything significant.

Investing & Inspiration

“How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen

“Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.” -Michael Platt

“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers

Tomorrow

It is time to buckle up as we will see a full week of trading ahead of us next week as we are out of the holiday zone. We will be receiving ~30% of the S&P 500 Q4 earnings reports too.

We are also due to receive the following significant economic data next week:

• The new home sales report on Monday,
• The consumer confidence report on Tuesday,
• The Fed’s first interest rate decision of the year on Wednesday,
• The Q4 GDP on Thursday. On the corporate front, the earnings season will begin to heat up, with about 30% of the S&P 500 reporting fourth-quarter earnings.