Friday

Here We Go Again…

Posted on by George Mahfouz

Here we go again with more tariffs and on Friday, we also got a very weak jobs report. The markets reacted as they should have, especially after a rip-roaring record setting month of July that stocks enjoyed. On Friday the Dow Jones Industrial Average (see chart here) fell over 500 points, the S&P 500 (see chart here), the S&P 500 (see chart here) dropped over 100 points, the Nasdaq Composite (see chart here) fell over 400 points and the small-cap Russell 2000 (see chart here) closed the month of July down 45 points.

Now let’s add some perspective to this. The stock market has been on a tear since the bottom in April (see last month’s blog here). The markets not only recovered all its losses from the initial tariff fiasco earlier this year but went on to make all-time highs yet again in July. However, as the tariff deadline of August 1st loomed in the background, all heck broke loose with an expanded version of these tariffs in some instances along with a dismal jobs report that was also issued on Friday. Hence, a noticeable market sell-off ensued. To me all this heated market needed was a reason to sell-off and it got that on Friday.

Now looking ahead, where do we go from here? We needed a healthy market pullback for the uptrend to continue. Market participants have become so used to seeing markets going up and up with no end in sight. This is an unrealistic expectation and without healthy pullbacks, the market could set itself up for an outright crash which nobody wants to see. Now I don’t like what I saw in the jobs report, nor the increase in tariffs, so now I think the Federal Reserve may soon have enough data to start lowering rates. This is what the markets want to see and that might be the case sooner than later.

From a technical point of view, the aforementioned indexes finally came out of extreme overbought conditions according to the relative strength index aka the RSI to where now there could be some select opportunities to consider.

Good luck to all 🙂

~George

A Respite From The Sell-Off!

Posted on by George Mahfouz

Stocks snapped back sharply on Friday after a week of relentless selling pressure. On Friday the Dow Jones Industrial Average (chart), surged 313.66 points, the Nasdaq (chart) popped 70.67 points, the S&P 500 (chart) notched a gain of 35.70 points and the small-cap Russell 2000 (chart) closed Friday out up 18.27 points. For most of last week the markets were under tremendous pressure as oil continued to plummet along with bank stocks. On Thursday U.S. crude oil closed at a 13-year low only to snap back on Friday gaining over 12%. One of the reasons why oil has bounced off of multi-year lows is a rumor was floating around that the Organization of Petroleum Exporting Countries aka O.P.E.C. was prepared to cut production. We will see if this becomes the case. Furthermore, the European banks have been sold off ruthlessly all year long which has indeed carried over to our banks here at home. So when you have both oil and banks selling off the way that they have, it’s no wonder why there has been a global sell-off sending markets into correction territory.

As the global sell-off continues and as the chatter of doomsday gets louder and louder, I think it is important to remember that we have been in one of the strongest and longest bull markets of all time. Let’s not forget it is not only normal but quite healthy that stocks, bonds and commodities correct and balance out. It amazes me that when sell-offs occur that lead to corrections in the marketplace how the pundits come out of the woodwork and speak to how the world is coming to an end. My friends, what hasn’t been normal is for over six years how we have not had a market correction of over 10% that has stuck. Well here we are today and this is where we find ourselves.

Yes, equities can go lower and yes it can get more painful. But once valuations become attractive again and this is what market corrections provide, you better believe at some point in time buyers will resurface and take advantage of the what goes on sale. The markets are closed on Monday due to Presidents’ Day. Both Paula and I wish everyone a very safe and happy holiday 🙂

~George