Most active stocks were AMD (Advanced Micro Devices), BAC (Bank of America), GE (General Electric). Top gainer in stocks was WCG ( WellCare Health Plans, Inc) closing at $259.81, +$28.54, +12.34%, while top loser in stocks, equities was SWDBY ( Swedbank AB (publ)), closing at $15.88, – $2.96, -15.72%.
Major stock market indices declined with large losses
The Dow Jones index dropped more than 450 points, and S&P 500 posted worst day since January on worries over economy, economic slowdown and worries about a yield curve inversion.
“The spread between the 3-month Treasury bill yield and the 10-year note rate turned negative for the first time since 2007 — thus inverting the so-called yield curve — according to Refinitiv Tradeweb data. An inverted yield curve happens when short- term rates surpass their longer-term counterparts. This is considered by investors as a trustworthy indicator of a recession coming in the near future.”, source: MSN
A mixed trading seesion for March 20 2019, with only Nasdaq closing higher at 7,728.97, +0,07%. Dow closed lower at 25,745.67, – 0.55%, and S&P 500 closed at 2,824.23, -0.29%.
The Fed announcement pushed intially the stock market higher, reversing course later on
Stocks close mostly lower after Fed signals no rate hikes this year
The Fed brought down its 2019 rate hike forecast to no increases down from two hikes. The central bank also indicated it intends to end the reduction of its massive $4.2 trillion balance sheet by September. However, the Fed also trimmed its economic growth forecast for 2019. Stocks initially rallied off their lows of the day on the announcement as traders cheered a more accommodative policy stance from the Fed, which is typically supportive of equity prices.
No further interest rate hikes could be positive news for the stock market
Higher interest rates increase both the cost of capital for firms, and lower the valuation of intrinsic value for stocks and equities. The decision by Fed to appear very dovish for 2019 may indicate that US economy is headed for slower economic growth. So stock picking will be a tough task.
Shares of The Boeing Company (BA) closed at 377.14+1.73 (+0.46%) on March 13, 2019. The stock most probably will experience increased volatility after the recent news of the deadly accident and orders to ground the Boeing 737 Max 8&9 planes even in the US. The stock market will anticiapte the solution by Boeing.
Boeing technical analysis
The stock was pressured but still it is above the 200-day moving average.
On March 13, 2019 shares of Boeing witnessed volatility. This may continue until the company provides an official solution explanation.
As of 2:27 PM EST time all 3 indices are in red, Source: Yahoo finance. A trade deal between US and China which may be officially announced soon is widely expected. But profit taking is evident today after the recent strong performance, it is justifiable.
S&P 500 is at the moment below the important level of 2,800 points.
US economy is forecasted to increase at a lower pace in 2019 – Which business sectors may outperform?
A recent repot on the prospects of the US economy in 2019 compared to 2018 by the Federal Reserve Bank of St. Louis shows that most probably the US economy will exhibit lower economic growth in 2019. “Despite some crosscurrents, U.S. economic conditions remain favorable. Real gross domestic product (GDP), the broadest measure of economic activity, is poised to increase by about 3 percent in 2018, which would be its largest increase in more than a decade. More impressively, job growth has been exceptionally strong, and the unemployment rate has dropped to its lowest level in about 50 years. These tailwinds have been offset to some extent by declining activity in the housing sector and an unexpected slowdown in business fixed investment.”, Source: https://www.stlouisfed.org/publications/regional-economist/fourth-quarter-2018/forecasters-gdp-growth-2019
Key drivers of US GDP growth In our article about the US stock market a few days ago we wrote that one of the key drivers for the economic expansion in 2019 would be a strong labor market. Four other very important fundamental and macroeconomic factors are:
According to the prediction of IHS Markit the US GDP growth is expected to stabilize near a growth rate of about 2% in 2019 and 2020. If we compare this forecast to the growth of about 3% in 2018, the biggest growth in a decade, then yes, the US economy will probably exhibit an economic slowdown in 2019. What Are Professional Forecasters Predicting for 2018-2019? Actual Forecast Percent Change (Q4/Q4) 2017 2018 2019 Real Gross Domestic Product 2.5 3.1 2.4 Personal Consumption Expenditures Price Index 1.8 2.1 2.1 Percent (Average, Q4) Unemployment Rate 4.1 3.7 3.6
SOURCES: Federal Reserve Bank of Philadelphia and Haver Analytics.
The above table forecasts that in 2019 the real GDP growth in US could be 2.4%, less than the 3.1% expected growth in 2018. If this scenario is to become a reality an important question investor should ask is which is about the current stage of business cycle in the US economy and which business sectors could outperform in 2019. Four stages of business cycles Business cycles have four phases: • Trough • Expansion • Peak • Contraction The US economy is most probably somewhere between the peak and the contraction phases of the business cycles. In the peak phase best sectors in this phase include energy, utilities, healthcare, and consumer staple as the economic growth is slowing. In the contraction phase the economic activity and corporate profits are declining and interest rates are climbing as the Federal Reserve aims to fight inflationary pressures in the economy. But there is a major problem about this economic theory. There are no severe inflationary pressures in the US economy, and corporate profits at least for the fourth quarter of 2018 seem to be very strong, with many companies beating the estimates on both EPS and revenue.
Can economic theory be validated by recent US stock market performance? If the US economy is indeed in the latest stage of business cycles, in the contraction phase, then energy, utilities, healthcare, and consumer staple business sectors should have performed better than other business sectors. What does the reality tell us about this economic theory?
Stock Sectors 3 Month % Change
Data as of February 8, 2019, Source: https://money.cnn.com/data/us_markets/
From the above table the economic theory is fully validated by the US stock market performance for the time period of last 3-months. Utilities, Health Services and Consumer Non-Durables stock sectors have outperformed compared with other stock sectors. The only sectors that is not fully in accordance with economic theory is Energy. Still three out of four sectors described above are a significant statistical number, hard to ignore.
We cannot be certain that the performance of these stock sectors will continue in 2019. But many times, the stock market tends to discount important changes in the broader economy, several months before official economic data is released. The partial US government shutdown will have a negative impact on the US GDP growth in 2019, and it is too early yet to make any prediction. It is interesting though that the 3-month performance of the stock sectors mentioned above seem to validate the idea that economic slowdown for the US economy could be a reality in 2019.
a very dynamic activity, job, and task with a focus on psychology and
developing an edge is important for a solid making money strategy. What many
traders do though is letting their psychology and emotions change their
decisions and place trades that do not fit their criteria. Without a written
trading plan and the commitment to stick to it daily, letting emotions take
control can ruin the most effective strategy in the world, supposing there is
one. In this article, we will refer to three tips related to psychology that
successful traders are aware of and the solution to them to implement trades
unaffected by the daily financial news and distractions.
tips are the following ones:
more on losses than on gains
changing the trading strategy when market conditions change
Stock market trading
with number 1, revenge trading. If you ask any trader if he/she has ever made any
revenge trading, chances are that the reply will be yes. Revenge trading is
when an open position, either long or short hits its stop-loss, the trader has
a loss and the open position closes, yet very soon the trader reopens a new
position following the initial opinion about the market direction. In a strong
rally, if a trader is short on a stock, and the market makes new highs, then
most probably a short position will incur losses. Reopen another position going
against the trend is too dangerous and risky. It is ok to accept losses, it is
part of this daily financial game called online investing. But revenge trading
should be avoided at all costs as it shows that the trader has a very weak
characteristic, he/she does not have a trading plan to stick with and more
importantly does not have a money management plan. A loss of 5% or 10% is
acceptable. But a loss of doubling this amount when market conditions are
highly volatile choosing the same trade within a few minutes seems an amateur
move, not a professional one. Avoid revenge trading to survive to trade in the
likes losses when it comes to trading. But even top traders incur losses. A
trader must not feel bad or disappointed when a loss happens. Trading is about
risk and management of it. There are no guarantees that trade will lead to
profits. And there should be no sad feelings. On the other hand, the best
practice is for any trader to be humble and treat gains as the reward of
his/her financial analysis. Forget losses quickly. They are part of the trading
game. Use losses to become better in the future, as input for evaluating your
trading strategy and its effectiveness.
effectiveness of the trading strategy is measured only by the results. When
market conditions change and trend reversals occur the bias of sticking to the
prior trend, which now is history is very strong. Being not adaptive to market
conditions because of your analysis that the market should have the direction
you think is a great psychological trap. The market does not care what you
think it should do. Be always flexible. Adapt to market conditions. Accept you
are wrong now. Trade with the trend may seem many times irrational, but
statistics have shown it is the wisest trading strategy. Do not simply get
stuck in opinion, rather monitor what the market is doing to make money with