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Monthly Newsletter

November 5, 2017

"Synchronized Worldwide Growth" Powers Stocks to New Highs

Stocks made it through the historically difficult months for stocks, August, September, and October, totally unscathed, as the S&P 500 advanced a strong 4.7%.  To say that the stock market’s performance has confounded the analysts and individual investors alike has become a tiresome tirade.  Investors have been saying this for months and years now.  The talk about bubbles and potential crashes has become common place, as many look back to 1999 or 2008 to draw comparisons.  These investors point out that this bull market that started in March 2009 is now 8 years and 8 months old and has reached heights many feel are stratospheric.  And the market has attained these heights with record low volatility, having thus far in 2017 not seen a pull back of as small as 3%, the longest streak ever.

For many months now, I’ve been trying to rationalize this historic stock market run as follows:  While our bull market is almost 9 years old, the rest of the world is actually just getting started.  2017 is basically the first year that we have seen breakout performances for both foreign developed markets and the emerging markets.  Up until this year, those markets traded sideways as the US economic recovery gathered steam and propelled its stocks higher.  We are now for the first time seeing what has become coined as “synchronized worldwide growth”.  Jim Cramer of CNBC used that term last Tuesday night (10/31) to describe what has been going on around the world.  “The switch has flipped in Europe” he said, as the Eurozone has finally begun to move in the right direction.  China is now growing consistently and there are a lot of positive developments in India as well.  And Japan, which has basically been in a 28 year bear market, just recently ended its longest streak of up days ever, advancing 16 days in a row. 

But don’t think that the US performance is based solely on the merits of the recovery of the rest of the world.  The concept of synchronized worldwide growth means that a strong US economy helps to fuel recoveries around the world, and economic recoveries of other countries help to sustain a strong US economy.  Good economic data feeds on itself, producing a self-sustaining recovery.

Cramer also points out that previously, companies were reporting strong earnings that were based solely on cost cutting, not on strong revenues.  But that has now changed, as companies are reporting strong revenue increases.  Recent earnings reports have been very strong.  Apple surged this past week as demand for all of its products surprised to the upside.  This trend should continue as customers can’t seem to get enough of the new iPhone 10’s.  Amazon and Facebook also reported stellar results.  Continuing with the technology theme, chip makers are seeing an enormous demand for these semi-conductor chips that power an ever-increasing array of products. 

But it’s not just technology companies that are the stars of this recovery.  Sectors such as aerospace, defense, and construction are all doing well.  As an example, engine and generator manufacturer Cummins (CMI) continues to hit new highs in its stock price, an indication that a surging US economy has produced a strong demand for power generation.  The financial sector should also do well as increasing loan growth will translate into higher profits for this sector.

For those of you who are skeptical of this bull market because you feel that tax reform will never get done or that the failure to reform health care will lead to problems, Cramer says to rest assured.  The stock market performance is not based on any successes that might occur in Washington.  It instead is based on a non-inflationary economic boom.  “This is what a bull market looks like”.

RMD Withdrawals – I have now contacted, either by phone or email, everyone who needs to make an IRA distribution before year end.  If you haven’t yet taken care of it, please contact me if you need my help with this.        Jeff Feldman


Market Data - 11/5/17  

Dow Jones                  S&P 500             NASDAQ          Russell 2000              10 Yr Treas

   23,539                           2,588                  6,764                   1,495                          2.34%

     Earnings Yield (S&P)                           Gold                         Crude Oil
           5.33%                                              $1,270                           $55.70


JANUARY 2013           JANUARY 2014                JANUARY 2015             JANUARY 2016                   JANUARY 2017
FEBRUARY 2013        FEBRUARY 2014              FEBRUARY 2015           FEBRUARY 2016              FEBRUARY 2017

MARCH 2013              MARCH 2014                 MARCH 2015               MARCH 2016                MARCH 2017

APRIL 2013                   APRIL 2014                       APRIL 2015                      APRIL 2016                     APRIL 2017
MAY 2013                     MAY 2014                           MAY 2015                        MAY 2016                        MAY 2017

JUNE 2013                   JUNE 2014                         JUNE 2015                      JUNE 2016                       JUNE 2017


JULY  2013                  JULY 2014                      JULY 2015                   JULY 2016                    JULY 2017

                                                                                                                                                                                                             AUGUST 2013              AUGUST 2014                     AUGUST 2015                 AUGUST 2016               AUGUST 2017

SEPTEMBER 2013    SEPTEMBER 2014          SEPTEMBER 2015       SEPTEMBER 2016      SEPTEMBER 2017

OCTOBER 2013           OCTOBER 2014                OCTOBER 2015                  OCTOBER 2016            OCTOBER 2017

NOVEMBER 2013          NOVEMBER 2014             NOVEMBER 2015              NOVEMBER 2016

DECEMBER 2013           DECEMBER 2014              DECEMBER 2015             DECEMBER 2016











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