Week of May 26, 2014
A View from the Top
Source: Roslan Rahman-AFP/Getty Images
The S&P 500 closed above 1,900 for the first time ever last week. Investors have had a long list of reasons to remain cautious this year, but the stock market has remained resilient as it marched to this new milestone. Granted, many skeptics will point to the fact that it was a pre-holiday record where trading was exceptionally light. Regardless, the S&P 500 is now more than 2.8 percent above where it began 2014, and many traders had been pointing to the 1,900 level as a key psychological barrier for stocks to surpass before momentum could be sustained.
Source: CNN Money
Volatility Gone for Good, or Hiding in the Weeds?
When something drastic happens in the financial markets, as was the case in the last financial crisis that began circa 2008, stock market volatility goes wild. As investors, we were forced to endure copious amounts of instability for a multi-year stretch. We grew accustomed to large price swings and now that things have become calm in recent months, some investors are growing anxious. It’s as if a tornado came through our neighborhood and some can’t ever really look at the sky the same way again. The Chicago Board Options Exchange Volatility Index, or VIX, is widely considered to be stocks’ “fear gauge.” When things get wild, usually the VIX will increase in value. Last Thursday, the VIX hit a 14-month low, and has been trading at a 3-month average not seen since 2007, according to the Wall Street Journal. A portion of the investment community points to this as us being “lulled to sleep by complacency,” and the law of averages will bring us back to more volatile times. However, they may also have simply grown too accustomed to what could turn out to be a brief period in history when volatility was abnormally high. Whatever the case, the S&P 500 has traded in a tight range of only 4.5 percent since March 4, according to the Wall Street Journal. This calmness among stocks has been eerie to some, and surprising to almost everyone.
Home Sales Bounce Back
The U.S. housing market showed a much needed sign of life last week. On Thursday, sales of existing homes, as calculated by the National Association of Realtors, were reported as growing 1.3 percent in April. While not a huge gain, it was the first monthly increase of this measure in 2014. Furthermore, sales of new single-family homes reversed two consecutive months of decline by increasing 6.4 percent in April, according to the Commerce Department. This, along with mortgage rates dropping to a seven month low of 4.14 percent last week, is giving investors reasons to believe the housing market remains strong and well positioned to regain the momentum lost earlier this year.
Side Note of the Week
Here are some interesting statistics on we celebrate our nation’s Memorial Day.
Please feel free to forward this commentary to family, friends or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.
Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC. Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public.
* The Dow Jones Industrial Average is an unmanaged group of securities demonstrating how 30 large publicly owned companies have traded and cannot be invested into directly.
* Indexes are unmanaged, statistical composites and their returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index.
* Past performance does not guarantee future results.
* Charts and graphs should not be relied upon as the sole basis for any investment decision and are for general informational purposes only.
* The prices of small cap stocks are generally more volatile than large cap stocks.
* Consult your financial professional before making any investment decision.
* This newsletter was prepared by CWM, LLC.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.