It seems that all of my posts to the blog have been about the incredible level of volatility we'ver been experiencing. Trust me, I long for the day I can submit a posting stating that the week was uneventful!
Yes, it was another volatile week. On the surface of things, it doesn't look too bad. Down 203 Monday, up 890 on Tuesday, down 74 on Wednesday, up 190 on Thursday, and up 141 on Friday. Tuesday was obviously a big day, the second highest point move on the Dow in history. But the rest of the week looks sort of...well...boring.
In reality, it was far more volatile than it looks. The swing from low to high on Monday was over 450 points, most of it in the last 15 minutes of trading! Wednesday was likewise a very volatile day, covering almost 475 points from low to high. This kind of intraday volatility has become the norm, as traders attempt to rapidly digest every bit of news that hits the wires, and try desperately to either profit from it, or curb their losses.
Aside from the market, there was a fair amount of news this week. The Fed cut interest rates another 50 basis points, dropping the Fed Funds rate to 1.0%. GDP came in negative, showing a decline of 0.3% in the third quarter. In addition, personal consumption (a measure of consumer spending) contracted 0.3%, and personal savings rose, indicating that people may be trying to build a cushion in case things get worse. The Personal Consumption Expenditures (PCE) index rose last month, indicating that consumers are spending more money for the same goods than they were the month prior. Versus last year, PCE is up 4.2%. All in all, the economic data was not very good, but that's what we've all been expecting.
Next week could be volatile again due to the election. There are a lot of issues in play during this election, and regardless of the outcome, the next administration has a mess on its hands.
The market had an overall positive week though, which is a welcome sign. I, however, would prefer a number of mildly positive days in a row rather than one or two big ones flanked by wild swings. Going forward, I continue to believe we may have seen the bottom, but I am not convinced that we won't see it again. I believe there will be continued volatility for some time, but that the volatility should be viewed as providing opportunity to purchase quality names at discount prices. I believe that individual stocks are likely to recover ahead of the broad market, so continued market doldrums may not be what is experienced by some investors.
If you have any questions, please feel free to contact me at nsnodgrass@evanstonadvisors.com
