PWM Weekly Stock Market Update

Happy Saturday,

Another good week for stocks. The Dow Jones Industrial Average jumped 3% on Friday and finished up 2.2% for the week. The NASDAQ 100 is positive for the year, and it is up more than 15% for the past twelve months. Small-cap stocks continue to rebound, and international stocks are looking better. The S&P 500 has risen 29% from the March lows.

Why are stocks rebounding? We’re starting to see optimistic signs from around the world. Gilead Sciences is using its drug remdesivir to treat COVID-19 patients, and the results are encouraging. Boeing is resuming production in Seattle, Germany is going to let small businesses open on Monday, and the PGA Tour is teeing off June 11 at the Colonial Golf Course in Fort Worth, Texas. Speaking of Texas, Governor Greg Abbot plans to open some businesses on April 27.

Our investment models were quiet this week as volatility continues to drop. We only rebalanced ten accounts on Tuesday, a year low – which is a good sign.

It has been near impossible to buy U.S. Government securities because large institutions are gobbling them up for their money market funds. As a result, we are purchasing Certificates of Deposits from around the country for our cash and bond holdings. CD’s are federally insured to $250,000 per person, per account.

The CBOE put/call ratio is an indicator I watch closely. It relies on options to determine if investors are greedy or fearful. An option is a contract that allows you to control 100 shares of stock for every contract you own. A put option will rise in value when the price of a stock falls. A call option will increase in value when the price of a stock rises. If investors purchase several puts, fear is high. When confidence is high, they will buy calls. If the ratio is over one (more put buyers than call buyers), investors are nervous; below one, they’re confident. In March, the indicator peaked at 1.83. The ten-year average is .94; the current reading is .91. The ratio has dropped 50% from the peak, an encouraging sign for investors.

Corporate insider buying has been bullish for the past few weeks. Executives and insiders are buying shares of their company stock because of the compelling valuations.

Here’s how stocks, bonds, and other asset classes performed this past week.

  • The S&P 500 rose 3%
  • The NASDAQ rose 7%
  • International Stocks rose .34%
  • Emerging Markets rose 2.2%
  • Long-Term Bonds rose 1.4%
  • Gold fell .17%
  • Oil fell 17.2%
  • Chinese Stocks rose 3%

I decided to run the Boston Marathon in 2009; however, I needed to qualify for the race first. Due to the marathon calendar and my schedule, I missed the window for 2009 and 2010, so I set my sites on 2011. To qualify, I signed up to run the 2010 Austin Marathon, and as a backup, I registered for the Los Angeles Marathon, scheduled for three weeks later. To run Boston, I needed a plan, and it included a two-year training schedule, weight training, and better eating habits.

Training for a marathon is tedious and lonely, especially on runs of 15 to 20 miles or more, and running in Texas is challenging because temperatures will climb north of 100 degrees in the summer and drop into the teens during the winter.

I qualified for the Boston Marathon based on my time in Austin. On race day, my goal was to run each mile under 8 minutes and not fixate on the finish line, 26.2 miles from the start. If I kept my pace, I would finish the race in 3 hours and 30 minutes or better. I followed my plan and ran the race one step at a time, one mile at a time, and finished in 3 hours and 22 minutes – a personal best!

Runners who struggle to finish a marathon become overwhelmed by the magnitude of the race, especially when they obsess over the entire 26.2 miles. To get to the finish line, follow your plan, focus on your goal, keep to your pace, and enjoy the journey.

A journey of a thousand miles begins with a single step. ~ Chinese Proverb

Have a great weekend, and keep the faith!

 

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