Stock Market Woke Up…Something Changed

Something Changed

Friday February 2nd was Ground Hog Day in the United States.  The stock market woke up…something changed.  But it wasn’t just the stock market in the United States, it was happening around the globe.  But first back to the famous ground hog, Punxsutawney Phil.

Punxsutawney Phil saw his shadow and there’s suppose to be six more weeks of winter.  In honor of this day, I watched the Bill Murray movie, Ground Hog Day.

Something Changed

In the movie Bill Murray plays a weatherman covering Ground Hog Day and inexplicably finds himself reliving the day over and over and over again. Until one night something changed.  He woke up the next morning and the cycle had ended.

I couldn’t help but think that the stock market, especially since February 2016 was doing the same thing over and over again. Very small pullbacks in which everyone would yell, ‘buy the dip’ and it would continue to push higher.  Then pullback, buy the dip, push higher. Until the stock market woke up on Ground Hog Day 2018…something changed.

Friday’s drop was the Dow Industrial’s sixth worst point drop ever.  Percentage-wise it wasn’t even in the top 20.  But for the week the Dow dropped the most in 2 years.  Something changed.

In the video below I talk about several things that are going on, some not so obvious.

Trump Year One

Okay we’ve just finished one year of the Trump administration and I want to revisit a post that published about a year ago.  At the time that Donald Trump became president, the stock market was then at one of the highest valuations ever for a new president. The CAPE ratio was 28.46.

It is now much higher. The preliminary CAPE ratio stood at 33.6 for the market close on January 16.  That is higher than the highest reading for 1929, just prior to the Great Depression. And much higher than the valuation in 2007 just before the Financial Crisis of 2008.

The S&P 500 closed at 2776.42 on January 16.  It closed Friday at 2762.13, so close to the same reading.  It’s high close was 2872.87 on January 26.

 

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