Safety & Security as Markets Wobble
The major equity indices are struggling.Today the Nasdaq posted its third consecutive down
Today the Nasdaq posted its third consecutive down day after last Friday’s close marked the fourth consecutive down week for the index. This is now its longest losing streak since May 2016 with only one-third of Nasdaq stocks trading above their 50-day moving averages – not exactly great breadth. The Dow Jones Industrial Average posted its second consecutive weekly decline as well with last Friday’s close.
The Russell 2000 has now experienced its third worst performance in its history relative to the S&P 500 for the first 160 trading days in a year and is now in the red for 2017 while the S&P 500 is up 8.5%. The S&P 500 today has only around 40 percent of its stocks trading above their 50-day moving average, the lowest percentage since early November – any poor breadth indicator.
Over the past 2 months, since June 22nd, the Utilities sector has been the strongest performer – not exactly an indicator of a bull market.
Nor is the iShares 20+ Year Treasury Bond ETF (TLT) rising during the year to above its 50-day and 200-day moving averages a bullish sign for equities nor for an accelerating economy.
Despite the wobbly markets, today’s report on University of Michigan’s Consumer Sentiment found that the mean expected probability of higher stock prices rose to the second-highest level on record at 62.9% from June and July’s 59.2%. The last time it was this high was in June 2015, when the markets experienced at 10% correction within two months – all that confidence comes with a price.
On top of all that we are experiencing rising geopolitical tensions as the U.S. and South Korea engage in military exercises right next to that bastion of stability and calm diplomacy, North Korea. This evening, President Trump will speak to the nation about his plans for Afghanistan, now the now longest running war in American history. Good times.
Amidst the rising tensions, both geopolitical and domestic, one good hedge against those global tensions may be found in Defense and Aerospace stocks, some of which are included in our Safety and Security investing thematic. Over the weekend Barron’s discussed a company that they found particularly attractive.
Large-cap defense stocks have had 20%-plus total returns over the past year, outpacing the Standard & Poor’s 500 index by more than 10 points. And more gains could be ahead for shares of the No. 1 U.S. defense contractor, Lockheed Martin.
Source: In a World of Danger, Lockheed Looks Like a Safe Bet – Barron’s
