Look ahead to a volatile 9 months: Time to chew gum, walk, rub your belly, and pat your head at the same time
As of today, November 3 at 12:30 p.m., I don’t know who will win the Presidential election. I don’t know if the rally in the stock market today, with the Standard & Poor’s 500 up 2.02% at 12:30 p.m. New York time, is a vote for some specific outcome, or (more likely in my opinion) optimism that we’ll get a stimulus package shortly after the voting. (The S&P 500 finished the day up 1.78%.) But I do know that we’re looking at a volatile 9 months with big ups and downs in stocks. And I do know that the best way to approach this period is the investing equivalent of chewing gum, walking, rubbing your belly, and patting your head at the same time. In other words think about the financial markets in multiple time frames.
It was a short session today, the Friday after Thanksgiving, on Wall Street but that didn’t stop the Standard & Poor’s 500 and the NASDAQ Composite from setting new all-time records. The S&P 500 closed up 0.24%. The NASDAQ Composite finished ahead by 0.92%. Volume, as you might expect, was relatively light–just 60% of the average daily volume this year. That didn’t prevent some really big moves today. But, by and large, these moves didn’t take place where you might have expected.
The number of Americans filing initial claims for unemployment in regular state unemployment programs climbed by 30,000 in the week ended November 21, the Labor Department reported today, November 25. For the week initial claims in state programs rose to a seasonally adjusted 778,000. Economists surveyed by Reuters had expected 730,000 new claims for the week. This is the second straight week for an increase in new claims for unemployment and adds to other data showing the U.S. economy is slowing
Is this as good as it gets? That’s an important question today as the Dow Jones Industrial Average closes up 1.54% to 30,045.84, the first close above 30,000 ever. Other indexes were just as strong. The Standard & Poor’s 500 gained 1.62% by the close. The NASDAQ Composite was up 1.31% and the NASDAQ 100 was ahead 1.46% at the end of the session. The Russell 2000 small cap index ended the day ahead 1.78%. It’s not hard to see why stocks and investors are so ebullient: There’s just so much good news.
Saying on Sunday that the coronavirus surge in Nevada is running at wildfire levels, Governor Steve Sislak announced new restrictions to start on Tuesday and that will run for three weeks. The new rules will require casinos, amusement and theme parks, arcades, bars, and restaurants to reduce their capacity to 25% from the current 50%. What I think is most interesting to investors, though, is the reaction of stocks with Las Vegas exposure to the news.
The returns for 2018 and 2019 for my Dividend Portfolio show the challenge facing dividend income investors during this period of extremely low interest rates.
In 2018 my Dividend Portfolio showed a yield on 3.60%. That produced $6,483 in dividend income that year. (In this portfolio I put an equal $10,000 into each position and rebalance each year.) The goal of this portfolio is to beat the yield on the 10-year Treasury. On January 1, 2018 the yield on the 10-year Treasury was 2.58%. In 2019 my Dividend Portfolio showed a yield of 4.90%. I held fewer stocks in that portfolio that year but I still managed to produce $6,365 in dividend income that year. On January 1, 2019, the yield on the 10-year Treasury was 2.71%. But as THEY always tell us, there’s no free lunch in the financial markets.
On the night of November 18, I made Duke Energy (DUK) my second pick in my Special Report: “Dividend Stocks that are beating the Risky Rockets” on my JubakAM.com subscription site. On November 19, I’m added these shares to my Dividend Portfolio. Duke Energy embodies many of the trends currently driving utility stocks higher.