Stocks having best January in years
The federal government has been closed for a record 28 days. About 800,000 federal workers are furloughed and not collecting paychecks. President Donald Trump and House Speaker Nancy Pelosi are trading daily insults. The world’s largest democracy is at a standstill.
And stocks are having their best January in 30 years.
“The stock market is not interested in watching this reality show,” said Nancy Tengler of Tengler Wealth Management. “What it is interested in is that the world outside of D.C. is still growing. Employment is full and the Federal Reserve is tempering the rhetoric. And China just threw out an olive branch in the form of a sixyear, $1 trillion buying spree of U.S. goods.”
The Dow Jones industrial average added to its January comeback with another strong day on Friday, sailing upward 336 points, or 1.4 percent, to close at 24,706. The Dow is up 5.9 percent to start 2019, and up 13 percent since its Dec. 24, 2018 recent low.
The S&P 500 finished at 2,671 Friday, up 35 points on the day, or 1.3 percent. The S&P is up 6.5 percent for 2019 and has risen more than 13.6 percent since Dec. 24. It is having its best January since 1989. All 11 sectors in the S&P are positive for the year, led by the financial stocks.
Both the S&P and the Dow have exited correction territory. A correction is a decline of 10 percent off a recent high.
The Nasdaq Composite is up 7.6 percent this year and surged 72 points on Friday to finish at 7,157, a jump of 1 percent on the day.
“It is a very good month,” said Howard Silverblatt of S&P Dow Jones Indices.
Beyond the shutdown fiasco in Washington, economic news has been generally good. Gasoline prices average $2.24 per gallon, down 60 cents from six months ago and the lowest price since July of 2017, according to AAA. Wages are up. Inflation is down. Mortgage rates are at their lowest level in nine months. Unemployment remains at near-record lows.
J.P. Morgan Chase chief executive Jamie Dimon, who chairs the Washington, D.C.based Business Roundtable, said in a call with reporters this week that the economy is good but that the shutdown could severely harm economic growth if it continues through the end of March.
“It’s more of a political issue than anything else,” Dimon said on the call, according to a CNBC report. “Consumers are in good shape, they’re spending money, they’re saving money, household formation is going up, wages are going up.”
The booming stock market is reacting to easing tensions in the trade war between the U.S. and China and to the Federal Reserve’s more moderate attitude toward rate hikes.
“The government shutdown is a distant third in the list of things that have affected the short-term performance of the stock market,” said Washington investor Michael Farr. “First would be the Fed’s posture with regard to monetary policy. Second is the progress in trade negotiations with China.”
Gregory Davis, chief investment officer at the $4.9 trillion Vanguard Group, said the Fed’s signaling that it would be more patient in terms of raising interest rates “has decreased the likelihood that there is going to be a recession this year. The stock market views a patient Fed as a positive.”
Earnings season just finished its first week, and while there was some signs of softening, most companies reported good results. Goldman Sachs stock had its best day in 10 years after smashing earnings expectations.