While global economic growth is cooling, particularly in China, the U.S. stocks market is still growing. After a tumultuous 2018 marred by volatility and uncertainty, January has been a breath of fresh air and a relief to investors at every level.
Following the Martin Luther King Jr. Holiday, this short trading week has produced more growth, with investors largely unmoved by the ongoing government shutdown and other economic headwinds.
Stocks Growth for Most Major Benchmarks
Looking at three key index benchmarks it’s clear that there’s still a fair amount of investor confidence in the market, even if growth is relatively slow.
- The Dow Jones Industrial Average (DJIA) grew 0.75% over the last five days of trading.
- The S&P 500 Index (SPX) grew 0.24% over the last five days of trading.
- The NASDAQ Composite Index (NASDAQ) was the only outlier, declining -0.16% over the last five days of trading, however, it is still up 6.60% year to date.
Chip Market Gets a Break
One very important story to emerge this week was the surge of chip-related stocks on Thursday. The microprocessor market has been in a prolonged slowdown since 2018. Decreased demand in the industry has worried investors about the future of what was previously considered to be a strong bull market.
The PHLX Semiconductor Index (SOX) rose 5.4% on Tuesday, making it the best single day gain since 2011. Chip companies are beginning to report their Q4 earnings, and the results are promising so far. Texas Instruments (NASDAQ: TXN), Lam Research Corp. (NASDAQ: LRCX), and Xilinx Inc (NASDAQ: XLNX), all of which are major chip stocks, beat Wall Street earnings estimates this week.
If this confidence in the chip sector continues it could help to offset losses from 2018.
Government Shutdown is a Risk
The Labor Department will release job figures next week, including unemployment numbers for January. While the politics of 2019 have so far had a negligible impact on stocks, there is concern that any decline in the job market could be pinned to the shutdown, which could send investor confidence downwards.
The White House has also warned that GDP could drop as low as 0% for the first quarter if the shutdown continues much longer. Investors will not ignore such a massive shift in economic performance, even if GDP is near-guaranteed to recover after the shutdown is resolved.
Markets have started a strong recovery path from the volatility of 2018, but risks for the market still exist. As always, strict due diligence and strong portfolio management should be practiced by all investors.
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