There is the possibility that this could be a delayed reaction to rates having gone up over the year already, with the 10-year treasury bond rate moving from 2.41% at the start of the year to 3.06% at the start of October 2018 and to a flattening yield curve (which has historically been a precursor to slower economic growth). In keeping with the old adage of “trust, but verify”, I decided to take a look at the data to see if there are answers in it to these questions. Do not put any money into the trendy boutique market if you might need it to take care of some financial obligations. US Sector Market Cap Change. I know that the S&P sector classifications are imperfect, but my priors seem to be wrong. American Intl Group, Inc. (AIG) – Shares of American Intl Group, Inc. continue to trade below $35 as financial sector remains weak.
As a result of it lets review the dynamic of main American index Dow Jones. As we noted in the earlier section, the market drop does not seem to be smaller at larger and more profitable companies, and government bond rates have not dropped. As stocks have gone through their pains since October 1, treasury bill and bond rates have remained steady, which would make little sense if the expectation is that they will rise in the near future. While information technology, as a group, lost 8.76% of aggregate market capitalization in October 2018, the three worst sectors in the US market were energy, industrials and materials, all of which lost much more, in percentage terms, than technology. In my (limited) reading of market analyses during the last four weeks, I have seen at least a half a dozen hypotheses about the stock swoon, from it being the Fed’s fault (as usual) to a long overdue tech company correction to it being a response to global crises (in Italy and Saudi Arabia). While negative earnings stocks have seen the market correction, during October 2018, there is no pattern across the other PE classes. The median percentage change, in both October 2018 and YTD 2018, in market capitalization was greatest at the youngest tech companies.
I have argued that, unlike two decades ago, technology companies now are now a diverse group, and many of them don’t fit the “high growth, high risk” profile that people seem to still automatically give all tech companies. Bank of America Corp ( BAC ) – Bank of America Corporation is still one solid stock and was trading back in the $17’s Tuesday. Note again that the market correction may be, at least partly, a delayed reaction to the strength of the US dollar leading into October, but the timing is still difficult to explain. In fact, the two sectors that did the best were consumer staples and utilities, with the latter’s performance also providing evidence that it is not interest rate fears that are primarily driving this market correction. In fact, the lowest PE ratio companies had the second worst record, in terms of price performance, among the groupings. While the percentage change in stock prices at these companies is in line with the market drop, if Apple is included in the mix, the five companies collectively lost a staggering $276 billion in market capitalization between October 1 and October 26. accounting for almost 11.7% of the overall drop in market capitalization of US stocks.
Collectively, these five companies have added almost $521 billion in market capitalization since the start of the year, and without them, the overall market would have been down substantially. Mainfreight entered a highly regulated market which required all freight travelling over 150km to be moved on rail, and which was dominated by a virtual cartel of giant transport companies. For much of 2018, the US market & economy has diverged from the rest of the globe, posting solid numbers (prior to October) whereas the rest of the world was struggling. One of the lessons of the last decade is that much as countries would like to disconnect from the rest of the world and chart their own pathway to economic prosperity, they are joined at the hip by globalization, with crisis in one part of the world quickly affecting economies and markets in other parts. European markets were mostly higher, with France’s CAC 40 (CAC40) up 0.8% and Germany’s Dax (DAX) increasing 0.6%. The FTSE 100 added 0.5% in London. Latin America has had the best performance of the regional groupings, with the election surprise in Brazil driving its markets upwards during the month.