Nov 20, 2018

Fear and flatlining: The stock market's brutal 2018

After an epic 2017, the three major U.S. stock market indices are trending toward a negative year in 2018, with a return to volatility and puzzling sell-offs after strong — but not astronomical — earnings numbers in formerly stalwart U.S. stock sectors.

Expand chart
Data: Money.Net; Chart: Harry Stevens/Axios

Between the lines: Maybe the valuations were a little too hot, or investors were spoiled by double digit returns.

  • Perhaps it's people looking at the economy and forthcoming interest rate hikes and deciding to sell off now in case things turn south.
  • Or maybe it's the fear of second-order effects from a potential cold war with China.

The other side: “This sort of price action is extremely normal,” Peter Lazaroff of Plancorp told MarketWatch. “What was strange was the outsized returns investors have earned in recent years with effectively no volatility.”

Driving the news:

  • The FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) have collectively lost $1 trillion in market value from their 52-week highs.
  • Four out of the 5 worst performing S&P 500 stocks today were retail companies (L Brands, Target, Ross Stores, and Kohl's), per FactSet.
  • In the last 3 months, the Volatility Index (VIX) — a fear indicator on Wall Street — has surged more than 50%, per FactSet. The gauge still remains low by historical standards, but it's producing big daily swings like the chart shown below.
Data: Factset; Chart: Lazaro Gamio/Axios

The bottom line: Enjoy the holidays and get some rest. December and 2019 could be a wild ride.

Go deeper

Trump says he will campaign against Lisa Murkowski after her support for Mattis

Trump with Barr and Meadows outside St. John's Episcopal church in Washington, D.C. on June 1. Photo: Brendan Smialowski/AFP via Getty Images

President Trump tweeted on Thursday that he would endorse "any candidate" with a pulse who runs against Sen. Lisa Murkowski (R-Alaska).

Driving the news: Murkowski said on Thursday that she supported former defense secretary James Mattis' condemnation of Trump over his response to protests in the wake of George Floyd's killing. She described Mattis' statement as "true, honest, necessary and overdue," Politico's Andrew Desiderio reports.

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Over the course of just a few hours, President Trump was rebuffed by the Secretary of Defense over his call for troops in the streets and accused by James Mattis, his former Pentagon chief, of trampling the Constitution for political gain.

Why it matters: Current and former leaders of the U.S. military are drawing a line over Trump's demand for a militarized response to the protests and unrest that have swept the country over the killing of George Floyd by police.

New York Times says Tom Cotton op-ed did not meet standards

Photo: Avalon/Universal Images Group via Getty Images)

A New York Times spokesperson said in a statement Thursday that the paper will be changing its editorial board processes after a Wednesday op-ed by Sen. Tom Cotton (R-Ark.), which called for President Trump to "send in the troops" in order to quell violent protests, failed to meet its standards.

Why it matters: The shift comes after Times employees began a coordinated movement on social media on Wednesday and Thursday that argued that publishing the op-ed put black staff in danger. Cotton wrote that Trump should invoke the Insurrection Act in order to deploy the U.S. military against rioters that have overwhelmed police forces in cities across the country.