Weekly Market Commentary - January 26th, 2021

ROBARE & JONES ON THE MARKETS

    

      Is there a bubble in the market? A survey from Deutsche Bank sparked talks about the possibility of asset bubbles. In a CNBC interview, Jim Reid, shared results that 558 of 627 market professionals (89%) saw some asset bubbles in markets. Reid explained central bank policies and stay-at-home trading were responsible, in part, for rising asset prices.

So far of the 13% of S&P 500 that have reported forth quarter earnings, almost all have had above average stock price to earnings. All of these earnings data has put the entire index at a valuation of 33 P/E on average (normal valuations are at 17 P/E). This may be troublesome to some companies and favorable to others that are large and growth in nature.

The S&P index was up 1.9% this past week due to gains of over 6% in the communication sector, but also had modest losses of 1.7% in both the energy and financial sectors. Markets seemed to not flinch either way from Biden's multiple executive orders.

Next weeks earnings reports will bring more clarity to the direction of many large cap companies with earnings reports from 3M (MMM), Microsoft (MSFT), Johnson & Johnson (JNJ), Apple (AAPL), Facebook (FB), McDonald's (MCD), and Caterpillar (CAT).

Let's take a look at the benchmarks from this past week!

Financial Literacy Test

1. Suppose you have $100 in a savings account and it is earning 2 percent a year. After five years, how much money will be in the account?
   1. More than $102
   2. Exactly $102
   3. Less than $102
   4. I don’t know

2. Now, suppose the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, will the money in the account buy more than it does today, exactly the same as it does today, or less than it does today?
   1. More
   2. Same
   3. Less
   4. I don’t know

  

3. When interest rates increase, what typically happens to bond prices? Do they rise, fall, or stay the same? Or is there no relationship between interest rates and bond prices?
   1. Rise
   2. Fall
   3. Stay the same
   4. No relationship
   5. I don’t know

  

4. Suppose you owe $1,000 on a loan and the interest rate you are paying is 20 percent per year, compounded annually. If you don't pay anything on the loan, how many years will it take for the amount you owe to double?
   1. Less than two years
   2. Two to four years
   3. Five to nine years
   4. Ten or more years
   5. I don’t know

      

Do you know the answers? Contact us to see if you're right!

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