Equities continue to roar higher, ending the first trading week of the New Year with all major averages hitting record highs. The Dow, after crossing 25,000 yesterday did nothing but expound upon the rally that has been in place for the last 14 months. At the closing bell, the Dow Industrial Average is eyeing 26,000 by ending the trading week at 25,295.
Naturally this has resulted in even more bullish sentiment for equities. In fact, bullish sentiment hit a 7-year high in the New Year. The latest AAII investor sentiment survey, conducted on Jan. 3., indicates that 59.8% of polled investors are bullish on the market, meaning they expect prices will be higher in six months. There has been a corresponding drop in both bearish and neutral investors. The percentage of market pessimists has dropped to 15.6%, down 5.1 percentage points over the last week, while neutral investors have slid by 2 percentage points to 24.7%.
Oddly enough, however, in the first week of the New Year investors pulled money out of U.S. equity-based exchange-traded funds (ETFs). These assets have been among the most favorite for investors seeking diversity and exposure to specific sectors or the market as a whole. About $4.4 billion was pulled out of ETFs over the course of the week, according to FactSet data. Bond funds, which also saw record adoption in 2017, saw $3.7 billion in inflows. On a sector level, investors pulled money from 2 industry-tracking funds in particular. The Consumer Staples Select Sector SPDR ETF had $670 million in outflows while $309.6 million was pulled from the Utilities Select Sector SPDR ETF. According to data from State Street Global Advisors, inflows for exchange-traded funds topped $464 billion in 2017, easily shattering 2016’s record of $288 billion. Equity funds had about $335 billion in inflows, by itself more than the entire industry had seen in any prior year, while bond funds had a record $126.6 billion in annual inflows.
In corporate news which is somewhat related to why I like the prospects for some retailers like J.C. Penney, (check out our Trade Alert) most recently the retailers CEO held an interview with Business Insider as follows:
We’re going after Sears and we’re going after market share that we think is going to be available not only now but as they continue to contract,” JCPenney CEO Marvin Ellison told Fortune’s Phil Wahba.
Sears has been closing hundreds of stores amid a years-long sales decline. The company said this week it was planning to close 103 Sears and Kmart stores by April, on top of the 63 store closures scheduled at the end of this month. Last year, the company closed nearly 400 stores.
Ellison said JCPenney is gearing up to swallow what remains of Sears’ business, and he suggested that Sears may eventually close all of its brick-and-mortar locations.
J.C. Penney, after closing 138 unprofitable locations in 2017, found a sharp increase in holiday same-store-sales, measuring higher by 3.4 percent. This was the company’s second straight quarter of positive comps, establishing a trend since closing those unprofitable and obviously weighted storefronts. The company maintained its FY17 profit guidance when it released its holiday sales results earlier this week.
Next week will be another big week for the retail sector as Target is scheduled to update investors on its holiday sales ending in the December 2017 period. Target (TGT) shares have been strongly performing since the November 2017 period and the company has recently been highlighted as a potential acquisition for the behemoth online retailer, Amazon. Also next week, the Census Bureau will release Monthly Retail Sales Data.
And for you volatility fans/traders/investors, the VIX finished basically unchanged at 9.22 and below 10 for the majority of the trading week. Complacency rules the day as markets charge higher. But….eventually… at some point in the future…something will spark the VIX and when it does the shorts will pounce as the underpinnings of the economy remain strong. Here is a link to the latest CBOE blog concerning volatility and you have any questions on how to participate in the short-VOL trade please contact us at support@finomgroup.com
From Finom Group to you, have a great weekend and check out our free contact at your leisure.
