Last week’s lightning-round In
By Tue, Jan 7, 2020
Hey Scoopers,
We are back with another lightning-round edition of The Daily Scoop. Here are the most important events that shaped the movements of the stock market last week:
- Last week, the stock market started the year on high notes. We discussed when the New Year’s ball dropped, nothing about the U.S. economy or global economy was changed. Therefore, there was no reason to see the stock market taking a different direction than what it was doing in December, moving upward. (Read More)
- However, on Friday, the story changed. There was a tweet, the U.S. conducted military operations in the Middle East, and the fear of war and political unrest change the course of the market. Just like that, the stock market gave back everything that it has amassed the day before. Scroll to the “Overall Market” section to learn more.
Beyond the overall market, we think it’s time to change our perception of oil and its importance to our economy. More information is available in the “Water Cooler” section. And, don’t forget to scroll down to read more about what happened in the stock market last week.
Market Recap
- U.S. markets: All three indices finished Friday in the red. Scroll to the “Overall Market” section to learn more.
- Cryptocurrency: Bitcoin’s price bounced back above the $7,000 mark, and jumped to higher than $7,400 per coin. The jump seems to be, at least partially, due to an exchange rate misunderstanding between Iran’s Rial and USD after some reports claimed Bitcoin could be traded as high as $24,000 USD in Iran.
- U.S. markets: All three indices finished the first trading day of 2020 in the green. Scroll to the “Overall Market” section to read more.
- Cryptocurrency: The start of 2020 wasn’t too exciting for cryptocurrency traders. Bitcoin’s price fell under the $7,000 mark. The decline was mostly due to the lack of volume in the crypto market at the beginning of the year.
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Scoopers, thank you as always for sending us your questions, feedback, and requests. This week’s special thanks go to Mike T., who took the time to write to us and had some encouraging words to share. Among a few other things, Mike loves Scoop‘s “no hard sell attitude.”
Thank you, Mike, for your kind words. We will keep it going on our end. Make sure to send us your questions, whenever you have any.
To all other fellow Scoopers, as always, please send us your questions, feedback, and requests. We read all of our emails. Our email address is members@tradestocks.com. Or, reply to this email.
Lesson number one
What happened last week?
Unrest in the Middle East impacted the Oil prices on Friday and dragged down the Basic material sector by almost 2%. The Financial Services sector was the second-biggest losers, and nearly all other sectors didn’t see any green on Friday, either.
The stock market’s true nature was at full-front display. The first trading day of the year was all rosy, and in a matter of hours, things turned around in the opposite direction. It only took two days in 2020 to get reminded of the lesson number one in the stock market. Never forget that you cannot predict the market.
Oil may not matter that much anymore.
The Middle East drama and unrest always impact the U.S. stock market. It’s easy to see why. Oil was once one of the most important inputs for economic growth. And, to this date, oil-related news has the power to move the market. However, does oil matter that much? Or, is it just an old mental association we all make between oil and economic growth that has remained with us from the decade past?
What else can move the market?
To answer that question, we don’t need to search too far or too deep. Let’s go back to January 2nd when the stock market started the year with approximately 1% gain. What drove the market on January 2nd was the stock price of one company. Apple (Ticker: AAPL) makes up nearly 10% of the tech-heavy Nasdaq and 3.4% of the S&P 500. Therefore Apple’s pricing moving upward has the power to move the market.
One day later, the oil price decline dragged the Basic materials sector by almost 2%, resulting in the stock market losing its previous 1% on January 3rd. In other words, just one company in the technology sector has almost the same market-moving effect as the entire Oil industry.
Even more dramatic than that is the realization that one dollar invested in Apple since the company went public would have made you 218 times richer than one dollar invested in the entire U.S. Oil and Gas sector (measured by iShares US Oil & Explore & Prod ETF). See the chart below for the growth rate difference between those two investment options.
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