Econified

December 8 – 12 did not have as much stock market growth as the week prior. While there were several industries that grew, the overall stock market stayed fairly constant. Here is a summary of the performance of a lot of key indexes in the stock market this past week:

• S&P 500 Index – decreased 0.70%
• Nasdaq Composite – decreased 1.87%
• Dow Jones Industrial Average Index – increased 1.01%
• Russell 2000 Index – increased 0.75%

The big news that happened this past week was that the Federal Reserve lowered interest rates last Wednesday. Since this is what most investors predicted, this did not have a large impact on the economy. However, this could be the reason why many industries rose this past week. The Nasdaq Composite and the S&P 500 are more heavily weighted towards tech stocks. The technology industry did not have a good week in the stock market. However, most other industries had a positive week as investor sentiment increased. Many investors are still unsure if the technology industry is overly valued due to AI’s rapid growth that could be unsustainable. As economic information will become available in the next few days, this industry will be disproportionately impacted. Some more risk-adverse investors likely pulled money from the technology industry and moved it to more resilient stocks like pharmaceuticals and financial services.
Looking at this week, all four of these indexes were down today, December 15th. This shows a broader trend that investors are unsure about the health of the economy. Once more economic information gets released, we should get a much better indication of how the economy is performing.

Industry Changes

Pharmaceuticals: The Pharmaceuticals industry, tracked using Dow Jones’ U.S. Pharmaceuticals Index (DJUSPR), increased 1.99% this past week. Pharmaceuticals increased greatly in November, but this industry went down in early December. The pharmaceuticals industry is recession resistant, and increases in November were in-part due to investors shifting money to more safe investments. However, Black Friday data helped reassure investors that the economy was healthier than anticipated. A healthier economy means that investors will put more money into riskier investments, like the technology industry. This trend did not last into this week as the pharmaceuticals industry increased again. This signals that there is more doubt about the health of the economy. Economic data is at the forefront of many investors’ minds, and investors moved into this industry to buffer from potentially negative news this week. This is further corroborated by the 2.19% increase in this industry’s index today.

Financial Services: The Financial Services industry, tracked using Dow Jones’ U.S. Financial Services Index (DJUSFV), increased 2.16% last week. This industry has been doing very well in recent weeks. This industry was particularly helped by the Federal Reserve’s interest rate cut decision last Wednesday. Stocks have continued to grow and show strong profitability. The returns on this industry have been 18.7% YTD which is only slightly lower than the technology index, which is up 23.87% YTD. Investors still want high returns, but they may not be as risk tolerant to choose to invest in the risky technology industry. Many investors are likely choosing to switch to financial services from technology to get solid returns without the increased risk of an AI bubble.

Technology: The Technology industry, tracked using Dow Jones’ US Technology Index (DJUSTC), decreased by 2.94% last week. This industry has been talked about a lot in the other industries’ discussions, but it is important to note that investor sentiment in this field has been decreasing. AI is bringing a lot of growth, and it is making a lot of organizations more productive and valuable. However, competition in the industry is becoming fierce, and profitability does not seem to be a priority for many AI companies. AI technologies have not found a way to be widely profitable, especially considering how expensive it can be to operate. This industry is still showing remarkable growth this year, but it has continued to fall in recent weeks. It is likely that many AI companies will not be resilient enough to weather a recession, so investors in this industry are especially concerned with economic data.

Consumer Goods: The Consumer Goods industry, tracked using Dow Jones’ US Consumer Goods Index (DJUSNC), increased by 1.88% last week. It is the most profitable time of year for the consumer goods industry, and Black Friday sales numbers indicate the consumers are poised to bring a lot of growth to this industry this year. This industry is only up 9.74% YTD. This is still very positive, but it is the second worst performing industry on this list this year. The Federal Reserve’s interest rate cut also will help this industry as debt becomes more affordable for businesses and consumers.

Oil & Gas: The Oil & Gas industry, tracked using Dow Jones US Oil & Gas Index (DJUSEN), decreased by 0.90% last week. This is the worst performing industry on this list this past year, and this is largely because of President Trump’s foreign and domestic oil policies that have led to lower oil prices. Lower oil prices mean less profitability for these organizations despite continued domestic oil production growth. If oil prices were at the same level as they were a year ago, this would likely be the best performing industry this year. However, oil prices have fallen 22.74% this year which has caused this industry to not achieve the same levels of growth as the rest of the market. Oil prices fell 3.37% last week, which is why the industry went down last week.

Parting Thoughts

Investors throughout the market are preparing themselves for the economic data being released this week. Strong jobs numbers tomorrow and low inflation rates on Thursday will ease many investors’ worries, and this will bring strong growth. However, worsening economic conditions will undoubtably have a negative impact on the stock market. With the growing foreign tensions between Venezuela and the United States, oil prices may start to rise if there becomes a global shortage. This is something to look at as this industry is positioned for growth if higher levels of profitability become available. The technology industry will likely be the most impacted industry by the economic data being released this week. Investors in this industry have been growing increasingly wary of the economy’s performance, so this industry is poised to be greatly impacted by this data. The safest industry to invest in currently is likely the pharmaceuticals industry due to its nature of being recession resistant, and many of the companies in this industry have shown strong growth this past year. Econified will provide reports throughout this week as economic data becomes available.