“The Dow’s ongoing flirtation with the 20,000 market milestone is the talk of Wall Street.”
The 120-year-old Dow Jones Industrial Average consists of 30-blue chip stocks that make up arguably the world’s best-known stock index. At the time of this article and this blog post, the average is trading at near record levels and threatening the break the 20,000 mark. So how important is breaking the 20,000 barrier? Consider the following five questions.
Why, with the Dow so Close to 20,000, can’t it get over the hump?
Is Dow 20,000 a big deal?
Does a new milestone mark a new stage of the bull run we’ve seen?
Will Dow 20,000 improve the mood of investors?
Is Dow 20,000 a reason to buy?
Adam Shell, in this USA Today article, provides some answers to the above 5 questions that can help investors keep a more balanced perspective on what a Dow 20,000 really means for both individual investors and the economy.
You may want to use the information in this blog post and the original article to
With so much in the news about the stock market, record high values, a possible correction or pullback in market values, the Federal Reserve’s interest rate changes, and other economic factors, you may want to use this article and this blog post to explain why the Dow Jones Industrial Average is just one of many factors that affect investors, the market, and the economy.
Since the Dow Jones Industrial Average is in record territory, is this a good time to invest in the stock market? Explain your answer.
At the time you answer this question, what is the current Dow Jones Industrial Average? Has it gone up or down in the last six months, and what affect has the change had on the stock market and the economy?
The SEC has issued an investor alert warning people about fraudulent solicitations that purport to be affiliated with or sponsored by the Securities and Exchange Commission.
The SEC does not endorse investment offers, assist in the purchase or sale of securities, or participate in money transfers. SEC staff will not, for example, contact individuals by telephone or e-mail for purposes of:
seeking assistance with a fund transfer
forwarding investment offers to them
advising individuals that they own certain securities
telling investors that they are eligible to receive disbursements from an investor claims fund or class action settlement; or
offering grants or other financial assistance (especially for an upfront fee).
If you receive a telephone call or e-mail from someone claiming to be from the SEC (or other government agency), always verify the person’s identity. Use the SEC’s personnel locator, (202) 551-6000, to verify whether the caller is an SEC staff member and to speak with him or her directly. In addition, you can call the SEC at (800) SEC-0330 for general information, including information about SEC enforcement actions and any investor claims funds.
Ask students to visit other websites, such as, consumer.gov and investor.gov for additional tips on investing wisely and avoiding fraud.
Ask students to find a list of international securities regulators on the website of the International Organization of Securities Commissions (IOSCO) and a directory of state and provincial regulators in Canada, Mexico, and the U.S. on the website of the North American Securities Administrators Association (NASAA).
What actions can you take to protect yourself from government imposters?
What are the tell-tale signs that an impersonator is contacting you to steal your financial information?
Automated investment services are expanding. Many financial service companies are offering “robo advice,” in which investors complete an online questionnaire and a computer program generates and monitors a portfolio of funds. Robo-advisers are also designed to automatically rebalance a portfolio based on changes in the market as well as any changes in the amounts allocated to certain investments.
With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:
lower costs for obtaining advice and conducting transactions.
an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
an easier investment approach for younger clients with less-complicated financial lives.
Some will be concerned about automated portfolio management. Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.
For additional information on robo advice, click on the following articles:
“Investors may wade into unknown territory next month as the Federal Reserve readies the first rate hike in nearly a decade amid a corporate earnings recession.”
In this Reuters article, Rodrigo Campos explores the following factors that can be used to predict what could happen in the financial markets in the near future. Consider the following
The Federal Reserve may raise interest rates in December–the first increase in nearly a decade.
Earnings for the third quarter of 2015 for 90 percent of the corporations listed in the Standard & Poor 500 are lower than expected.
The decline in corporate revenues has been steeper than the drop in earnings.
As pointed out in this article, rising interest rates are always a negative factor for stocks. Since 2013, every time the Fed has indicated a rate hike is on the horizon, the stock market throws a tantrum, and the Fed decides not to raise rates. At the time of this blog, it is impossible to know if the Fed will raise interest rates in December–especially with corporate earnings on the decline. Even the experts are not sure what will happen between now and the end of the year.
You may want to use the information in this blog post and the original article to
Discuss the relationship between corporate revenues, earnings, and stock prices.
Explain the affect an increase in interest rates could have on the financial markets and consumers.
Explore possible investments for a down market and a market on the upswing.
What is the relationship between corporate revenues, corporate earnings, and stock prices?
What affect would a Fed decision to raise or lower interest rates have on the financial markets? On consumers?
Assume you have $375,000 invested in a diversified retirement portfolio. Corporate stocks in your portfolio include utilities, technology, energy, and consumer stables–some of which have reported lower earnings for the last two quarters. You also assume the Fed will raise interest rates in December. Would you sell some or all of your holdings? If you decide to sell, how would you determine which securities to sell? Explain your answer.
“Even after bouncing hard off last week’s lows, the stock market has appeared unwell.”
Based on current information from August 2015, Michael Santoli, the author of this article, explains some of the “big” problems that are affecting the stock market and the nation’s economy. He cites the following major factors that account for the current downward spiral of the U.S. financial markets.
Economic slowdown in China
More realistic expectations for future economic growth
Lower forecasts for corporate earnings growth
Uncertainty about the Federal Reserve’s decisions that could impact interest rates
The political climate leading up to the 2016 presidential election
One final point: The month of September is typically the worst month of the year for stocks. September 2015 should be an interesting month to say the least–get ready and hang on for what promises to be a rough ride.
On May 28, 2015, the Securities and Exchange Commission announced fraud charges against William Quigley. He is accused of creating a scheme to steal from investors and from a brokerage firm where he worked as the director of compliance.
The SEC’s Enforcement Division alleges that was involved in a scheme to solicit investors to buy stock in well-known companies or supposed start-ups on the verge of going public. The SEC alleges that:
The securities were never purchased for the investors.
Quigley wired the money out of the country or he withdrew it from ATM’s near his home.
he had accomplices, two brothers who live in the Philippines.
To make the most of your money and your choices, educate yourself on how to make stock investments confidently and intelligently . . .”
This article can be used to help reassure people who are afraid to make their first stock investment. Specific topics in the article include
The Ten Most Important Points about Stock Investing
Checking Important Company Fundamentals Before Investing in a Stock
Financial Measures to Consider before Investing in a Stock
A Mandatory Reading List for Stock Investors
Reassuring Points for Nervous Stock Investors
Information in each of the above topics is explained in a straight-forward and easy-to-understand format beginning investors can understand. The last topic, Reassuring Points for Nervous Stock Investors is especially important for people reluctant to invest in stocks.
“A decision by OPEC this week to maintain current levels of oil production is hammering major energy companies in the U.S. and abroad.”
This article explores the winners and losers of lower energy prices. For consumers, lower energy and gas prices means increased discretionary funds for purchasing consumer goods including food, clothes, electronics, and presents for friends and relatives during the holiday season. Also, both large and small retailers benefit because consumers have more money to spend. And airlines, package delivery services, cruise lines, and other companies are spending less on fuel.
The disadvantages of lower energy and gasoline prices are already causing the stock prices of big oil companies including Chevron, ConocoPhillips, Exxon Mobil, Marathon Oil, and British Petroleum to decline.
“The best way to avoid penny stock scams is to do independent research.”
This article underscores the importance of researching penny stocks before investing. Too often, the lure of “big” profits encourages people to invest without researching penny stocks. Simply put, they don’t do their homework.
According to this article, a good place to obtain research information about penny stocks is the Security and Exchange Commission website (www.sec.gov). By examining a company’s 10-K annual report, 10-Q quarterly report, and Form 8-K filings, in which companies report material events.
The article also warns investors about email promotions about penny stocks that are more hype than reality. For example, Paul Allen, a 65-year old retiree from Boston, received a flood of emails about a company called Vapor Hub International suggesting that shares of the e-cigarette company were about to take off. He invested and quickly lost 80 percent of his investment. And there are many more examples where investors–especially investors with limited funds and little experience buying and selling stock–often lose all or a large portion of their investment.