What’s On Our Minds:

This Thursday marks the thirty year anniversary of “Black Monday”. On that day, the Dow Jones tanked nearly 23% in a chaotic selling spree.  For the most part, the one day crash was caused by growing complexity in the market.  Computerized trading platforms were new at the time and complicated hedging strategies that used equity index futures contracts were just being introduced.  Today, on a percentage basis, that correction would knock over 5,200 points off the DJIA.  As a former stock broker told us this morning, “that was a tough day in the trenches”.  On the bright side, the S&P 500 has returned nearly 900% since.

Tufton Capital Portfolio Managers, Randy McMenamin,  saved the Wall Street Journal from that day.  This paper, along with other “fateful” days in the markets are kept it in our firm’s library as a reminder that corrections can and do happen.

Wall Street Journal: Monday October 19, 1987

Last Week’s Highlights:

Third quarter earnings season kicked off and investors were optimistic.

Going into the week, investors were expecting solid performance in the big bank’s earnings reports. On Friday, Bank of America’s report was met with happy investors and the company’s share price increased by 1.5%. JPMorgan and Citi sold off as they failed to meet some important metrics. Particularly, both banks failed to deliver strong loan growth and loan quality metrics.

Looking Ahead:

Investors will have a keen eye on earnings reports coming across the wire this week.   Many believe that in order to sustain the rally we have seen in equity markets, investors will need to see strong earnings growth over the next few week.

On Monday we will hear from highflier, NetFlix. On Tuesday we will see earnings from Goldman Sachs and Harley Davidson. On Wednesday, Abbot Labs reports their results.  Phillip Morris, Berkshire Hathaway and Taiwan Semiconductor report on Thursday.  On Friday, we will wrap up the week with reports from General Electric and Proctor & Gamble.