Looking Back at the Markets in June and Ahead to July 2020
June was a mixed month. The national reopening in May and June led to new viral outbreaks and a spike in new infections in multiple states. Surprisingly, though, both the economic recovery and financial markets did very well. As we enter July, the question of many minds is whether the medical situation will improve—and whether the good economic and market news will continue.
Monthly Market Risk Update: May 2020
April saw markets rebound from the recent lows set in March, as progress combating the spread of the coronavirus gave hope to investors. The S&P 500 gained 12.82 percent during the month, marking the best single month for the index since 1987.
Markets Are Confident—But Are They Right?
As we did last week, I’d like to provide an update on where we are in the coronavirus crisis. This week, the news has generally been good. The virus continues to come under control, with the growth rate slowing (although the case count has not declined as much).
Is There an End in Sight for the Coronavirus Crisis?
Things have quieted a bit (but only a bit) in terms of the coronavirus crisis. As such, I thought it would be a good time to provide an update on this evolving situation. Let’s start with the trends in the spread of the virus to understand what they mean in the present for the markets, as well as in the future for the pandemic itself and the economy.
Looking Back at the Markets in March and Ahead to April 2020
March was a really tough month. After a terrible February, all major stock indices were down by double digits, leading to significant declines for the quarter as a whole. All of the major indices ended the month and quarter below their 200-day moving averages, often a sign of more trouble ahead.
First Wave of Economic Damage: 3 Million New Unemployment Claims
As expected, the initial jobless claims report—the one that shows how many people have been laid off and are newly applying for unemployment assistance—was a shocker this morning. Three million people lost their jobs and applied for unemployment last week. This is by far the highest number ever, with the previous record at just under 700,000 in 1982.
How to Think About the Coronavirus Pandemic: The Big Picture
With everything that is happening in the world, now is a good time to step back and think about where we are and where we might be going. There is a tremendous amount of information available. But what’s missing is a framework for that information that would help clarify the big picture.
Where Bear? There Bear!
We have finally seen the end of the bull market, with the Dow dropping 20 percent from its highs and the S&P 500 following today. We are officially in a bear market, with all that implies. Stock markets around the world are down again today on the news.
Is the End of the Bull Market Nigh?
Monday, March 9, will be the 11th anniversary of the bull market that started back in 2009. With recent pullbacks and turbulence around the coronavirus, it is reasonable to worry that this anniversary will be the last and that a bear market will break the streak sometime in the next year. As such, now seems a good time to consider where we stand—and where the market might be headed.
Reassessing the Coronavirus Risk
In yesterday’s post, I pointed out that the markets were taking a break, stopping the sudden slide to think about whether the news surrounding the coronavirus is really as bad as all that. Today, they appear to have decided that, yes, things are that bad and may be even worse. Perhaps, then, it is time for me to reassess my conclusions.
How Should Investors React to the Coronavirus?
It is now clear that the coronavirus has escaped the attempted containment by Chinese authorities and has spread around the world. According to the World Health Organization, there are 79,331 confirmed cases, of which 77,262 are in China and 2,069 are outside of China (as of February 24, 2020).
Monthly Market Risk Update: February 2020
It’s time for our monthly look at market risk factors. We had a strong start to the year, with U.S. markets at all-time highs by mid-January. But a risk-off sentiment driven by the spread of the coronavirus from China spooked investors, leading to modest declines for equity markets at month-end.
Looking Back at the Markets in January and Ahead to February 2020
January was a tough month. We started with a U.S. attack on an Iranian general (creating thoughts of war) and ended with the possibility of a new global pandemic (with the Wuhan coronavirus spreading around the world). In between, of course, we had the impeachment spectacle here in the U.S., as well as the British exit from the European Union.
Outlook 2020: How Real Is the Risk of Recession?
As we move into 2020, we find ourselves in an uncertain place. Economic trends have deteriorated, and growth levels have flatted. Plus, the impeachment process and election could have negative repercussions. Indeed, the risk of recession is real—although its impact may be much milder than many fear.
Market Thoughts for November 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for October. It was a great month, with U.S. markets doing well and international markets doing even better. This positive news was surprising, given the impeachment inquiry, weak job growth, and declining business confidence. Still, major sectors of the economy remain strong. Consumers continue to earn and spend more. Plus, the Fed has gotten behind the markets with rate cuts at its last two meetings. But is there volatility ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Economic Risk Factor Update: October 2019
Overall, the economic data released last month came in worse than expected. There was a sharp decline in two of our metrics, consumer confidence and service sector business confidence. Job creation was more mixed, as the pace of new job growth remains below that of 2018 but is still at a level above the trouble zone on a year-to-year basis.
Market Thoughts for October 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for September. It was a pretty good month, with U.S., international, and emerging markets all up. These results were surprising given the month’s events, including a drone strike on a Saudi oil complex and the impeachment inquiry of President Trump. Still, the fundamentals remained solid. New and existing home sales went up. We also saw strong personal income growth, leading to strong retail sales growth. But are there headwinds ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
What Does the Fed Rate Cut Tell Us?
Yesterday, the FOMC decided to reduce the target range for the federal funds rate from 2–2.25 percent to 1.75–2 percent. As the headlines put it, the Fed cut rates by one-quarter of a percent. The headline version is certainly pithier, but the first version is more accurate—and gives a better sense of what actually happened.
Market Thoughts for September 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for August. It was a tough month for markets, with fixed income the only bright spot. There was a lot of volatility, with markets down between 4 percent and 6 percent on three occasions. What drove the declines? Politics. The U.S.-China trade war heated up, and the Fed and the White House sparred over rates. Still, the economy remained solid—with consumer confidence high and strong job growth. So, will there be more volatility ahead? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
More Market Turbulence: No Surprise Here
We saw the largest stock market drop of the year. The Dow Jones Industrial Average was down more than 800 points (over 3 percent), an even bigger decline than we saw earlier this month. Plus, we are on track for the worst week of the year. It is a tough time for markets, and investors are worried. But should they be?
Markets Drop on Trade War Fears
The past week has been a tough one for stock investors. The S&P peaked on July 26, and it has dropped every day since then for a total decline of almost 6 percent (as of the close of August 3). This is a large and fast drop that has understandably rattled investors, who wonder why the sudden pullback—and whether it will continue.
A Look Back at the Markets in July and Ahead to August 2019
In July, U.S. markets were up overall, between 1 percent and 2 percent, and bonds also had gains as interest rates declined. Although international markets were down slightly, by about 1 percent or so, they remained above their long-term trend lines. From a financial perspective, July wasn’t a great month, but it was a pretty good one for investors.
Market Thoughts for August 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for July. It was a mixed month. U.S. markets rose and fixed income went up, but emerging markets pulled back. In the U.S., second-quarter growth beat expectations, buoyed by the consumer. People were willing and able to spend, a trend that is likely to continue. Earnings also went up, another positive surprise. Still, risks remain, including the threat of Brexit under Prime Minister Boris Johnson. What should we expect for August? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
Deal on Spending and Debt Ceiling Is Good News for Economy
This morning’s announcement of the deal between Congress and the White House to suspend the debt ceiling for the next two years is undiluted good news. With an agreement that the government can borrow to spend the money that it has already committed to spending, we can avoid a totally unnecessary, politically driven crisis that could have caused real economic damage.
Earnings Season: Here We Go Again
This morning, I spent some time speaking with a client who wanted to know why markets had slowed down recently. But I am not sure I agree with her. We hit all-time highs just the other day, although in recent days, the market has been taking a bit of a breather. Will that down time continue, or could we get another leg up?
Economic Risk Factor Update: July 2019
Although there was some good news last month—job growth bounced back to come in well above expectations—the overall trend remains negative. Confidence has continued to decline, while the yield curve hit an official inversion as of the end of June.
2019 Midyear Update
Commonwealth CIO Brad McMillan provides his 2019 midyear market outlook. Growth has been solid this year. Consumers remain confident, and business continues to hire and invest. Indeed, markets have responded to these positive conditions, as they are once again close to new highs. If the economy continues to grow and the fundamentals remain solid, which is likely, we should continue to see more progress in the markets. But will the risks, including the trade war and the debt ceiling, come into play? Stay tuned to find out. Follow Brad at http://blog.commonwealth.com/independent-market-observer.2019 Midyear Update
The Inverted Yield Curve, the Fed, and Recession
One of the most reliable signals of a pending recession is when, in the jargon, the yield curve inverts. This sounds like a fancy phrase, but it simply means that investors demand to be paid more for a short-term loan than for a long-term one.
A Look Back at the Markets in May and Ahead to June 2019
“Sell in May and go away” was certainly on point last month. With U.S. and global markets down significantly, investors closed out the month with a level of worry we have not seen since the end of 2018. Let’s take a look back at this volatile month, as well as what we might expect going forward.
Is It 1998 All Over Again for the Markets?
Recently, I've fielded a few calls from advisors asking for my thoughts on media coverage declaring that current market conditions are similar to those of the late 1990s. Their clients are worried about what might happen. Could we see a replay of 2000?
Should We Ignore Recent Market Volatility?
After yesterday’s terrible performance—with U.S. stock markets down more than 2 percent—worries are starting to rise. Combined with last week’s declines, it looks like we may be seeing the end of the bull market. So, is it time to panic?
Two Cheers (Not Three) for the Jobs Report
On the face of it, this morning’s strong jobs number should elicit a full three cheers. Job growth came in at 263,000. This result was up from last month’s downwardly revised 189,000 and well above the expected 190,000. Looks like a home run, right?
Market Thoughts for May 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for April. It was another great month, as U.S., emerging, and developed markets were all in the green. Although there were concerns about a slowdown at the end of last month, first-quarter economic growth actually came in well above expectations. Plus, consumer spending picked up, consumer confidence bounced back, and business investment came in stronger than expected. So, should we expect more good times ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Investors: Sell in May and Go Away?
Today we will take a look at an old investing adage: “sell in May and go away.” It is supposed to reflect the idea that market returns over the summer and fall are worse than those in the winter and spring. Under this theory, you should sell all your stocks in May and then buy them back in November.
Does Strong Q1 for Economy Forecast More Blue Skies Ahead?
We got the first estimate of economic growth for the start of the year. Despite quite a bit of concern about slowing growth, the figure came in at 3.2 percent. This result was well above the expected 2 percent and a substantial acceleration from the 2.2-percent gain in the last quarter of 2018.
Markets Back at New Highs: So What?
This morning’s news revealed that, as of yesterday, both the S&P 500 and Nasdaq stock indices had hit new highs for the first time in six months or so. Let’s cut right to the chase here. For me, the appropriate response to this news is, “So what?”
Politics Again: The Mueller Report and the Markets
With the Mueller report scheduled to be released later today (as of this writing), preceded by the press conference with the attorney general this morning, the newspapers are on high alert. This report is being billed as a potential constitutional crisis and, if it doesn’t approach that level (as it almost certainly will not), as the beginning of the next round of political wars.
Monthly Market Risk Update: April 2019
It’s time for our monthly look at market risk factors. Just as with the economy, there are several key factors that matter for the market in determining both the risk level and the immediacy of the risk. Although stocks have largely recovered from their recent pullback, given valuations and recent market behavior, it is useful to keep an eye on these factors.
Market Thoughts for April 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for March. It was another great month, with U.S., emerging, and developed markets all up. But this strength was a bit strange, considering the weakening seen in the fundamentals. Here in the U.S., both consumer and business confidence took a hit, the yield curve inversion caused many to worry about a pending recession, and analysts lowered their expectations regarding corporate earnings. Given all this, is growth likely to continue? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Yield Curve Inversion: Evaluating the Risk
If you think about it, the fact that you can borrow cheaper for 10 years than for 3 months is a signal that something is broken. It is simply riskier to lend for longer, so the imbalance shows that something is wrong. As such, the yield curve inversion makes sense as a risk indicator.
10 Years After the Market Hit Bottom, Where Are We Now?
I am in Colorado this week at a Commonwealth conference, spending some time at high altitude when I normally live pretty much at sea level. The altitude seems somehow appropriate, though, when I look at where the markets are right now compared with where they were 10 years ago. We have climbed to astonishing heights since the bottom—heights almost no one expected back then.
A Look Back at the Markets in February and Ahead to March 2019
From a financial markets perspective, last month was a good one. U.S. markets were up between 3 percent and 4 percent, developed international markets were up 2 percent to 3 percent, and even emerging markets managed to notch a small gain. Overall, February was another step forward from the decline at the end of last year, suggesting markets have regained their footing.
Market Thoughts for March 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for February. It was another good month, with U.S. markets, developed markets, and fixed income showing gains. Still, the housing market continued its slowdown, and business investment softened. We also saw a terrible retail spending report. But the market was able to bounce back from the lows seen at the close of 2018, buoyed by the end of the government shutdown. So, will the markets continue to move higher, and what risks are ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Earnings Recession Ahead? Not So Fast
We talked yesterday about the possibility of another government shutdown and the effect that could have on both business and consumer confidence. That shutdown looks to be something we will avoid. But now there is another potential confidence buster ahead being talked up in the media: an earnings recession.