The age of abundance has given way to an age of scarcity, while the pro-cyclical version of inflation may have given way to the counter-cyclical version.
September closed with a whimper (from folks hoping the seven-month stretch of positive performance months for the S&P 500 would make it to eight). The month also held true to the history of September being the worst month for performance on average since the index’s inception in 1928.
It was 35 years ago this month that I began my career on Wall Street. In thinking about those three-and-a-half decades, I decided to shift tack with today’s report and ask readers to indulge me as I ruminate about what I’ve learned during these decades.
Over the past 70 years, rising government debt generally has been accompanied by weaker economic activity. But it’s not a simple relationship.
Special purpose acquisition companies (SPACs)—also known as blank-check companies—have gained immense popularity among investors since the beginning of 2020, despite being around for decades.
The stock market could use some mouthwash.
As expected, in a unanimous vote, the Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) kept the fed funds rate unchanged in its range of 0-0.25%.
In what shaped up to be a very impressive first half of the year for both the economy and stock market, stellar earnings growth has been a key ingredient.
There is always a lot of controversy around the implications of high and rising government debt. Over the past 70 years, rising government debt has generally been accompanied by weaker economic activity.
The Fed made no changes to its interest rate or balance sheet policies; but some of the language in its statement was tweaked, reflecting recent hotter inflation data.
To get the facts, sometimes you need to look beneath the surface.
Second quarter is likely the peak growth rate for both the economy and corporate earnings; with positive economic surprises waning.
Is the stock market disconnected from the economy?
A boom in spending has stirred fears of economic overheating, which has coincided with a surge in commodity prices and a lift in traditional inflation metrics.
Economic and earnings data are in boom territory, with more momentum likely near-term.
Although it’s early in the first quarter earnings reporting season, it’s worth a look at the progress so far and the implications for the rest of the season, as well as valuations.
As Shakespeare might put it, “full of sound and fury, signifying nothing” is perhaps an apt way to describe the character of the market so far this year.
I am often asked by investors why we do not have formal tactical views on growth vs. value like we do on large caps vs. small caps.
U.S. economic growth is accelerating as vaccinations rise and social-distancing measures ease, but hopes for a long-lasting spending boom may hit a couple of speed bumps. Vaccine rollouts in major countries are proceeding at different speeds, but stock market performance contradicts what vaccination data would seem to imply for investors. Meanwhile, inflation-adjusted longer-term Treasury yields have risen as investors anticipate stronger economic growth.
Is the stock market disconnected from the economy? Perhaps, but less so lately.
“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” -Investor and mutual fund manager Sir John Templeton
Looking at the latest economic data reveals V-shaped recoveries in many goods-based indicators; while services has more catch-up to do.
Hope is high that economic growth will accelerate as more people are vaccinated against COVID-19, but so far economic data has been lackluster. Meanwhile, bond investors are expecting inflation despite signs that the economic recovery’s momentum may be stalling. Why does everything seem so disconnected?
As quickly as it soared to the moon, GameStop came back down to earth; but the lessons learned are key to turning day trading speculators into longer-term investors.
As expected, the Fed kept rates unchanged; but did make clear its view that vaccines are key to the trajectory of the economic recovery.
As a review of the year that was, today’s report analyzes and dissects the nature of the K-shaped recovery in both the economy and stock market.
U.S. stocks have continued to climb amid optimism about a vaccine-led economic recovery, but it’s a narrow path—buoyant investor sentiment could easily be deflated by bad news. Although global economic growth has struggled, an acceleration in vaccinations in major countries could support stronger growth in the second quarter.
Last week was shocking and extraordinarily sad; and as if Americans didn’t have enough with which to contend, it was capped off by a weaker-than-expected December jobs report.
As expected, the Federal Reserve’s Federal Open Market Committee (FOMC) voted unanimously to keep the federal funds target rate in a range of zero to 0.25%; where it’s been since March. A majority of FOMC officials maintained their forecast that the rate would be kept near zero at least through 2023.
September 2 was a momentous day on several fronts. It was the initial pop to all-time highs for both the S&P 500 and NASDAQ; after an impressive run from the March 23 pandemic low. It was also a turning point in terms of market leadership; reflecting budding optimism about a turn-for-the-better in economic data.
Encouraging news about COVID-19 vaccines has boosted hope for stronger economic growth, kicking off a rotation in stocks and equity sectors as investors look to a brighter future. However, near-term volatility is possible, as we’re not yet out of the coronavirus tunnel.
This week’s report will look at last week’s market moves in the wake of positive vaccine news (with additional and even better news today); but will also review our most recent tactical recommendation change.
Actual third-quarter earnings may be less important than what business leaders say about their expectations.
The Fed did not add to this week’s uncertainties and kept rates unchanged, while also providing no new information with regard to its balance sheet.
For the third time since the COVID bear ended its short havoc, U.S. stocks went into pullback mode—culminating in the worst week since March. The virus itself continues to be a culprit; with another surge in cases and hospitalizations; although not for deaths, at least not yet. The lack of a fiscal relief package and heightened election uncertainty are also to blame.
Investor sentiment is telling a mixed story about the market’s ascent since the March low; begging the question, will the skeptics converge with the optimists?
With investors already on edge regarding election uncertainty, an “October surprise” arrives yet again. Can history provide some guidance on how elections impact markets?
As of this writing, it’s a rough start to the week for U.S. equities. Major indices attempted to find more stable ground last week, but volatility risks persist and the bears are winning the latest round. Policy risks abound—not just election-related, but both monetary and fiscal policy as well.
Fed maintained rates at near-zero, while also updating its summary of economic projections; now expecting a shallower economic contraction, but a slower recovery thereafter.
The U.S. stock market hit pause in early September, as investors took a harder look at market overconcentration and frothy sentiment. Meanwhile, global economies may be entering a new phase, and the Federal Reserve’s newly announced inflation policy is likely to keep U.S. rates lower for longer.
Rotation away from the market’s prior momentum darlings continues. Friday’s jobs report had bullets for both the optimists’ and pessimists’ case studies. And improving productivity, partly due to work-from-home trends, could persist as a positive economic driver.
In a speedy round-trip, the S&P 500 hit an all-time high last week; meaning the rally since March is now an “official” bull market.
Although certain high-frequency data haven’t improved markedly, the threat of the virus has started to recede.
The July labor market report had talking points for both the economic bulls and bears; with Congress on the hot seat to keep the recovery from faltering.
The Fed left rates unchanged near-zero, as expected, while emphasizing that “the path of the economy will depend significantly on the course of the virus.”
Earnings have so far bested an extremely low bar, but stocks may be discounting too swift a recovery; while concentration remains a risk.
U.S. stocks have been fairly resilient lately, even as coronavirus hotspots flare up around the country. Although consumers and businesses are increasingly worried about rolling shutdowns, major stock indexes generally have moved sideways. How long can this continue? Much depends on the shape of the economic recovery.
Rate of change and inflection points in economic data drive stocks; but in these unique times, the level of said data needs to be considered, too.