Market Thoughts for December 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for November. It was another great month for U.S. markets, although international markets didn’t fare as well. Still, the news was positive given the worrying headlines on the Hong Kong riots and the ongoing trade dispute. Here in the U.S., consumer confidence remained at a strong level, and business confidence bounced back. Plus, job growth beat expectations, and new home sales were up. What should we expect as we head into year-end? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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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.
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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.
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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.
2019 Midyear Outlook: Economy and Markets Continue to Tell a Growth Story
Slowing growth and a significant stock market decline at the start of the year had many wondering whether a recession was near. Commonwealth CIO Brad McMillan's position was "not yet." Six months later, he still believes the data supports continued growth for the economy and markets, but there's more to the story, including political risks that could derail the recovery.
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
Market Thoughts for July 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for June. It was a great month for markets around the world, capping off a strong second quarter. With so many worries about slowing growth, earnings, geopolitics, and trade, why are we seeing such strength? The Fed’s more dovish comments at the June meeting had a lot to do with pushing markets up. Plus, the economic data—from retail sales to housing—is solid. Things are actually pretty good. What does this mean for the rest of 2019? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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.
Market Thoughts for June 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for May. It was a tough month, with U.S. and international markets down. At the same time, May’s decline could be considered modest, and it was not based on fundamentals. Instead, it was all about confidence, which was rattled by a reignited trade war with China and proposed tariffs on Mexico. Still, there was some good news. Consumer spending picked back up, and job growth remained strong. Where does this leave us as we start June? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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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.
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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.
Outlook 2019: Despite Current Slowdown, Will We See More of the Same?
For the past several years, despite mounting political concerns and a few short-term setbacks, the economy and markets have continued to grow. But now that story seems to be changing. With key economic indicators and investor confidence taking a hit recently, what will this mean for 2019? Commonwealth CIO Brad McMillan presents his expectations for the new year.
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.
A Look Back at the Markets in January and Ahead to February 2019
After a terrible fourth quarter in the financial markets, we had a sizable bounce in January. Markets were up significantly, both here in the U.S. and around the world, and sentiment seemed to change markedly from pessimism to a new optimism. The question going forward is whether things have really changed that much.
Market Thoughts for February 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for January. It was a great month for the financial markets. Despite the government shutdown, signs of an economic slowdown, and dropping consumer and business confidence, U.S. and international markets were up. Plus, job and wage growth were strong, and companies made more money than expected. With the fundamentals solid, even the Federal Reserve hit pause on interest rate increases. So, what should we expect in the month ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Did the Fed Back Down? Not Quite
Well, as expected, the Fed did not raise rates yesterday. Further, it came out with what was perceived as a much more dovish statement than anticipated, essentially declaring a pause in rate increases. In response, markets cheered.
Will News from the Fed Heat Up the Markets?
With the brutally cold weather locking down large parts of the country, the hope today is that the Fed will heat up the markets by both holding rates steady (as expected) and dialing back the liquidation of its balance sheet.
What Can Consumer Confidence Tell Us About the Markets?
Right now, the base case remains positive. With earnings expected to keep rising and with valuations low per recent history, continued appreciation seems reasonable. Add in the real possibility that many of the issues currently weighing on the market will be resolved, and the positive scenario looks even more likely.
The Short-Term Effects of the Government Shutdown
I wrote about the big-picture effects of the government shutdown the other day, which are likely to be longer term. As it continues, though, the shorter-term effects continue to pile up. As such, it is time to take a look at what the shutdown means now and over the next month or so.
Outlook 2019: Back to Slow Growth
As we approach year-end, we find ourselves in an unfamiliar place. Despite mounting worries over the past couple of years about politics and other issues, the market and economy continued to grow. Through the first half of 2018, the markets were moving higher, despite a few breakdowns, and economic growth was accelerating.