Stocks fell yesterday despite continued strong earnings. The FOMC meeting concludes today but the market will most likely be dominated by investor reaction to overnight earnings reports from giants like Apple#, Alphabet#, Microsoft#, and Visa#. Overall, these companies beat revenue and earnings estimates substantially. Aftermarket reaction yesterday afternoon was muted, which was an indication that …
July 26, 2021 – After a rocky start last week, investors figured out that the likely economic consequences of the Delta variant won’t be significant nor long lasting. Hopefully, the virus won’t prove us wrong. The big item on the calendar this week is the FOMC meeting, which isn’t likely to be very controversial.
Stocks rose to new highs Friday culminating in a four-day rally after last Monday’s sharp losses related to rising Covid-19 related fears. Earnings season has been generally on target with extraordinary year-over-year gains compared to last year’s second quarter when much of the country was in lockdown. The 10-year Treasury yield remains low at about …
July 23, 2021 – A scary start to the week is ending at possible all-time highs in major averages. Strong earnings, especially from banks, are pointing to a better Q2 than many expected. That being said, narrow leadership points to some concern in the near term.
We have been expecting market volatility to pick up as our economy shifts gears coming out of the pandemic. Stay-at-home stocks were massive winners in 2020, while reopening companies took the baton for the early part of 2021. Now that we’re getting back to some sense of normalcy, it becomes a much more difficult market …
July 21, 2021 – Bond yields are low because our world is awash with money. As money supply growth recedes and the Fed starts tapering, yields could rise. A lot depends on what corporations and individuals do with excess cash. On the inflation front, while some commodity prices are receding, demand for rents and labor are increasing. It’s hard to buy the Fed’s “transient” argument if rents and wages increase persistently. If inflation becomes enduring, the Fed may have to adjust its plans.
Stocks rebounded from Monday’s sharp loss as investors reevaluated the economic impact of a sharp increase in the Delta variant of Covid-19. While the future courses of infection, hospitalization and deaths are uncertain, given the number of Americans who have already had the disease or have been vaccinated, it appears likely that a highly contagious …
July 19, 2021 – Stocks fell on Friday once again despite strong data on retail sales. Perhaps the biggest issue affecting markets was the acceleration of the Delta variant of Covid-19. In percentage terms, the number of cases in the U.S. continued to climb sharply. There was no better proof of concern than the price action in the stock of vaccine maker Moderna. Last week, its shares rose by almost 20%.
One of the tragedies of the Delta variant is that its impact in developed nations like the U.S. could be significantly muted if more of the unvaccinated got the injections. Experts expect a large majority of Americans who are unvaccinated or had the disease previously to be infected this time around. The Delta variant is …
July 16, 2021 – Interest rates dropped again yesterday, but counterintuitively, bank stocks rose while growth stocks suffered. Our “transition” period is sure to continue to confound investors and bring more volatility. We touch on inflation data, margin expansion and market breadth/valuations in today’s note.
Transition remains the name of the game this week. Major averages, led by mega caps, touched new highs, but are basically flopping around with increased intraday volatility while the average stock continues to weaken. Earnings are coming in hot, as expected. I want to touch on 3 major pieces of this puzzle today, namely inflation, …
July 14, 2021 – The sharp rise in the CPI for June and the Senate Budget Committee’s approval of a $3.25 trillion spending package once again points to a transitional economic moment. Some of the inflationary components may be transitory and the budget proposal is a long way from passing. Change in the macro environment means changes in the investment world as well.
Stocks drifted lower yesterday after a surprisingly hot inflation report for June. This once again raised issues regarding the possible timing of the Fed’s bond purchase tapering process. Strong earnings reports from Goldman Sachs and JPMorgan Chase# were met with yawns by the market as earnings season got underway. Only a strong quarter from Pepsico#, …
July 12, 2021 – Transitions bring both uncertainty and volatility. We saw that last week in the bond market. Expect more of the same in all financial markets over the next several months as investors digest slowing growth rates, less monetary intervention, and greater regulation.
Stocks rose sharply on Friday, largely erasing the large losses experienced Thursday as the yield on 10-year Treasuries fell to as low as 1.25% in early morning hours. While the media tried to explain the sharp drop in yields via fundamental factors such as economic weakness or the spread of the Delta variant of Covid-19, …
July 9, 2021 – Stocks took a breather yesterday with losses across the board. Interest rates continue to defy bears with 10-year Treasury yields down nearly 50bps in short order to 1.29% during one of the most bullish economic data sets of our time. The Delta variant and numerous re-lockdowns globally are causing a fresh bout of fear.
It is often said that smart money resides in bond land. With the total value of bonds outstanding being 3X that of equities, there may be some truth to this mantra simply due to size. Historically, interest rates move well in advance of stocks, but one does not exist without the other. After seeing interest …
July 7, 2021 – Declining interest rates in the second quarter have propelled growth stocks back into a position of leadership. Rates declined again yesterday as stocks fell, but key leaders like Amazon# and Apple# advanced. Can rates decline further? If we look to the past and exclude the panic in the market last spring as the pandemic took hold, it would appear rates are at the low end of their decade-old range. Thus, the sharp rotation from cyclicals to growth stocks may be about to pause should rates find a near-term bottom.
Stocks fell yesterday but finished well above their worst levels. After 7 straight up sessions for the S&P 500, I will attribute the decline to profit taking. There was no significant new news. For more than a decade, growth stocks outperformed cyclical and value stocks by a wide margin. That coincided with a slow steady …
June 2021 Economic Update – “Is this a Bubble?”
Prices for many assets, including housing, stocks and commodities, continue to rise while inflation remains in check and fixed income rates remain at historic lows. In this video Chris Gildea, a Principal and Portfolio Manager with Tower Bridge Advisors, analyzes these factors to assess the current state of the economy.
July 2, 2021 – We are now halfway through 2021 and the markets have already given investors generous returns again. What do the next six months look like and what are the most critical data points with which we need to concern ourselves? We discuss the bull/bear debates below with an outlook on the second half.
We are now 15 months removed from a Covid-induced pandemic that shut down the world. Looking back to last year, not many, if any, could have expected such a massive rebound in economic conditions, earnings and a global vaccine rollout that put everyone on a path to normalcy so quickly. Halfway through 2021 we have …
June 30, 2021 – Stocks are on pace for 5%+ gains in June. As long as interest rates stay low, earnings growth will remain the primary market driver. But growth rates will slow going forward. The Fed labels inflation transitory. If it is right, markets can continue to market higher. Tomorrow’s labor report will be an important factor. Job growth may actually accelerate in the months ahead as we return to work and school.
Stocks are on track for their best monthly performance this year with gains of over 5% up to today, the final trading day of the quarter. The catalysts were better-than-expected economic growth, flat interest rates, and a nice earnings tailwind with no interest rate headwind. As noted on Monday, we are at peak growth rates …
June 28, 2021 – We are at peak growth. Our economy is growing close to 10% annualized and inflation is distorted by a sharp but hopefully temporary spike in commodity prices. Over the next year or so, as everything starts to normalize, how will that change our view of the world and central bank policy? We explore that today.
Stocks continued to move higher last week. Although President Biden stepped back from the bipartisan infrastructure bill by demanding it be tied to a broader progressive agenda to spend billions more on social programs, over the weekend he seemed to walk that back a bit, no longer insisting a veto would accompany a stand-alone bill. …
June 25, 2021 – Last week’s critical Federal Reserve meeting is now in the rearview mirror and barely a blip on the radar as the Nasdaq and S&P 500 are back to making new highs. With inflation, growth and stimulus peaking, winners and losers continue to diverge, with technology taking a leadership role as transportation and cyclical stocks digest massive gains. Yesterday’s bipartisan infrastructure deal boosted cyclicals, but much work needs to be done before anything gets passed.
Another day, another new high in the S&P 500, initially pulled by growth relative to value. Mid-day news of a bipartisan agreement on infrastructure was enough to help transportation and deep cyclicals catch up to their growth brethren. Biden announced a $1.2T package, which includes $579B in new spending, agreed upon by 21 Senators broken …
June 23, 2021 – The pandemic has brought with it a housing boom. The rate of increase in home prices will dissipate as high prices bring more sellers to market. Home building will remain strong as the inventory of attractive modern homes remains near record low levels. The elevated construction activity could add 0.5% or more to GDP for an extended period.
Stocks rose slightly yesterday, following through from Monday’s sharp rally. Monday’s gains in the stock market essentially erased the losses last week that followed the FOMC meeting. Long-term interest rates also returned to pre-FOMC meeting levels. The biggest change over the past week has been a slight flattening of the yield curve, and a subtle …
June 21, 2021 – Last week, the Fed began to recognize publicly that inflation and growth were running a bit hot. A mid-course correction might be necessary but will still take several months to implement. Markets reacted by lowering long term inflation expectations slightly as the yield curve flattened. All in all, the adjustments were modest. Soon the focus will return to earnings as the second quarter comes to a close.
The Dow suffered its worst week since October after the Federal Reserve suggested that it might move forward with its intentions to reduce bond purchases and raise the Federal Funds rate. Note the word intentions above. Nothing has been implemented yet. What the Fed said last week, through formal statements and comments from Fed officials, …
June 18, 2021-Fed announcements usually take a few days before the market figures out what they really said. This time is no different as rates initially spiked but made a 180 degree turn yesterday. Winners and losers in the stock market also flip-flopped. What to do now?
Market participants, in both stocks and bonds, waited with bated breath for the conclusion to the 2-day Federal Reserve Meeting. After two straight months of worrisome inflationary data, lower than expected employment reports and a continued rise in consumer spending, many were frightened at the prospect of the Federal Reserve changing their stance and pulling …
June 16, 2021 – Everyone will be watching the conclusion of today’s FOMC meeting to see whether the Fed hints at any change in policy. What will likely be said is that the Fed will acknowledge inflationary pressures and spend time this summer to determine how much inflation is enduring. The market reaction will depend how that is said. Investors want the Fed to acknowledge some concern, but not too much. It’s a tricky path to navigate.
Stocks fell modestly yesterday as investors anxiously awaited the outcome of the two-day FOMC meeting that will end today. There are actually two events of note happening today. One, just noted, is the FOMC meeting. The other is the first face-to-face meeting in Geneva between Vladimir Putin and President Biden. While the latter could have …
June 14, 2021 – The benign bond market, despite strong inflation numbers, signals that near-term pressures are transitory. But as the recovery progresses, other pressures, like higher wages and rents, may not be so transitory. The economic news over the past 5 months has been very bullish as the pandemic fades. The rest of the year will exhibit some growth deceleration. The path of the stock market will be dictated by the trends in inflation and interest rates.
Friday was a dull session without much movement or news. Let me start this morning with a few statements of either fact or conclusion. Then I will try to pull it together. 1. Earnings growth in the second quarter, especially compared to a year ago, will be outstanding, maybe the highest year-over-year growth rate I …
June 11, 2021 – Robust inflation data, rising prices across the board, labor/commodity shortages and pent-up demand are all real inflationary worries. However, the 10-year Treasury is now down 30bps in just 2 months. Is the market wrong?
Often times, stock and bond markets react in ways that are very counterintuitive. Robust quarterly earnings updates bring about aggressive selling. Horrible reports precede stocks rising. The discounting nature of our capital markets means today’s headlines are less important than what investors and institutions expect a year from now. Such was the case yesterday with …
June 9, 2021 – Normally the bond market sends better messages than the stock market. With bond yields falling once again, the message is either that economic growth is going to decelerate faster than might be expected or central banks will continue to intervene for much longer than consensus expectations. 2% 10-year bond yields suddenly look far away.
Stocks closed mixed yesterday in a session with little economic news. The yield on 10-year Treasuries fell to 1.51%, the lowest yield since late February. This is despite the May CPI report, due out tomorrow morning, that is likely to report year-over-year inflation at or above 3%. The Fed has said that current inflation readings …
June 7, 2021 – Stocks made solid gains on Friday led by the tech sector after a solid but slightly less than expected employment report.
While the gain in the number of new jobs was a bit below forecasts, it was right at the trailing 3-month average. Pre-pandemic, an addition of over 500,000 jobs per month would have been considered extraordinary. However, in a world just opening back up, growth at that rate is a bit disappointing and probably delays …
June 04, 2021 – Markets took a breather this week in preparation for a critical update on employment due out this morning. Biden’s infrastructure plan is hitting some speed bumps. A change in his tax plan to pay for it brought more questions than answers. Something will get done eventually.
Stocks opened down across the board yesterday until reports came out that Biden’s private meeting with Senator Capito offered major changes to his American Jobs plan. Every report out of the political world comes with a grain of salt, but they are pulling out all the stops in an attempt to get a bipartisan infrastructure …
June 2, 2021 – All eyes will focus on Friday’s employment report. Too much growth will reignite inflation fears. Too low a number will suggest to some that the recovery is threatened. Demographics suggest full employment may return faster than previously expected. While the Fed says inflationary pressures are transient, a shortage of workers can only be fixed by accelerating wages. That would hardly be viewed as a transient situation.
Yesterday stocks closed mixed after a strong opening. 10-year Treasury yields moved higher on good economic data. Oil prices spiked on improved demand forecasts and a sign that OPEC production increases would be measured, designed to meet increased demand at best. In March our economy created 916,000 new jobs. In April it created just 226,000 …
May 28, 2021 – The last trading day of the month ends with similar questions from when it started. How strong is inflation today and how long will it last? Many commodities have declined substantially during the month but the service side is seeing another mismatch of supply and demand.
Inflation and interest rates remain the name of the game, causing whipsaws in cyclical stocks relative to go-go growth this week. Longer lasting inflation means higher interest rates. This helps industrials, banks, commodities, and some consumer stocks which have pricing power. A reversion back to a life of sub 2.0% inflation would put a cap …
May 26, 2021 – Pandemics and technology accelerate change. Old companies fight to adapt, but bureaucracies, the need to defend the old profitable fortress, and age are not on their side. The current economic surge will extend some of their lives, but many will no longer flourish.
Stocks finished a bit lower in a quiet session yesterday. Treasury yields slipped to the bottom end of the recent range, aiding the tech sector. You have heard me say many times that pandemics accelerate change. They accelerate change more than create it. Video conference has existed for years but took off during the pandemic. …
May 2021 Economic Update – “A Look Ahead”
Interest rates, inflation and corporate earnings are key indicators of the health of the economy and the trajectory of the investment markets. In this video, Co-Chief Investment Officer Jim Vogt discusses the current state of the economy and the outlook for the months ahead.
May 24, 2021 – Last week we were reminded that Bitcoin remains a solution looking for a problem to solve. Without any real purpose, it has long been reliant on creating more buyers than sellers. If there is a message in last week’s action to investors, it is to think for yourself before buying anything and not just listen to the technobabble you hear in the media constantly.
Stocks started to stabilize late last week after several weeks of weakness led by technology stocks. While the Dow and S&P 500 were still within 3% of all-time highs, the tech-heavy NASDAQ was down close to 8% at its low. Newer hyped stocks, including many SPAC names that came public in January and February, fell …
May 21, 2021 – After a 3-week hiatus, buyers came rushing back to the markets. Technology stocks rebounded the most, coinciding with a slight reversal in interest rates. Taper talk is coming, and we examine what that means for markets from here.
After three straight days of losses in the overall market, bargain hunters stepped up to the plate yesterday with technology stocks leading the charge higher. The Nasdaq bounced back 1.8%, pointing towards hope of at least a short-term bottom after another mini-correction. The Dow closed up 0.5% and the Russell 2000 Small Cap Index gained …
May 19, 2021 – As the speculative wave that peaked in the first quarter unwinds, stocks are under pressure. Another factor is that earnings growth rates have probably hit their peak. Slower growth and the unwinding of speculative excesses creates selling pressure. But flat interest rates and increasing profits suggest this wave will not spiral into a meaningful correction for the overall market.
Stocks retreated yesterday. The selling accelerated into the close and appears to be carried forward this morning as futures are down once again. Much of the selling is concentrated in tech stocks and the speculative favorites of just a few months ago, especially SPACs. As noted previously, when stocks fail to go up on good …
May 17, 2021 – Last week proved that it is hard for stock prices to fall sharply while the Fed keeps pumping money into the market. It is also hard to sustain a correction without a sharp increase in interest rates. Thus, the Fed keeps pumping, the government keeps spending, profits keep rising, and, so far, inflation is still in check. Last week’s increase should be transient. But as the excess pool of labor declines, keeping inflation in the 2-3% targeted range will get more difficult.
On Wednesday, after a much higher than expected increase in consumer prices reported for April, stocks fell sharply with the Dow Industrials falling over 700 points. On a percentage basis, small cap and NASDAQ stocks fell even more. Higher inflation, should it persist, would mean higher interest rates and lower P/E ratios for equities. But …
May 14, 2021 – History doesn’t repeat but it often rhymes. We take a look at the recovery from the Great Financial Crisis and compare it to our Covid-19 recovery. Many similarities, many differences. Most importantly, straight up advances from recessionary lows don’t last forever.
Whipsaw action ramped up after April CPI reports showed a much larger than expected increase in prices across the board on Wednesday. Although everyone was expecting one of the stronger yearly inflation reports in decades, not many were expecting month over month trends to rise 90bps, the most since 1981. It is also the first …
May 12, 2021 – Stocks retreated amid profit taking. But with earnings strong and rates contained, there isn’t much long-term concern. This morning’s CPI report will get most of the attention today. An upside surprise to the numbers will accelerate inflation fears.
Stocks, at least as measured by the Dow, suffered their biggest decline in two months. The two worst performers, United Healthcare and Home Depot#, were down after six straight record-setting new highs. I guess you could call that just good old profit taking. The NASDAQ, which has taken the brunt of recent selling pressure, rallied …
May 10, 2021 – Demographics suggest increased inflationary pressure. Quite simply, the number entering the work force grows by a trickle while the baby boomers retiring increases at a greater pace. With growth close to 10% this year and 4% next year, that suggests increasing inflationary pressures.
Stocks continued higher amid great economic and corporate earnings news last week, while interest rates remained within a trading range. If you are an equity investor, it is hard to question the direction of earnings. They are headed higher, a lot higher. With all the stimulus from both the Fed and Congress flowing through the …
May 7, 2021 – Jobs, jobs, jobs. Another monthly update on unemployment today will lead to more discussion amongst bulls and bears. As the economy heats up, investors will place bets on when the Fed will need to pull back on the stimulus front. Higher interest rates lead to more declines in frothy areas.
Today’s most important news will be the monthly nonfarm payrolls report. With nearly half of America getting at least one vaccine shot and many others fully vaccinated, reopening efforts are ramping up. Although we are not going to repeat last June’s 4.8 million jobs added, April should show solid strength, resulting in the neighborhood of …
May 5, 2021 – Stocks sold off yesterday although they finished off their lows. The tech leaders during the pandemic suffered the most despite the fact that interest rates actually fell
This week, according to The Wall Street Journal, 41% of financial assets held by individuals were invested in equities. That is an all-time high. You can attribute it to the rise of small retail investors investing through new platforms like Robin Hood, but an increase of that scope is clearly more broad – based than …
May 3, 2021 – When stocks fail to go up on better than expected news, investors should ask themselves why. Stocks fell last week despite a surge in earnings. Perhaps most of the good news has already been discounted.
Stocks fell on Friday, capping off one of the weakest weeks for equities in a couple of months. This is earnings season. For the past two weeks, earnings reports for more than half the S&P 500 have been released. Results have been excellent. Actually, they have been more than excellent. Companies regularly have beaten expectations. …
April 30, 2021 – Another scoop of fiscal stimulus from President Biden. The Federal Reserve is keeping interest rates lower for longer. A strong quarterly earnings season so far. Price increases are coming due to raw material inflation and supply chain constraints.
Stocks started out positively yesterday, keying off of several very strong earnings reports from the likes of Facebook, Apple, Caterpillar, and Google, to name a few. As the day progressed, however, we saw a “sell the news” sentiment creep into the market. This week also heralded two key events: the end of a two-day FOMC …
April 2021 Economic Update – “Growth vs. Inflation Part 2”
Earnings growth is accelerating, interest rates remain unnaturally low, and there is way too much money seeking a home. But too much money means valuations get stretched and pockets of euphoria erupt. In this video, Tower Bridge Advisors Chief Investment officer Jim Meyer discusses the trajectory of the market, given the unique factors currently impacting …
April 2021 Economic Update – “Growth vs. Inflation Part 2”Read More
February 2021 Economic Update – “2021 – Growth vs. Inflation”
The market is projecting continued growth in corporate profits. Coupled with low interest rates, this will continue to inflate asset values, including stocks, until interest rates rise and inflation increases. In this video, Tower Bridge Advisors Chief Investment officer Jim Meyer discusses the possibility of rising rates and inflation stalling the growth in asset values. …
February 2021 Economic Update – “2021 – Growth vs. Inflation”Read More
February 22, 2021 – The biggest factor this morning is the ongoing rise in 10-year bond yields. Higher yields mean lower P/Es for stocks. They impact growth stocks more than value names. As the economy recovers in a rising rate environment, watch for better relative performance from value sectors and a sharp headwind to excessive speculative activity.
Last week was highlighted by a continued move higher for long-term bond yields, a modest correction among high flying tech stocks, and ongoing volatility in the speculative fringes of the stock market. The short squeeze targets like GameStop continued to move back down in the direction of fair value, while SPACs continued to raise billions …
December 2020 Economic Update – “2021 – Growth vs. Inflation”
Heading into 2021, the big questions to be answered are whether companies can continue to grow revenues and earnings, and if the Fed can keep inflation in check and interest rates low. In this video, Tower Bridge Advisors Chief Investment Officer Jim Meyer discusses the path ahead in 2021 and the impact of growth and …
December 2020 Economic Update – “2021 – Growth vs. Inflation”Read More