Fed Meeting – Driving on a Foggy Night The Federal Reserve lowered its key interest rate by a quarter percentage point yesterday, the third consecutive reduction. This brings the total reduction to 1% since the Fed began cutting rates in September. The rate cut to a target range of 4.25%-4.5% is back to the level …
December 16, 2024 – The FOMC meeting this week will likely dominate markets as earnings season is largely over and a few key economic reports are due. The key will be any suggestions that alter the future path of rate changes. While few expect rate cuts of 25 basis points or more to occur at each meeting going forward, some call for 3 or more in 2025 while some ponder the thought that there might be none if inflation stays near 3% or goes higher. Any change in overall expectations will be market moving.
As we all know, we live in a bifurcated world. Since the election, people have either been celebrating Trump’s victory or mourning Harris’ loss. That translates to the economy. Enthusiasts point to tax cuts, deregulation, DOGE, and overall benefits of disruptive change. Those predicting pending disaster suggest multiple foxes will be let loose within the …
December 12, 2024 – A Fed rate cut is likely in December even though inflation remains persistent, but further cuts are uncertain. Despite positive economic indicators and strong stock market performance, high valuations and potential risks like trade wars and geopolitical issues could lead to a market correction. Investors should proceed with caution in 2025, maintaining a balanced portfolio and realistically assessing potential challenges, as market volatility may increase.
Inflation report Yesterday’s headline CPI inflation report posted a 2.7% rise for November, driven by price increases in goods such as cars and furniture. The report showed inflation remained steady with core CPI (i.e., ex food and energy) at 0.3% month-over-month and 3.3% annualized. Shelter inflation moderated slightly, while increases were seen in food and …
December 9, 2024 – To paraphrase the old saw, history never repeats itself; it just rhymes a lot. Speculation has escalated to the point that it is starting to resemble the meme stocks and SPACs of 2021. Nowhere is this more obvious than in alternative mechanisms to play the surge in bitcoin prices. While one can’t say when speculative bubbles will burst, ultimately, they always explode. 23+ times forward earnings suggests a market priced for perfection. While the rally could extend through year end as investors try to defer realized gains until next year, caution is advised.
Stock prices are setting record highs. Bond yields are starting to recede. Bitcoin is over $100,000. Profits are rising and, hopefully, regulatory costs are set to decline. Is it too good to be true? When something looks too good to be true, don’t you step back and pause? In early 2021, euphoria set in. SPACs …
December 5, 2024 – “Water, water everywhere, and not a drop to drink.” In Samuel Taylor Coleridge’s poem, The Rime of the Ancient Mariner, sailors at sea are surrounded by water but are unable to drink it. This is the irony of being surrounded by something but being unable to benefit fully from it. Similarly, the economy may be chugging along at 2.5-3% GDP growth, and the holiday season seems to have kicked off to a strong start with decent consumer spending trends, but not all companies are benefitting equally. Meanwhile, equity markets continue to hit new highs.
Cyberweek Was Solid During the five-day period from Thanksgiving to Cyber Monday, shopping choices and discounts abounded. Cyber Monday discounts inundated anyone with an email account. According to Mastercard data, total retail sales increased 3.4% compared to the prior year on Black Friday, with in-store sales up only 0.7% but with online sales up nearly …
December 2, 2024 – November was the best month for stocks so far in 2024. At the same time yields on 10-year Treasuries have declined from 4.4% to 4.2%. The message of the market isn’t always right. But it’s a good place to start.
Obviously, the place to start is the consequences of the Presidential election. One can look at the election in two ways. Trump won and Biden/Harris lost. Let me start with the latter. Throughout the campaign the biggest criticism of Joe Biden was that he was getting too old to serve another four years. But much …
November 29, 2024 – With the conclusion of Thanksgiving, investors are now looking towards December holidays and the end of what has been another strong year of market gains. Markets exhibited a risk-off sentiment on Wednesday ahead of the US Thanksgiving holiday, influenced by ongoing tariff discussions and some disappointing updates from major tech companies. Let’s recap this data from this shortened trading week.
The S&P 500 has added 0.6% this week to its already strong 25% YTD gains. President-elect Trump’s recent appointments and strong stance on trade created uncertainty, though some believe it to be a negotiating tactic. Positive factors like a ceasefire between Israel and Hezbollah, supportive systematic fund strategies, and a resilient macro backdrop provided some …
November 25, 2024 – After a brief surge post-Election, markets have generally moved sideways over the past two weeks as they await actions on tariffs, deportations, and forcing a reduction in our collective regulatory burden. The hyperbole of 60% tariffs, deporting 20 million people, and saving $2 trillion is just that, hyperbole. Nonetheless, there likely will be tariffs, the southern border crossings will be reduced, some will be deported, and the regulatory burden will be reduced. Wall Street will judge the economic balance of these activities over the coming weeks and months. The outcome will dictate the market’s direction in 2025.
The market’s message isn’t always correct, but it’s a good place to start. Over 4 sessions after Election Day, the S&P 500 rose by close to 4%. However, by the close last Friday, that gain had moderated to closer to 3%. Another way to look at the market post-election is to note no change after …
November 21, 2024 – The stock market, particularly the S&P 500, is currently experiencing a period of high valuations, prompting concerns about its sustainability. Several metrics point to this overvaluation: the S&P 500 is trading at a high price-to-earnings ratio, nearing its peak levels from recent years; bond yields remain elevated, reducing the attractiveness of stocks relative to safer investments; and indicators like the CAPE ratio and price-to-sales ratio are flashing warning signs reminiscent of the dot-com bubble era.
Markets are expensive Despite these concerns, the market continues to show resilience, with the S&P 500 hovering near record highs. This apparent contradiction can be explained by several factors. First, while valuations are high, they are not entirely unreasonable given the current economic environment. Factors like strong corporate earnings growth, driven by technological advancements and …
November 18, 2024 – The honeymoon is over. Now comes the task of translating campaign promises into reality. To date, we have not seen Trump’s economic nominees but they are less likely to be as controversial as a few announced last week. But the economic future will depend less on Cabinet appointments and more on initial Executive Orders and Congressional actions. Tariffs and less immigration will be headwinds; less regulation and more M&A activity will be offsetting positives. The keys will be the 10-year Treasury yield and steps to keep the deficit within acceptable limits.
The Trump honeymoon last week gave way to a more sobering evaluation of both the current economic environment and what the economic impact of the new Trump administration might look like. While Trump has made a long list of expected cabinet level nominations public, few had direct economic impact. The election seems to make clear …
November 14, 2024 – Top Google searches for gifts for this year’s holiday season have been: turntables (also known as record players), bean bag chairs and ice cream makers. This seems like a throwback to an earlier time. Market bulls have been focused on a combination of seasonality, an election relief rally, stock buybacks, and positive macroeconomic surprises. Bears have been focused on higher mortgage rates, stickier inflation, potential new fiscal and regulatory policies, and stretched valuations. As it has been said though, you cannot drive a car forward very well by looking in the rearview mirror.
Nostalgia may be evident in gift buying this holiday season, though previous market winners from the first half of this year have not been the winners of the second half. A period of digestion and rotation has been taking place since Fed rate cuts and following the election. Investment banks and industrials have performed well …
November 11, 2024 – Markets are celebrating a Trump victory. Voters enthusiastically embraced more economic freedom and less regulation. Tariffs and deportations are headwinds depending on the pace of both. Right now, markets are ignoring the risks and probably will continue to do so through year end. History shows that initial post-election euphoria doesn’t always translate into cloud-free reality. The best tactic for now is to maintain one’s asset allocation keeping an eye on how implementation of Trump’s agenda matches today’s optimism.
Prior to the Presidential election 23 Nobel Laureates for Economics collectively stated that Trump’s economic agenda would be bad for the economy. Obviously, markets since the election have disagreed. Today, I want to divide my note into three segments; what was the message of the election, what has been the message of the market so …
November 6, 2024 – With Donald Trump winning a close election, markets are reacting quickly. Are they overreacting? Are we entering a golden age for equity investors? We offer our comments below. Simplistically, markets like higher earnings and lower cost of capital. Less regulation feeds entrepreneurial juices. The obvious was partially discounted going into election night. Overnight futures suggest a strong follow through. But the devil is always in the details. Some campaign promises might be executed; others might not. Read on.
To start, the message from both financial markets and the public was clear. As we note repeatedly, financial markets have no emotion. They care about earnings, interest rates and the terminal value of a stream of future cash flows. They don’t care about all the emotional stuff we have been dealing with over the past …
November 4, 2024 – The election is tomorrow. By the end of the day today, probably half or more of voters will have already cast their ballots. But the real determinant of markets over the next year will be actions taken by the Federal Reserve. They may be the headwinds to inflationary pressures created, should the next President pursue only a fraction of his or her campaign promises. Growth may be forthcoming but so might higher long-term interest rates.
We’re finally at the moment of truth, the Presidential election. For those of us in Pennsylvania it will also mark the end of the endless barrage of distorted ads that by now have no chance of changing anyone’s mind. By Friday evening over 71 million Americans had already voted. By the end of today, half …
October 31, 2024 – During this season of Halloween, it seems appropriate that we have been experiencing a Jekyll and Hyde economy and stock market this year. The consumer has been resilient while the industrial economy has been relatively weak. The Federal Reserve began lowering interest rates in September, though mortgage rates and home prices have been moving higher. We had a 10% stock market correction scare in October, but third quarter market returns were generally positive. Bumps in the night are normal in markets, and economic growth scares are typical. So far earnings have been mixed, but markets have been trending higher going into the election.
The Strange Case of Jekyll and Hyde Most are familiar with the novel by the Scottish writer Robert Louis Stevenson, “The Strange Case of Dr. Jekyll and Mr. Hyde.” Dr. Jekyll and Mr. Hyde are two alter egos of the same character, exhibiting wildly contradictory behavior. It seems like we have been experiencing a Jekyll …
October 24, 2024 – While the “Magnificent 7” tech companies are expected to drive significant earnings growth in the S&P 500, some lower-than-expected earnings surprises and downward revisions in certain sectors have led to a modest projected growth of 3.4% for Q3 2024. Despite this, positive long-term earnings forecasts and current market highs suggest investor confidence. Yet, concerns remain about the potential for low future returns, especially considering rising interest rates and the ballooning national debt. Ultimately, navigating this market environment requires prudent investment strategies that acknowledge these risks and the potential for a “Minsky moment” triggered by a loss of investor confidence in U.S. debt.
Earnings season prelude The “Magnificent 7” – a group of dominant tech companies – have been major drivers of S&P 500 earnings growth in recent times. Once again, they are predicted to deliver the lion’s share of earnings with an average of 18.1% earnings growth, but the remaining companies in the index are only expected …
October 21, 2024 – China was the world’s primary growth engine from the late 1970s until the start of this decade. No more. A combination of poor policy, overbuilding, too much debt, and leadership whose goals are more political than economic has resulted in lower growth rates and declining population. While short-term efforts to reverse trends might help in the short run, they don’t solve core issues. As China’s economic growth rate falls, the headwind to world GDP growth will get stronger.
The fourth quarter is historically the strongest for equities and this year’s Q4 is starting off in sympathy to historic trends. Banks got earnings season off to a strong start. While most companies still must report third quarter results, the trend suggests a very solid earnings season. The biggest question is whether AI momentum can …
October 17, 2024 – A Dutch semiconductor equipment company spooked investors this week after it accidentally published a disappointing financial outlook a day earlier than scheduled. Meanwhile, several financial firms reported better than expected earnings this past week, noting steady consumer spending and a pickup in dealmaking activity. So far in October, the path of least resistance for markets has been higher.
Technology Hits Turbulence Shares of ASML#, which manufactures equipment used to make advanced semiconductors, including the processors used to power artificial intelligence, sank 6% Wednesday. The stock had plunged 16% a day earlier, giving up more than $52 billion in market value. That was after ASML’s third-quarter results mysteriously appeared online. The company later confirmed …
October 14, 2024 – The election is three weeks away. The market’s message is that, economically, it is a non-event. Most of the promises of candidates will probably die somewhere in Congress. Meanwhile, AI keeps emerging at an accelerating pace. That will prove more dominant over the next four years, economically, than any fiscal or monetary developments in Washington.
Today, I want to discuss three topics, the Election, the impact of two major hurricanes, and the productivity potential of AI. Then, I will attempt to put a bow around the package tying all three to today’s financial markets. Let’s start with the election. From an economic viewpoint (the only way I look at elections …
October 10, 2024 – The U.S. job market showed monstrous growth in September, exceeding expectations and boosting worker wages despite some sectors lagging and uncertainty surrounding the upcoming election. So far in October, rising bond yields have largely been ignored by investors. And, companies will soon release their third-quarter results, so we will learn if we get tricks or treats.
Predictions that the Fed will cut 50 bps at its next meeting have vanished The U.S. job market has risen from the grave with monstrous growth—some 254,000 jobs emerged from the shadows in September, far exceeding the predictions of economists. Restaurants, retail stores, and construction sites are teeming with new hires, while wages have risen, …
October 7, 2024 – For the past several months, rotation in the stock market has been driven but both momentum and changes in the yield on 10-year Treasuries. Declining yields have created increased interest in stocks with higher dividend yields such as utilities and consumer staples. But that decline has reversed in recent days questioning any ongoing strength in these safe names. Meanwhile, investors have sifted through the long list of names deemed AI winners to narrow the field of future expected winners. As investors look toward 2025 with some optimism, leadership may once again rotate toward a more focused list of names.
Stocks have acted in more volatile fashion in recent weeks reacting to the ying and yang of economic data that indicates a slower economy one month and a robust economy the next. That was punctuated Friday with a stronger than expected employment report following weaker than expected numbers for August. The report set off a …
October 3, 2024 – Third quarter stock market performance was led by utilities, industrials, healthcare and consumer stocks and not the Magnificent 7 technology names, as investors took a more defensive posture. While the focus lately has been on the Fed’s actions on interest rates, a number of external shocks have arisen recently. These include a major East Coast/Gulf Coast dockworkers strike, rising tensions in the Middle East, and a devastating hurricane in the U.S. All have supply chain impacts that could negatively impact economic growth and inflation near term, just as the Fed has been finding success taming inflation.
“Known unknowns” are risks that we are aware of that are expected to occur at some point, such as a hurricane during hurricane season. Hurricane Helene, however, surprised most due to its severity and ultimate destructive path. “Unknown unknowns” are events that are both unforeseen and unexpected. Energy shocks often fall into this category. For …
September 30, 2024 – While August and September are normally rocky months for equity investors, this year has been different despite a rise in volatility. This week’s economic data ending with Friday’s employment report, will be important indications of future economic progress. We enter earnings season in about two weeks. Unless this week’s data shows a marked change in economic trends, individual stock performance in weeks ahead will key off earnings results more than macro data.
Are we moving toward recession or is growth going to stay reasonably robust? That isn’t a question that will be answered this week, but economic data, starting with manufacturing surveys and ending with the September employment report, will likely be revealing. Employment has moderated in recent months but remains consistent with a soft landing…as long …
September 26, 2024 – The Federal Reserve’s significant rate cut signals a shift to an easing cycle, aimed at supporting the labor market and economic growth, but has also sparked concerns about potential inflation resurgence in the bond market. While historically, rate cuts without a recession have been positive for stocks, the Fed’s move, combined with potential fiscal expansion, may complicate the path to reaching the 2% inflation target. The current situation highlights the Fed’s challenge in balancing economic growth with managing inflation risks.
Key Takeaways from the Fed’s Supersized Rate Cut • A Critical Turning Point: The Fed’s larger-than-usual 0.5% rate cut signals a significant shift in monetary policy, transitioning from aggressive tightening to an easing cycle. This proactive move aims to support the labor market and ensure continued economic expansion, increasing the likelihood of a “soft landing.” …
September 23, 2024 – The Fed’s decision to lower rates by 50-basis points was a proper first step. But it was only a first step. For investors, the key is when and where will the cuts stop. That will depend on the future course of the economy. A soft landing will see cuts end sooner with a terminal rate of 3% or higher. A recession will require a steeper series of cuts and the final rate will be lower. Most will vote for the former but the outcome today is uncertain. The market’s euphoria after the first cut won’t last long if unsupported by favorable economic data.
The Fed gave markets what they wanted and traders celebrated. Whether it is behind the curve or not, a 50-basis point cut in the Fed Funds rate was a right initial step in a series of rate cuts to come. The key question was never whether 50 or 25 basis points was the right way …
August 12, 2024 – Last week’s volatility exposes the heightened level of uncertainty in today’s financial markets. This week, the largest retailers report earnings and may offer some clarity into consumer spending trends. But uncertainty is likely to remain elevated until we get closer to the November elections.
Roughly 75% of the time, stocks go up. They go up because earnings rise. They don’t go up in a straight line for obvious reasons. Interest rates fluctuate. Central bank actions are impactful. With that said there are periodic bear markets. While occasionally they represent a correction of a severely overvalued market, most bear markets …
December 8, 2023 – Markets rallied yesterday but remained in tepid anticipation of today’s employment report and next week’s CPI report. The November employment report came in close to expectations with gains of 199,000. Not sure from the early read how much those numbers were enhanced by the end of the auto and Hollywood strikes. Markets reacted negatively to the report as month-over-month wages increased slightly more than anticipated. The unemployment rate fell to 3.7% as the labor participation rate rose to a pre-pandemic high.
Stocks rallied yesterday while bonds stayed mostly level in front of next week’s Federal Reserve meeting. For a change, the leaders were the big tech stocks, noticeable laggards over the last four weeks during a period where investors moved toward equities perceived as being cheaper than the high multiple Magnificent Seven. The pop in the …
September 18, 2023 – Markets are directionless, torn between better economic activity and an increase in storm clouds from labor unrest to China. What is crucial is the future trend for interest rates. Investors will parse this week’s FOMC meeting for clues, but probably won’t get a much clearer picture for their efforts.
Stocks have been trading sideways in a directionless pattern for the past month. On the plus side, earnings have exceeded forecasts and the economy continues to grow at a rate faster than economists had predicted. But that has been countered by a series of concerns: 1. Interest rates, particularly at the long end of the …
June 12, 2023- : The S&P 500 traded into Bull market territory last week on the back of a broad market rally. The broadening of the rally is key to continued optimism in the market. However, the possibility of a recession still looms, despite the rally.
Are we in a new Bull market? Last week the S&P 500 rallied to its highest level this year which put the index 20% above its October lows. On a year-to-date basis the index is up 12% led by mega-cap technology stocks. However, as we mentioned many times before, not all stocks and sectors have …
May 12, 2023 – While mega caps keep gaining steam, the average stock is now down for the year. Eight of the last nine trading sessions have been negative for the Dow Jones Industrial Average. The Fed may be done raising rates, but an all-clear signal is far off in the distance. Transitions are hard!
April’s consumer inflation report was well received, with a continuation of a gradual slowing for inflation. Ditto for the Producer Price Index yesterday morning. Our infamous “Fed whisperer”, Nick Timiraos, helped fuel a minor rally in growth stocks when his latest Wall Street Journal missive noted “Federal Reserve officials were already leaning toward taking a …
April 26, 2023 – Markets are being buffeted by crosscurrents. The banking crisis has come back into focus amid turmoil at First Republic. Earnings reports move individual stocks both ways. Bond market strength portends a weakening economy and slower inflation. Yet pockets of economic strength endure, mostly in the travel and leisure sectors. The net for equity investors is a standoff, one likely to endure for some time amid persistent rotation of leadership.
It was a wild day yesterday with several strong moves relative to earnings, a wild ride for First Republic Bank, the regional bank most people see as the stress point within the banking system, and a sharp rally in bonds. The major averages were all lower. After the close, solid earnings from Microsoft# reduced some …
October 26, 2022- Stocks have now risen sharply for three straight sessions as both the value of the dollar and the yield on 10-year Treasuries retreated. But disappointing earnings last night from a trio of tech names may spoil the party this morning. Or at least give it some reason to pause. The poor numbers from tech land remind us to look forward, not back. The great opportunities that technology created over the last quarter century are now maturing. The good news is that new opportunities will appear. They always do in a capitalistic entrepreneurial society.
Stocks rose sharply for the third straight session. It’s earnings season. Through yesterday, the results were basically in line with lowered expectations, but perhaps the biggest driver of higher stock prices was the reversals over the past several days in the value of the dollar and the yield on 10-year Treasuries. Within a bear market …
October 12, 2022- As we enter earnings season, attention will shift from interest rate fears to corporate performance. Pepsi kicked it off this morning with good results, hopefully an encouraging sign. As always, the story for the season will revolve around expectations versus reality. In July, reality beat expectations sparking the best rally of the year. The key will be the relative performance of the large tech names, notable laggards coming into earning season.
Stocks ended mixed yesterday in a very volatile session where the Dow Industrial Average moved back and forth by more than 1000 points. News was rather sparse. A brief afternoon plunge occurred after the Bank of England signaled it would halt its planned intervention to support the pound Friday as originally planned. Stock, bond, and …
October 5, 2022 – Two huge up days in a row put bulls back in charge. Is this the market bottom? Only time will tell. It will largely depend on the severity of the pending economic downturn. But retreating interest rates, and weaking labor market statistics suggest the end to the Fed’s cycle of higher interest rates is nearing an end. That is at least one key ingredient to the end of a market downturn.
For those of you who have read my letters over the years, you should know about my 2-day rule. It states that two consecutive days of outsized moves in the opposite direction of recent market trends marks a reversal. Certainly, the gains Monday and yesterday qualify as strong up sessions in sharp contrast to the …
August 26, 2022 – Markets continued to consolidate the ~20% spike off June’s low with minor rebounds the past few days. In anticipation of Chairman Powell’s long-awaited speech at Jackson Hole today, stocks are priced for a somewhat hawkish update. Anything that deviates from that position could release energy in either direction. Other news items require some attention as well that could affect GDP going forward.
Stocks staged a late day rally to help bring all 11 S&P sectors to a positive close yesterday. Gains were led by Basic Materials, Technology, and Communication stocks. The risk-on tone had defensive sectors lag the overall market with Utilities, Consumer Staples and Health Care stocks fractionally higher. Rallies continue to follow the Treasury market. …
June 13, 2022 – Friday’s report on Consumer Prices told us all that the fight against inflation will be harder than previously anticipated. This week, the Fed will increase interest rates again. It may suggest the ultimate Fed Funds rate this cycle will need to be higher than previously thought. None of this is good news for equity investors.
Friday’s CPI report didn’t make investors happy. Led by sharply higher energy expenses, and the fastest growing shelter costs in decades, the message loud and clear was that inflation shows no signs yet of abating. Recognizing that government steps to curb inflation only began in March, the numbers we are seeing now weren’t impacted one …
May 25, 2022 – While the Dow tries to find its footing, the NASDAQ continues in steep decline as one former darling after another faces reality. It’s an ugly picture and it isn’t over for the speculative end of the market. for those looking for safer havens, more dependent on predictable cash flow growth, the picture is far better. The contrast between the two worlds was most evident yesterday.
Stocks fell once again although a sharp afternoon rally reduced the damage. Still, the NASDAQ fell another 2.4% after a prominent social media company lowered earnings guidance just a month after it previously offered a somber outlook. As a group, social media and related companies depend on advertising for revenue. With the economy slowing and …
May 2, 2022- When leadership gets taken out to the woodshed, the whole market dies. That is what happened last week. While some escaped (e.g., Microsoft) the loud and clear message is that the big boys of the S&P 500 are now at or near economic maturity. That isn’t a message a market already worried about interest rates and recession wanted to hear.
Stocks sank on Friday to close out one of the most miserable months for equities in many years. The NASDAQ took it on the chin the worst after Amazon# reported a weaker than expected outlook for its retail business when it reported results Thursday night. On Friday, Amazon# suffered its worst percentage loss since the …
March 25, 2022 – Investors continue to grapple with inflation, war news, Fed tightening and valuations. Historians will point to stocks not topping until earnings peak, inversion occurs and/or better alternatives. We got some answers over the past few weeks but cloudiness prevails, for now.
A few weeks ago, there were almost no positives to think of. Most investment advisors were bearish. Cash was sitting on the sidelines earning nothing. Short sellers were pressed. Russian invasion continued to look worse by the hour. Oil, wheat, natural gas and many other commodities spiked higher even after doubling since Covid. The most …
March 21, 2022- The Fed did what it said it would do, economic growth remains intact, and the war isn’t getting worse by leaps and bounds. That set the table for a strong rally in stocks. Is the bottom in? Or is this just a bounce? The answer may be a little yes and a little no. For some stocks, the bounce might be over, but if the economy stays solid, there remain plenty of opportunities.
Stocks rose sharply all week as the NASDAQ rebounded out of bear market territory and both the Dow and S&P 500 cut their 2022 losses roughly in half. Oil prices remained volatile closing at over $100 per barrel. Pain at the pump continues but it isn’t getting worse, at least for now. Interest rates rose …
March 7, 2022 – While the war outcome continues down a path leading to a Russian occupation of Ukraine, the economic costs are becoming both starker and more apparent. Gasoline prices are rising close to $0.50 per week. If anything, the pace is accelerating. Wheat, aluminum, copper and palladium are spiking as well. These root commodity price increases will flow into a massive array of products. Inflation is quickly becoming more supply constrained than demand driven. The Fed’s weaponry can’t increase supply.
Stocks fell last week for the fourth week in a row, a combination of inflation fears and the war in Ukraine. Bond yields fell amid a flight to safety. The news from Ukraine is discouraging, to say the least, but it isn’t unexpected. Russia has overwhelming military advantages and continues to make progress in its …
January 10, 2022 – If there was a message last week, it was that speculative fever is dissipating as the Fed winds down its pace of bond purchases. No one knows when the purging of speculation will end but it probably will be with a thud, not a whimper. Market rotation to financials, industrials and energy names suggests the economy continues to thrive despite Omicron. The rotation can go a bit farther. The high growth sector got very overpriced, outpacing cyclical and value stocks for years, and it could take several more months for the rotation to run its course, allowing for some intermittent bounces and reversals. The overall market is down only modestly as the speculative fringes blow apart.
It was a tough week for stocks particularly on the NASDAQ. The speculative end of the market took the biggest hit as bond yields rose in line with continued economic growth. I noted last week the relevance of the January barometer. While not always valid, there is a trend that says, “as goes January, so …
October 11, 2021 – Markets remain volatile as growth slows, interest rates rise, and Washington politics remain a mess. Until supply chain problems are resolved the picture is unlikely to change. Demand is strong but much of it is unfilled. Perhaps it is time for Washington to take notice.
Stocks gave up some ground on Friday but still finished the week with decent gains. Trading remained volatile. Leadership rotated between growth and value stocks several times depending on the economic news of the day and trends in interest rates. The week ended with 10-year Treasury yields crossing the 1.60% barrier for the first time …
October 4, 2021 – A tough September is not a harbinger of what’s to come. The Delta variant is fading, and interest rates are not likely to rise as fast as they did in September. Inflation concerns remain. However, that should mute future upside. Higher earnings, on the other hand, will mute the downside.
Stocks rallied at the end of a dismal September. While growth in September deteriorated a bit thanks to the persistence of the Delta variant of Covid-19, stocks fell due to a combination of issues, a slowdown in growth being just one. Interest rates rose, the Fed hinted at tapering bond purchases before year end, and …
October 1, 2021 – Concerns, they are aplenty. Markets ended September on a sour note, as major averages tested last week’s spike lows. The key to the next 5% move revolves around equities holding near current support levels. Near-term headwinds are compounding, pointing to more downside risk. Rest assured, this bull market is not over yet.
Another quarter is in the books as we enter October which historically has been a favorable seasonal time to be invested. This is especially true in years where stock market returns are already generous. History says we should expect a solid finish for 2021. Even after a nearly 5% drop across the board in September, …