CPI updates on Wednesday set multi-decade highs on the inflation front, while PPI reports yesterday were quite similar. Headline consumer inflation rose 0.5% (6% annualized) while the more important core metric was +0.6% (7.2% annualized). Price increases were broader based, but with massive increases on a yearly basis for many of the same areas: Gasoline …
January 12, 2022 – The battle to beat inflation hasn’t begun yet. The Fed won’t start until March when it stops buying bonds and starts to raise rates, but the inflationary forces appear to be growing. The December CPI being reported today will offer answers.
On Monday, stocks fell sharply in the morning, continuing the slide that began on New Year’s Eve, but then they reversed. Equities simply fell too far, too fast. The 10-year Treasury yield temporarily exceeded 1.8%, but then started to recede. By the end of the session, most losses had been recovered. A moderate rally continued …
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 …
January 7, 2022 – Increased volatility was expected for 2022, and markets are already giving investors something to think about. Fed minutes showed an increased desire to qualm inflation while pointing to less emphasis on job gains going forward. Quantitative tightening may be here sooner than many hoped.
Sellers continued to emerge in the growth vertical during Wednesday’s session, immediately following a release of the Fed’s December minutes. Every Fed meeting contains a lot of discussion among Board members, voting or not. These notes are released to the public three weeks after it happens, typically making these events “old news”. This time around, …
January 5, 2022 – Markets have started the year rotating out of highflyers into industrials, banks, oil companies and other cyclicals. It is an acceleration that was already in place late last year. Until the purge of the frothiest names is complete, this rotation is likely to continue.
It has been an interesting start to the New Year. Stocks rose out of the gate yesterday but quickly there was separation between winners and losers. The winners, at least for two trading sessions, have been what we used to call “Smokestack America”. Autos, rails, banks, oils, brokers, consumer staples and even some retailers were …
January 3, 2022 – 2022 will be a battleground with the tailwind of rising earnings confronting the threat of higher interest rates. It will also be a big election year, one with significant pending Supreme Court decisions, and perhaps most important, a new playbook for the Federal Reserve. January normally offers clues as to what lies ahead.
Stocks sold off late Friday, but it hardly made a dent on what turned out to be a very good year, probably quite a bit better than most expected a year ago. Earnings recovered faster than expected, the Fed kept pumping money into the markets at a torrid pace all year long, and yet interest …
December 31, 2021 – The final trading day of 2021 is upon us, and what a wild year it has been. While the major averages showed substantial gains, yet again, underneath the surface paints a much more confusing picture. While earnings will continue to impress into 2022, interest rates, Fed tightening, and inflation point towards more uncertainty as the economic cycle transitions to a new normal.
Despite a global pandemic, supply chain issues, low vaccination rates in emerging markets, and a slew of central banks reducing liquidity to fight inflation, stocks performed admirably. With one day left, the S&P and Nasdaq look to post a near 28% return, while the Dow Jones lagged with a still generous 19% advance. Not only …
December 29, 2021 – 2022 will be a battle of higher earnings versus higher inflation. We expect both to exceed expectations. 5% real growth without any population growth means more real consumption per capita. The Fed is slowly withdrawing stimulus, but the impact will still be felt through next year. Either the Fed is right, and inflation will fade quickly in 2022, or it isn’t taking the inflationary pressures in place seriously. As 2022 progresses, the answer will be resolved. The markets’ outcomes will depend on the answer.
Stocks drifted sideways yesterday in light holiday trading. More of the same can be expected for the rest of this week unless we receive some unexpected news. Over the past week or so, stocks have moved higher, recovering most of their early December losses. While Omicron will cause some near-term economic disruption, it looks like …
December 27, 2021 – Looking forward, it is a battle of growing earnings against persistent inflation. Since the stock market, like most economic activity, works in a nominal world, some inflation is good. But inflation has exceeded expectations for so many months that the market risk is that persistent inflation ultimately requires a stronger Federal Reserve response.
I hope everyone enjoyed a wonderful holiday weekend in good health. On Wall Street, the traditional Santa Claus rally is in place as averages again flirt with record highs. For now, the savage correction at the speculative end of the market seems to be winding down, while investors continue to rotate toward cyclical stocks, betting …
December 22, 2021 – As Wall Street fully digests the likely economic impact of Omicron, it is likely to quickly revert its attention back to growth, inflation, and interest rates. As we look to 2022, growth will wane a bit, and hopefully so will inflation. Where the 10-year Treasury ends up a year from now will likely be the greatest determinant of stock market performance.
Stocks soared yesterday, erasing much of the selling frenzy of the previous three sessions related to the rapid expansion of the Omicron variant. While the speed of spread has been a shock, most people who have gotten sick, especially those fully vaccinated, have had only mild symptoms. I don’t want to trivialize a disease, but …
December 20, 2021 – Omicron is spreading faster than a California wildfire. Complacency turns to fear once again. Omicron doesn’t appear to be as deadly as prior variants and we have an arsenal of protection to help fight the battle today. But until some semblance of normality is visible once again, financial markets are going to be hostage to the Omicron news. The spike in the disease is going to be almost vertical in the days ahead, yet the spike is also likely to be brief. Thirty days from now, we should be past the peak.
Stocks fell last week and the losses are likely to accelerate when the market opens this morning. The Omicron variant of Covid-19 is spreading rapidly, forcing changes in daily behavior we haven’t seen since the onset of Covid early in 2020. It appears Omicron is the most contagious variant to date. A few medical professionals …
December 17, 2021 – Another Fed meeting resulted in an initial positive market response, especially in cyclical assets where valuations are attractive. Chairman Powell finally gave everyone what they wanted, inflation discipline, or at least the prospect of it. Still, this does not mean everyone wins going forward.
I can almost copy and paste what I wrote the last time the Federal Reserve met. They have been consistent in their messaging and are proving to not be a negative surprise for markets. There exists a delicate balance between being too hawkish (raising rates too much and pulling liquidity) or too dovish (keeping stimulus …
December 15, 2021 – Today concludes a two-day FOMC meeting. How do you show measured behavior and market control while inflation is running close to 7% with few signs of fading? That is the task today of Fed Chairman Jerome Powell. It is always hard to predict how markets will react to Fed meeting news, but they sure weren’t in a good mood yesterday.
Stocks took a beating yesterday as investors await the end of the two-day FOMC meeting this afternoon. While we all know the basics; no increase in interest rates and an acceleration in the pace of bond purchases, all ears will focus on Fed Chairman Jerome Powell’s comments after the meeting. The Fed has dropped the …
December 13, 2021 – Markets are rotating as the Fed starts to taper its bond purchases. That means less fuel to ignite the speculative end of the market. Such a rotation was long overdue and healthy. The economy will grow close to 10% in Q4, and bond yields remain well anchored, a healthy combination for equity investors. But in 2022, growth will slow and Washington is likely to add a lot less fuel to push asset prices higher at the pace of the past couple of years. While the easy money has been made, stocks still look more attractive than bonds.
Stocks finished higher Friday, bringing an end to one of the strongest weeks in months. NASDAQ and speculative issues that had been lagging took part in the rally. Interest rates remained anchored. The big news item on Friday was a sharper than expected rise in the CPI. While the number was a bit higher than …
December 10, 2021- While the Dow Jones and S&P showed little movement, high beta and small cap cyclicals were sold yet again. Our new trading range creates a wide band to operate in. Breaking out is dependent on further Omicron news and more data on the inflation front which is driving Fed Fund futures to extreme levels today. The CPI report coming out this morning could be market moving.
Volatility finally took a slight breather the past few days with somewhat muted stock and bond movement after violent swings back and forth since Omicron was discovered a few weeks ago. Following a 5% – 10% correction in most major averages, we are already within shooting distance of new highs. However, we are still 10%+ …
December 8, 2021 – Stocks continued to soar as Omicron and Fed fears eased. With tax selling season winding down, the stage is set for a further rally into year end. Next year will bring decelerating growth and decelerating inflation. Markets don’t like transitions. That helps to explain recent volatility.
Stocks soared for the second straight day as fears related to Omicron and future Fed actions dissipated. Bond yields rose but stayed within their narrow trading range for all of 2021. If the economy is moving forward and interest rates remain contained, it is a good environment for stocks. As I did Monday, let me …
December 6, 2021 – Markets are being impacted by Omicron, Fed Speak, and the purging of excesses at the speculative fringes of the market. The first two have been discounted; the speculative correction may just be beginning. Growth at any price works until euphoria ends. Valuation matters.
Stocks got clobbered again on Friday, although the Dow Industrials managed to cut their losses with a late afternoon rally. There are three main causes for the market’s current stress; the emergence of the Omicron variant of Covid-19, concerns that the Federal Reserve will increase interest rates faster and more frequently than previously thought, and …
December 3, 2021- Market action got even wilder this week. Wednesday’s 1,000-point intraday negative reversal in the Dow Jones was nearly erased yesterday. Omicron is sure to create more near-term fear, but is also coming at a time where many questions are left unanswered. Even with underlying weakness in small caps, major averages are still within spitting distance of new highs. Washed out conditions create select opportunities.
Although news events over the past few days weren’t shocking by any stretch, reactions indicate the fragility and volatility of a fully valued market with more questions than answers in the near term. Wednesday morning’s bounce higher erased half of the early week losses, but proved short-lived due to a few intraday news updates. South …
December 1, 2021 – Congressional testimony from Jay Powell riled markets yesterday. He will have another chance to tone down the response as he speaks to the House today. At any rate, major corrections rarely happen when earnings are rising and rates are falling. Stocks may have been overpriced going into this decline, but the bulk of the correction may be over.
Stocks fell sharply once again. This time, however, the villain wasn’t Omicron or anything to do with Covid-19. This time it was Congressional testimony before the Senate by Federal Reserve Chairman Jerome Powell, warning of persistent inflation and possible slower growth. In the 1970’s there was a word to describe persistent inflation and no real …
November 29, 2021 – Omicron is the new word of the day, a name given to the latest Covid-19 variant. We know it is spreading rapidly, but what we don’t know is still far greater than what we do know. Wall Street hates uncertainty. So, on Friday it was sell first, learn the facts later. However, any economic impact is likely to be temporary. This isn’t the winter of 2020 all over again. Rather, it is a pandemic winding its course. Long term economic values will not be impacted significantly by the emergence of Omicron. With that said, markets should remain unsettled until speculation is replaced by facts in the days and weeks ahead.
Stocks cratered on Friday as fear spread wildly that a new Covid-19 variant, subsequently named Omicron, might supersede Delta and extend the pandemic well beyond current expectations. While we know the variant exists, concentrated for now in southern Africa, it has begun to show up worldwide. Just as the original virus seemed to start slowly …
November 26, 2021 – Markets are selling off hard this morning on reports of a potentially disastrous new Covid variant out of South Africa. Sell first, ask questions later was the overnight mantra as travel, hotel and cruise stocks are down ~10%. Interest rates are collapsing, yet again. This follows a recent pattern where earnings reports showed no wiggle room for investors. Stocks are being taken to the woodshed on any potentially negative news updates. This happens in a fully, or overvalued, market, but also brings opportunities.
Futures are certainly ugly so far. Another new Covid variant out of South Africa raises more questions than answers. Fears today are centered upon transmissibility, hospitalization potential and whether or not vaccines will work on this strain. Mutations have been occurring since the onset of Covid-19. More mutations create more issues with vaccine viability. Today, …
November 24, 2021 – This is definitely a bifurcated market. Low P/E winners populate the banking and energy arenas. Simultaneously, the great stories of the pandemic, like Zoom and Peloton, continue to fade rapidly. That’s what happens when euphoria fades and reality returns.
As the Dow continues to rise, the NASDAQ continues to fall. Interest rates are inching up, but it is hard to say that inflationary worries are increasing. The 10-year Treasury yield is only up by about 10 basis points from its recent mid-point and still below Spring highs. Economically, there has been a bit of …
November 19, 2021 – Mega cap technology stocks continue to carry the market higher while the average stock is starting to show signs of profit-taking. This week’s semiconductor and retail updates were encouraging to say the least. As we enter the Holiday season, is it fair to ask how much upside is left for 2022?
Late last night the bipartisan CBO released their Build Back Better projections. They concluded this plan will add $367B to the deficit over 10 years excluding $207B in revenue that could result from spending $80B on tax enforcement at the IRS. Adding those gains brings the deficit tally to $160B. Even though reconciliation rules require …
November 15, 2021 – Last week’s blowups at Beyond Meat and Peloton remind us that a hot product doesn’t make a great company in the long run. Following the investing crowd works for a while, but in the long run, reality matters.
Stocks exhibited solid gains on Friday, continuing their rally in reaction to solid third quarter earnings and stable interest rates. But it wasn’t always sunshine for every company. Two companies that stumbled were Beyond Meat and Peloton. Some years ago, I was in conversation with a marriage counselor. She noted that in difficult divorce situations …
November 12, 2021 – Another inflation update is front and center in determining market action after Wednesday’s CPI report. Growth stocks were taken to the woodshed, while interest rates spiked back to recent yearly highs on the short end of the yield curve. Euphoria still exists though, as Rivian Automotive went public with a market capitalization higher than Ford and GM. Thursday offered a reprieve for growth investors as stocks regained their footing.
As we have been noting for several months now, volatility is back. This usually occurs as we transition from an “everyone wins” early-stage cycle to one led by quality growth stocks. On top of this, inflation is running rampant and adding more questions for investors. Long -duration assets do not enjoy rising rates. By long …
November 10, 2021 – Stocks ended an 8-day winning streak as inflation news reinforced worries.
Stocks fell yesterday, ending an 8-day winning streak for the S&P 500, one that ultimately took virtually all leading averages to all-time highs. Better than expected third quarter earnings and steady interest rates were the perfect setting for higher asset prices. Strong demand and supply chain snarls have also caused both shortages and inflation. October …
November 8, 2021 – A strong report may have overshadowed a stagnant labor participation rate. The lack of returning workers suggests the labor market will be tighter for longer. Wage inflation is likely to stay elevated going forward. The offset will be higher productivity.
Stocks set new record highs on Friday after a strong October employment report, with over 600,000 net new private sector jobs created. The unemployment rate fell to 4.6%, a full half percentage point drop since August. While more people returned to the work force, the work force itself remains significantly smaller than it was pre-pandemic. …
November 5, 2021 – Another well telegraphed Federal Reserve meeting came and went without any major surprises. Markets responded with another breakout to new all-time highs in the S&P 500, Dow Jones, Nasdaq and even the Russell 2000 (small cap index). Earnings continue to add fuel to the fire with beats consistent with prior quarters even with supply chain issues. Today’s payroll report could determine how the week closes.
Tapering has officially begun. Chairman Powell and his team’s announcement came with zero surprises; a slowing of bond purchases by $15B per month ($10B in Treasuries, $5B in mortgage-back securities) with an expected end date in June of 2022. “Data dependent” is back as tapering could be altered, higher or lower, if economic results and …
November 3, 2021 – The FOMC meeting today will set the stage for tapering, but the path for future rate increases won’t be determined for several months. Meanwhile, the economy recovers from the Delta variant and earnings continue to offer a pleasant surprise. Politically, Democrats took a thumping last night in key governor races and have to rethink their strategy in front of mid-term elections.
Stocks rose once again yesterday as the FOMC began its two-day meeting. The flow of earnings numbers slowed but the results were the same, better than expected. 10-year Treasury rates remained around 1.60% as the curve steepened slightly, a sign of optimism about the future of economic growth. This will be a big week for …
November 1, 2021 – Politically, the noise and promises continue, but little gets accomplished. Against that backdrop, the economy moves forward. A recent slowdown caused by supply snarls and the Delta variant may be passing. Markets sense that as risk assets start to rally once again.
Stocks continued their upward march on Friday despite a somewhat disappointing GDP report for the third quarter. Analysts were willing to shake off that news, betting that the weak Q3 numbers related to Covid-19 and supply chain problems may be fading. Interest rates remained well contained, although a flattening yield curve caused a bit of …
October 29, 2021 – More earnings reports have arrived as we close out the busiest week for large-cap management updates on business conditions, last quarter’s earnings and forward outlooks. Throw in a collapsing yield curve, a Q3 GDP report, and an ever-changing reconciliation bill and we have a messy omelet chock full of data.
First, Wednesday’s market action needs to be highlighted. The past several weeks produced broad-based rallies with wide participation. New highs were happening across the spectrum, led by banks, insurance companies, energy, software and reopening stocks. That was completely reversed on Wednesday as the equal weight S&P 500 Index was down ~1.3% while the market cap …
October 27, 2021 – It is remarkable, and a testament to good management, how well Corporate America did in the third quarter, despite the spike in Covid-19 and huge supply chain issues. Most encouragingly, demand remained strong. Without a further surge in inflation expectations, investors have pushed equity values to new highs. At the moment headwinds are few. The biggest current uncertainty is what economic and tax package Democrats can cobble together, if any.
Stocks rose once again on the heels of good economic and earnings news. Bond prices held relatively steady. After the bell, tech giants Alphabet# and Microsoft# reported results that generally beat expectations, but the stock reactions were relatively muted. Today, the flow of earnings continues as we hear from the likes of Coca Cola#, McDonalds#, …
October 25, 2021 – Earnings season is off to a good start. Optimism for future growth is rising once again. But so are interest rates. How earnings and rates intersect over the next year will determine the future for stock prices. The fact that Powell and Yellen are starting to acknowledge the persistence of some inflationary forces signals that the Fed is unlikely to fall far behind the curve. That should give investors some comfort.
Stocks finished mixed Friday with the Dow up slightly while the NASDAQ suffered a modest decline as social media stocks fell sharply in the wake of Snap’s disappointing earnings. But, overall, it was a very strong week for stocks as earnings season got underway in earnest. What we have learned so far, as we head …
October 22, 2021 – Funds continue to flow into equities and out of bonds this month. After a rough September that saw more than half the market drop 10%+, we are back to making new highs, yet again. Seasonally, stocks are in their strongest stretch, pointing towards new highs in the near future. Numerous factors helped us quickly recover from the September mini-swoon.
Earnings keep rolling in and although estimates were lowered throughout September, the number of beats is consistent with prior, record-breaking quarters. Banks and financial companies always report first. With their sensitivity to interest rates, loans and consumer demand, they are a decent precursor for what’s happening in most industries. Loan growth demand continues to be …
October 20, 2021 – As earnings season progresses, we are seeing the impact of pricing power. Those that have it continue to prosper. Those that don’t hope they can raise prices enough to offset all their added costs. Investors need to focus on who has pricing flexibility and who doesn’t.
Stocks continued their rebound yesterday as earnings season began to get into high gear. The next 10 days will be the peak of earnings reports. Yesterday was a bit educational. Two big Dow components, Johnson & Johnson# and Procter & Gamble# reported. J&J had really good results and raised guidance. It generally operates in business …
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, …
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 …
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 …
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 …
November 22, 2021 – Record highs in the stock market masked an overall deterioration as slowing growth and rising costs impact more companies. While some of the pressures may be peaking or have already peaked, the clear sailing witnessed last spring is unlikely to return.
Lockdowns in Austria sent the Dow and S&P 500 lower on Friday although the NASDAQ continued to rise. Interest rates remained within a tight range. While stocks continue to rise, look at the chart below. It is a chart of the Russell 3000, perhaps the market’s broadest relevant index containing, as the name implies, 3,000 …
November 17, 2021- It’s amazing how well corporations have navigated a minefield littered with disease, shortages, and rising inflation. The ability to pivot quickly is the hallmark of good leadership.
Stocks continued to move higher yesterday. The Dow was aided by a strong performance by Home Depot# after it reported better than expected earnings. Indeed, the theme this earnings season is the skill demonstrated by corporations in managing through a minefield created by Covid-19’s Delta variant, massive political uncertainty, supply chain disruptions, and sharply rising …