“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 …
September 19, 2024 – About a year ago, Federal Reserve Chairman Powell said that the Fed was “navigating by the stars under cloudy skies.” The clouds have lifted somewhat as inflationary pressures have receded over the past year and employment gains have continued. The Fed finally cut the target range for the federal funds rate yesterday by 1/2 percentage point to 4.75 to 5 percent and suggested another half of a percentage point cut before year end. Stock markets ended the day down about 0.3%, though futures are pointing higher this morning.
The Fed Finally Made its First Cut The first cut in the Federal Funds rate this cycle is now in the books. Investors were positioned for about a 60% chance that the Fed would move by 0.5% instead of 0.25%. An additional 1% cut to interest rates is expected for 2025 on the way toward …
September 16, 2024 – The market’s direction this week will likely hinge on the FOMC rate decision on Wednesday. A 50-basis point cut would be well received. Beyond the Fed meeting, election season shifts into high gear. Only some of the campaign promises will end up passing muster with Congress. Voters and the media want more details but are unlikely to get more than a morsel. This election will be more on style than substance for better or worse.
Last week, I made a case for why I felt the Fed should cut the Fed Funds rate by 50 basis points this week. At the time, Fed Funds futures strongly suggested that the first cut would only be 25 basis points. By this weekend, the odds had shifted to 50-50. Inflation reports this past …
September 12, 2024 – Despite recent signs that inflation is slowing its pace of decline toward its 2% target, the Federal Reserve is expected to proceed with interest rate cuts to balance price stability and employment goals. The key question remains whether the economy will achieve a “soft landing,” recession, or face a period of stagflation. While the current economic picture shows a mixed bag, with unemployment rising and economic growth slowing down, inflation remains a concern. The Fed’s actions, including the magnitude and speed of future rate cuts, will be crucial in shaping the economic outlook and investors should remain vigilant.
The time for cuts has arrived Chances of a 50 bp rate cut being announced at next week’s September FOMC meeting dropped considerably following yesterday’s CPI report. Annualized core CPI showed inflation holding steady y/y at 3.2% while the three-month annualized pace rose to 2.1% from July’s 1.6% reading. Does it really matter whether we …
September 9, 2024 – Last week’s sharp market downturn coincides with a series of transitions that lend near-term uncertainty to investors. How big will next week’s Fed Funds cut be? Who will “win” tomorrow evening’s debate? Does last week’s weak employment report signal a recession around the corner? Is the surge in AI capex coming to an end? Over the next several weeks, there will be answers. The ride until then could remain bumpy but skies should be a lot less cloudy as year end approaches.
The S&P 500 fell last week by over 4%. The tech-ladened NASDAQ fell by even more. This all happened after the Dow Industrials set a new all-time high the Friday before last. What caused such a sudden reversal? Fundamentally, nothing! The key economic data point last week was Friday’s employment report. More on that in …
September 5, 2024 – The U.S. government publishes a number of color-coded books, such as the Tealbook, the Orange Book, the Plum book and Red book. The one that most are familiar with is the Beige Book, which summarizes regional conditions across the country eight times per year. The most recent Beige Book, which came out yesterday, shows an economy that is mixed across regions, with stagnant conditions and a weakening labor force. Other data showing slower economic growth has made investors blue short term.
Beige is Boring? The Federal Reserve released its Beige Book yesterday. The Beige Book is a Federal Reserve publication about current economic conditions across the 12 Federal Reserve Districts. The information comes from interviews and online questionnaires completed by businesses, economists, market experts, and other sources. The Biege Book is more of a mirror than …
September 3, 2024 – Politics will dominate the front pages for the next two months. Next week’s debate will get much attention. But as investors we are unlikely to learn much. Both will tell you what they think you want to hear, albeit in very different styles. Both will focus on what they might want to spend (or hand out) rather than how anything will get paid for. Investors, meanwhile, will focus on this Friday’s August employment report. A low number will scare investors and the Fed. A high number will calm nerves. September is a notoriously tough month for equity investors. Friday’s report will either reinforce or negate that pattern.
I hope everyone had a happy Labor Day weekend. In an election year, the real campaign traditionally starts right after Labor Day, although with the changing of the guard within the Democratic Party and the repercussions, the campaign logically started once President Biden announced he wouldn’t seek reelection and Kamala Harris quickly became the presumptive …
August 29, 2024 – The S&P 500 has rallied back to near its all-time high, but significant further gains this year seem unlikely. Consumers are showing clear signs of a slowdown in spending while labor markets are weakening. Inflation is trending lower, but the Fed will be careful to avoid reigniting inflation expectations. These factors may lead to another market correction.
The Fed’s balancing act The Federal Reserve’s focus is shifting from solely fighting inflation to considering employment conditions. Recent jobs reports, indicating a slowdown in hiring and a slight increase in unemployment, has sparked some recession concerns. But the unemployment rate has been low by historical standards, while core inflation remains above the long-term average. …
August 26, 2024 – Last week was all smiles. An ebullient Democratic Convention, a speech by Jerome Powell all but promising the first interest rate cut in mid-September, and good news on the inflation front. Bond yields fell and stocks recovered almost all the ground lost in the July/August retreat. But now the promises without substance give way to a press for more substantive answers from both candidates. To date, we have heard the promises of how they want to spend money. Now we want to hear how that is going to be paid for. Those answers could trigger some concern.
It was a golden week for equity investors. Stocks surged as Democrats cheered on their nominees in a party only those heavily invested in politics could enjoy. Substantively, the convention revealed nothing. That wasn’t its intent. The goal was to energize its base and clearly it accomplished that goal. It was also a week of …
August 22, 2024 – There has been a great deal of focus on the Federal Reserve lately and the timing of interest rate cuts. The Fed released minutes from its July meeting on Wednesday which suggested some participants were ready to cut rates three weeks ago. Fed Chairman Jerome Powell will be speaking on Friday in Jackson Hole, Wyoming where we may get more color on the Fed’s future path. As job creation was recently revised lower by 818,000 jobs over the past year, the labor market has been weaker than assumed and provides cover for the Fed to finally start lowering rates in September.
The view from the Fed The Federal Reserve on Wednesday released the minutes of the Federal Open Market Committee meeting that was held at the end of July. This data is three weeks old, but provides a window into the discussions at the Fed. Interestingly, several committee members wanted to start cutting rates by 25 …
August 19, 2024 – It is easy to lose focus when dissecting every morsel of data released. CPI wavers, employment growth gains or loses momentum, and the Fed’s interest rate decisions seem to hang in the balance. Fed Chair Jerome Powell will speak Friday, probably leaning toward a cut in September but not going much further. Against that backdrop and the uncertainties tied to the election, investor moods change from week to week. But stepping back, we are not in a recession, and the seeds for future growth are apparent, particularly in the tech sector.
It was another week of recovery as data skewed positively. Given that the economy seems, at least for the moment, to be in a phase of moderating growth and moderating inflation, it is logical that we are seeing a mixture of data, some positive and some not so positive. Growth in this economy, like the …
August 15, 2024 -So much for the panic brought on by the weak July payrolls report and the surprise unwind of the Yen carry-trade. The first two weeks of August have seemingly delivered a year’s worth of volatility, but the market’s performance is close to flat for the month following this week’s rebound. As of yesterday’s close, the S&P 500 index had recovered all but 1% of the 6% early August selloff and is now within 4% of an all-time high.
Inflation, consumer spending, and the labor market This week’s economic reports showed mixed results. June’s core CPI of 3.2% Y/Y was in line with expectations, while the 3-month annualized figure was 1.6%, which suggests the slowdown in inflation is on pace to achieve the Fed’s target of less than 2%. In contrast to the softer …
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 …
August 8, 2024 – Kingda Ka at Six Flags Great Adventure in New Jersey is the world’s tallest and second fastest roller coaster in the world, reaching speeds of 128 miles per hour and a height of 456 feet. Sometimes the roller coaster misfires and comes down backwards before launching again, which can make for a volatile and jarring ride. Volatility is a normal part of investing, and one measure of investing risk. 1%, 5% or 10% declines in the stock market are fairly common over time, although larger corrections are also part of the normal ebb and flow of equity markets. The recent volatility over the past week or so has reminded investors of this.
On a roller coaster, the ride may be thrilling, but you end up right back where you started. The stock market has been on a bit of a roller coaster ride lately, though for perspective, it is coming off of record highs. In the lead up to the market drop on Monday, stocks had gained …
August 6, 2024 – The unwinding of the yen carry trade sent markets around the world into a downward spiral yesterday. While much of the damage from that may be over, there are still headwinds for equity investors. While we don’t see a recession yet, it can’t be ruled out. The likelihood the Fed will move aggressively this fall to combat economic weakness has increased. But without green shoots pointing to economic acceleration, it’s hard to make the case that now is an aggressive entry point for equity investors. August and September are the worst months for stocks and August has just begun. Stay cautious.
Normally, I write these columns on Monday. But yesterday was an extraordinary day that deserves some post-closing remarks. Let me start by putting the word extraordinary into some context. The drop of over 1000 points in the Dow and an even larger drop in the NASDAQ Composite was only extraordinary compared to recent trading. Back …
August 5, 2024 – Bear market bottoms are V-shaped. After declines of 20-50% investors capitulate and sell in moments of panic, often at a time when the economy appears unlikely to right itself. But tops don’t behave in the same way normally. They roll over gradually. Sometimes, like after 9/11 or after the onset of Covid, the economy reverses suddenly. Sometimes, valuation differentials among asset classes get so out of line that a sharp correction takes place. The rapid 40% decline in late summer and early fall of 1987 is probably the best example.
Within a bull market, nonetheless there can be sharp corrections. In both the fall of 1998 and 1999 markets retreated sharply before quickly recovering, a lead up to the bursting of the Internet bubble in 2000-2002. Last week economic data suggested an acceleration in the slowing of world economies. China has been a mess for …
August 1, 2024 – The Olympics and the stock market are spectacles of intense competition. Just as athletes train and strategize for peak performance, investors analyze market trends and make calculated decisions to maximize returns while minimizing risk. Unforeseen events like injuries or unexpected economic news can cause sudden shifts in fortunes. However, the Olympics is a quadrennial event with clear winners and losers, while the stock market is a continuous race, where volatility is the norm.
The FOMC July meeting shift Yesterday’s FOMC statement and press conference confirmed that the Fed is aiming to lower its Fed Funds target interest rate at its September meeting absent any big surprises. The Fed is shifting its focus from solely combating inflation to a more balanced approach, considering both inflation and employment. This shift …
July 29, 2024 – Less than stellar earnings from Tesla and Alphabet combined with protectionist steps suggested by both Biden and Trump, sent the big tech stocks and the entire semiconductor sector reeling last week. That set up a massive rotation out of tech into cyclicals and staples. Earnings from four big tech giants later this week will either reinforce that rotation or stabilize markets.
It was another wild week for equities punctuated by the largest single day drop in close to two years on Wednesday. The VIX index, which measures market volatility, rose by close to 30%. Bonds moved far less than stocks, ending the week about where they started. This week’s highlights will be a continued flood of …
July 25, 2024 – The Magnificent Seven movie from 1960 focused on seven heroes hired to defend a small town under siege by more powerful forces. “They were seven, they fought like seven hundred” was the tagline. The Magnificent Seven stocks in the S&P 500 have been doing most of the fighting for index returns this year. Only three of the gunslingers made it to the end of the Magnificent Seven movie. As Mag 7 earnings are reported this week and next, it looks like they may not all fare similarly well.
While stocks react to earnings reports versus expectations and the forward guidance from management teams, we often look for signs of inflection in earnings and the economy. Major market indices declined 1-3% yesterday, with technology shares bearing the brunt of the selloff, as second quarter earnings continue to roll out. We can let some of …
July 22, 2024 – It has been a tumultuous week both politically and in the equity markets, but each marched to a different tune. Equity investors worried about earnings amid a slowing economy and fears that the surge in tech stocks may be ending, at least in the short-term. The half dozen leading tech names will all report earnings over the next 10 days with the exception of Nvidia which won’t report until mid-August. Reaction to those results will dictate how markets are likely to behave over the next several weeks
Over the space of eight days, former President Trump was shot, the Republicans held their convention and picked a populist to run to be Vice-President, and President Biden announced his intention not to run for reelection. At the same time, equity markets went on a wild ride, largely unrelated to the political landscape. Massive rotation …
July 18, 2024 – This past week’s stock market volatility has been characterized by a sharp decline in the Nasdaq, driven by weakness in tech stocks due to concerns about U.S.-China trade relations. This decline coincides with a rotation from growth stocks to value stocks, particularly small caps, spurred by expectations of lower interest rates and a potential shift in political leadership. While economic data has been positive, consumer sentiment has weakened due to high prices and some concerns about the labor market.
Market rotation U.S. stocks experienced a notable decline yesterday, with the Nasdaq Composite Index suffering a loss of 2.8%, its most significant loss since December 2022. This downturn was primarily driven by weakness in big tech stocks, particularly in the semiconductor sector, due to concerns about potential stricter U.S. trade restrictions on China. Since its …
July 15, 2024 – Despite recent gains, lower interest rates and the prospects for future earnings growth suggest markets are fairly priced. Most investors are optimists but game theory tells us to look always for non-conforming facts that might disprove our thesis. We delve into that this morning.
The primary purpose behind game theory is to reach a correct ultimate conclusion. Typically, one starts with a hypothesis and then seeks conforming evidence to buttress it. But game theory teaches you that often leads to incorrect results. Rather, it’s the failure to disprove a hypothesis that reinforces the conclusion. Let me give a simple …
July 11, 2024 – The Apollo 11 moon landing occurred 55 years ago this week. The challenge to get to the moon took about 8 years to realize, but eventually was achieved. It feels like we have been anticipating a rate cut from the Fed for that long, although it has only been about 1 year since the Fed stopped raising interest rates. Fed Chairman Powell pivoted a bit yesterday in his testimony to Congress, stating that the balance of risks has shifted, giving a boost to September rate cut expectations.
There were six crewed moon landings from 1969 to 1972. While the first moon landing was very memorable, very few people remember the next five moon missions. Similarly, if we get six quarter-point rate cuts, that would only reduce rates by 1.5% from the current 5.25-5.5%. However, the timing of the first cut is important …
July 8, 2024 – Equity investing success over the past few years has meant concentrating on technology. Over the past year, that focus has narrowed to AI. Has it been overdone? The answer suggests no, as long as the AI leaders can come close to meeting growth targets.
This past week was dominated by politics. While I will leave the questions surrounding the future of Biden’s candidacy to others, I would note that investors don’t tend to factor in the unknowns until the outcomes become more obvious than they are today. As Trump’s likelihood to become President rose in the aftermath of the …
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 …