One of the major concerns investors had to worry about last year was the inverted yield curve. There are many studies and historical precedence, but typically when you have long rates lower than short rates, it precedes an economic recession by 9-18 months. Once the curve inverts, with the standard metric being 10-year Treasury yield …
January 22, 2020 – Stocks may have run too far too fast. That increases the odds of a correction. But don’t confuse a correction with a bear market. A correction reverts to a rising trendline while a bear market reverts to a declining trendline. Strong economic trends mitigate any serious risk of a bear market anytime soon.
Stocks fell as concerns rose that the coronavirus, now emerging in China, will spread and inhibit global travel. In addition, new management at Boeing# warned that the 737 Max may remain grounded until mid-year or later. That not only impacts Boeing, which took the biggest hit in the Dow Industrials yesterday, but a raft of …
January 15, 2020 – Earnings season is here. As always, it is about matching results to expectations. The key is the forward outlook. If managements express optimism, stocks can move higher. If, however, they continue to lower future guidance, the seed for a correction could be planted. At the moment, investors expect a positive response.
Stocks closed mixed yesterday. The highlight of the day, the somewhat formal start of earnings season, was the report of fourth quarter results from three of the four largest banking institutions. The results were mixed with JPMorgan Chase# reporting much better than expected results thanks to very strong fixed income trading while Wells Fargo continued …
January 13, 2020 – Earnings season begins this week. Last week’s employment report suggests a continuation of a solid recovery. Stocks may not be cheap but if earnings are OK, there is still room for upside as long as market breadth widens.
Stocks fell Friday after a tepid employment report. But, as I have noted often, considering monthly changes can vary wildly, looking at 3-month averages usually gives a better picture. While the December gains were a bit below consensus expectations, November numbers were much better than expected. The three-month average, just shy of 185,000, is fine …
January 10, 2020 – The last decade was extremely positive for equity investors in light of many challenges. Quite the contrast from the start of 2000. New leaders will emerge over the coming 10 years but Technology continues to be the place where disruption and innovation occurs.
I want to thank Jim and leadership at Tower Bridge for the honor of writing these comments on Fridays. As you are well aware, he has a unique writing style that gets difficult information across to the reader in an easy, understandable and enjoyable format. If I can accomplish a fraction of his success, I’ll …
January 8, 2020 – Despite a sharp drop in the futures market initially overnight, the Iranian military response seems measured and not a major escalation of tensions. Next steps from both sides will be important, but hopefully equity markets can return to a focus on earnings rather than politics before too long.
Stocks turned lower once again as investors fretted over events in the Middle East. Those fears were confirmed last night as Iran launched missile attacks against two airfields in Iraq that housed U.S. troops. So far there have been no reported U.S. casualties, but clearly the attacks represented an escalation of tensions. Separately, a Boeing …
January 6, 2020 – Weekend events, mostly rhetoric, leave markets on edge. Iran could respond quickly but it may not be for days, weeks or even months. In the meantime, markets were ripe for profit taking and the seeds for a short term correction are present.
Stocks fell on Friday in a rather measured fashion after American forces assassinated two top Iranian military leaders near Baghdad. Oil prices spiked higher and interest rates fell. Over the weekend, tensions remained high and the rhetoric on both sides escalated. As a result, futures are down again this morning. Note that stocks rose sharply …
January 3, 2020 – A loud hurrah yesterday got shut down overnight after the assassination of a key Iranian general by U.S. forces. Hopefully, events will deescalate from here. All out war is not in the interests of either the U.S. or Iran. How stocks move after a probable weak open will depend on how both countries react to last night’s events.
Welcome to 2020. The New Year sure started with a bang. Stocks rose about 1% yesterday as investors welcomed in the New Year with enthusiasm. But the overnight news that U.S. forces had killed a key Iranian general in Baghdad has markets poised to erase all yesterday’s gains and then some when trading begins this …
December 30, 2019 – A strong finish to 2019 offers few clues to 2020. While most strong years (gains of close to 30% or more) have followed down years, the course of future years isn’t very predictable, although since the Great Depression no gain of that size was followed by a down year.
As we enter the home stretch, 2019 shapes up as one of the best years in decades. The S&P 500 is up just shy of 30%, virtually identical to 2013. Since World War II, the market has risen about 30% or more six other occasions. Four of those occasions followed down years. 2019 would be …
December 27, 2019 – The rally continues as data confirms a strong Christmas retail season. Momentum suggests it will continue, at least through the end of the year.
The fall/early winter rally continues a slow drift upward. Yesterday, the rally was led by Amazon, which has been a notable laggard throughout most of 2019. However, after a strong Christmas selling season, the stock reacted strongly. The strength in Amazon pulled more money into other FANG and related stocks. There really isn’t much …
December 23, 2019 – Stocks continue to rally. This is a holiday week and we don’t expect a major reversal of trend like we saw a year ago. However, for the rally to continue into next year, the economic backdrop has to continue getting better. Right now, signs suggest ongoing improvement.
Stocks continued their rally on Friday in the most active trading session of the year as various futures and options contracts expired on what has been labeled quadruple witching, an event that happens four times a year in the middle of the last month of each quarter. But aside from the volume created by quadruple …
December 20, 2019 – Stocks keep moving higher. While fears of complacency have some traders nervous, the economic backdrop for 2020 is improving. For markets to move higher, the cyclical laggards of 2019 have to become leaders.
Stocks continued to move higher as the Santa Claus rally continues. Economic reports worldwide continue to indicate that the 2019 growth slowdown appears to be ending. Interest rates are starting to climb, consistent with stronger demand. The 10-year Treasury yield at close to 1.95% is up almost 50 basis points from mid-summer lows. While negative …
December 18, 2019 – Stocks continue to march to record highs against an improving economic backdrop. But valuations are becoming stretched and clearly complacency is creeping in.
Stocks continued their march to record highs as all indications point to global economic improvement led by a strong consumer. The economic improvement is pushing stocks to record levels as it also leads to higher bond interest rates and a steeper yield curve. The obvious question today, with stocks marching to new highs almost daily, …
December 16, 2019 – A small Phase I trade deal with China removes a threat of further tariffs. But, by itself, it is hardly likely to move the economic needle. Continued accommodative monetary policy and stepped-up fiscal spending will be the thrust next year.
Stocks finished higher once again as the U.S. announced that it had reached a Phase I trade deal with China and would defer any additional tariffs at this time. While the Trump Administration is trumpeting this deal as a great boost to American growth, it is unlikely to move the needle much. Discussions on Phase …
December 13, 2019 – Progress in trade talks, a resounding victory in Great Britain for Conservatives, and the likelihood that Congress and the White House can agree on a spending bill without shutting down the government has the market pointed higher once again.
Stocks rose once again yesterday as it appeared that a final trade deal with China was imminent. In addition, it seemed that Republicans and Democrats in Congress were close to a spending deal to avert another government shutdown. Maybe Congress and the White House are finally beginning to comprehend each other’s style that will allow …
December 11, 2019 – Higher earnings, slightly higher interest rates, and a relatively flat dollar suggest modest further gains ahead. But we are at the top of a five year upward sloping channel today suggesting some pause may happen before further material gains.
Stocks closed narrowly lower yesterday. A weak start was reversed by scuttlebutt that the next round of Chinese tariffs would be deferred even without a Phase I agreement this weekend. We are likely to get these rumors, in both directions, up until the deadline. Indeed, even if additional tariffs are deferred, the threat of additional …
December 9, 2019 – Friday’s employment report proclaimed an ongoing sound economy. This week’s attention will focus on Sunday’s scheduled implementation of further tariffs on imports from China. While markets don’t expect them to happen, any deal will be modest and have little broad economic impact.
On Friday, I expected a relatively calm day barring a major outlier employment number. Of course, that is exactly what was reported, a number far ahead of expectations despite continued weakness in the manufacturing sector. Stocks rose by a bit over 1%, an apt celebration, but one that shouldn’t last for more than a day. …
December 6, 2019 – A dull market gives you time to make year end adjustments. Sell losers that aren’t performing to your prior expectations. Make sure your portfolio is balanced. Economically, unless today’s employment report offers a big surprise or there is a trade talks breakthrough, today could be another quiet session.
Stocks closed narrowly higher in a quiet trading session. There was very little in the way of new news to move the market. The big remaining economic release of consequence will come out this morning, the November employment report. Wednesday’s prediction from ADP (which pays out about 1 or every 6 private sector paychecks) was …
December 4, 2019 – While markets wavered yesterday as President Trump hinted at some delays in trade negotiations, the odds of a December 15 hike in tariffs don’t really change. Watch the actions, not the words. Tariffs, however, are a tax and the threat of tariffs against Brazil, Argentina and France are a cause of some concern.
Stocks fell sharply at the open yesterday after President Trump, in an off-the-cuff comment at the NATO summit, said Phase I might not happen until after the 2020 election. Mr. Trump has made similar apocalyptic remarks days before previous negotiation deadlines only to come to a positive conclusion at the last minute. That is not …
December 2, 2019 – Good economic data over the weekend should lift stocks early. U.S. economic data this week will be important, particularly the PMI numbers out this morning and the employment data coming on Friday.
Stocks fell in a holiday shortened session on Friday. There was no real news to account for the decline. Profit taking was about as good an explanation as anything. Today, being the start of the first week of the month, we will get a flurry of economic data and a first look at November. Weekend …
November 27, 2019 – You may not outperform the market if you don’t own those stocks making the biggest impact in any one year. But your goal shouldn’t be to beat the market. It should be to meet or exceed your own objectives.
Stocks once again moved higher yesterday in rather quiet trading. One item of note: the yield on 10-year Treasuries, now back below 1.75%, has given up roughly half of its rise from late summer lows reflecting the nation’s tepid economic performance. So why are stocks doing so well? You have read the list of reasons …
November 25, 2019 – It’s hard to short a dull market, especially at year end when everyone wants to defer taking gains until 2020. But there is no apparent external catalyst to lift stocks higher and the threat of higher tariffs may be escalating.
Stocks continued their listless pattern on Friday. Most averages experienced modest declines last week. About the only news of importance was trade talk chatter suggesting that even a small Phase I deal won’t be completed before December 15. That increases the odds that another round of tariffs gets implemented. On the economic front, the data …
November 22, 2019 – Stock markets are likely to become more volatile as next round of tariffs, due December 15, are implemented or not. To separate winners and losers in a slow growing economy, start by looking to see who invests for success and who tries to cut costs to survive. Not all who invest win, but those that don’t are almost always losers.
Stocks fell once again yesterday. Trade talk now suggests that there may not be a deal with China before mid-December. President Trump has previously announced another tranche of tariffs to go into effect on December 15th. Obviously, he believes that threat is leverage to get him the deal he wants. But China isn’t budging, at …
November 20, 2019 – It is earnings reporting season for retailers. What we are learning is those that invest to stay current and support their customers are winning, while those who fail to adapt are destined to fail.
Stocks were mixed yesterday. The Dow Industrials fell when component member Home Depot# reported decent results that were below Street expectations. That’s a no-no in the investment world. Other than that, it was a relatively quiet session. One should note, however, that the 10-year Treasury yield has fallen almost 20 basis points over the past …
November 18, 2019 – Markets continue to march higher in anticipation of a trade deal between China and the U.S. But perhaps a bigger factor in rising confidence is that no recession is imminent. With less economic downside to fear, investors are increasingly confident to buy equities.
Stocks once again rose to record highs on Friday after a White House spokesperson expressed optimism that a Phase I trade deal with China would be completed shortly. It is remarkable how many times markets can discount the same news flash, especially when talks of optimism don’t end up with a deal. Perhaps the only …
November 15, 2019 – While stock prices continue to move to new record highs, the gains are not supported by rising earnings or lower rates. Investors are trying to defer taking gains to next year. Valuations are becoming extended once again. A 2-4% correction would do a lot to heal an overvaluation state.
Stocks again showed little change. Economic data was a bit negative. Producer Prices in October rose a bit faster than expected and jobless claims rose by an unexpected 15,000 over the prior week. One week doesn’t make a trend but this bears watching. Any significant rise in unemployment claims over a number of weeks is …
November 13, 2019 – In a dull day without news, the Dow ended flat for the first time in over 100 years. While futures point lower this morning, profit taking more than any news item, appears to be the dominating factor.
Stocks were mixed yesterday. The Dow Jones Industrial Average actually ended up dead even for the first time since April 24, 1914. In a day absent much new news yesterday, three items got my attention. First, the new Disney+ service launched with more than a few technical glitches. I guess that was to be expected. …
November 11, 2019 – Logically, it is time for markets to pause. Stocks have risen in a straight line for several weeks, a critical tariff deadline is approaching, and another government shutdown looms if Congress can’t pass a funding bill that the President will sign.
Stocks closed mixed on Friday as the recent rally, based on trade talk optimism, seemed to be running out of steam. There are a few obvious reasons for equity markets to pause. 1. Stocks don’t go up in a straight line. While there will always be momentum chasers, even at market tops, fundamental investors find …
November 08,2019 – Stocks keep setting records based on an imminent deal with China that could include a rollback of tariffs. The good news is now largely priced in. No deal, or one that doesn’t include a tariff cut, may lead to some profit taking.
Stocks move higher once again as rumors circulated that a trade agreement was imminent and that both sides would be rolling back tariffs. While the Chinese seemed to embrace this story, reports from the White House were conflicting. We have been here before. Rumors, both good news ones and bad news ones, simply don’t turn …
November 6, 2019 – Markets are rotating as the economy improves. Overvaluation in crowded growth sectors is taking place as investors looked toward cyclical recovery and opportunities in depressed energy and manufacturing names. The rotation has happened very quickly and may require some backing and filling before resuming.
Stocks were mixed yesterday and market rotation continued. Former high flyers continued to weaken and the year’s weakest sectors, especially energy, had another strong session. More on that in a moment. A couple of months ago, economists were worried that bond markets were signaling recession with near record low interest rates and an inverted yield …
November 4, 2019 – There are many who fear that President Trump will lead us to economic ruin. While many find a lot to dislike in our President, his ability to move the economic needle, beyond excessive tariffs, is limited without legislative support. Given that nothing is expected between now and the next Presidential election, the fears many possess, at least in economic terms, are probably overstated.
Stocks rose sharply on Friday in reaction to a stronger than expected employment report and upward revisions to data from the previous two months. Wages also showed solid gains. More people working at higher wages is obviously good economic news and should put to rest any thoughts of recession, at least for now, barring any …
October 30, 2019 – Today is all about the Fed. The FOMC is likely to cut rates by 25 basis points and President Trump is likely to complain. But the real debate is whether rates need to go lower from here. With the yield curve no longer inverted, the argument for more rate cuts in December is less convincing.
Stocks finished mixed yesterday with a slight downward bias. The modest net changes, however, disguised the fact that about 100 stocks rose or fell by more than $4 per share. This is a thin market, especially when everyone wants to buy or sell the same security at the same time. Perhaps the most interesting name …
October 28, 2019 – A ho-hum earnings season is about halfway done. Seasonal factors are lifting stocks and new highs could be set today. But without momentum from rising earnings expectations, it is hard to see how gains will be sustainable without further good news.
Stocks staged a solid rally Friday and finished just a whisker below all-time highs. Earnings and rumors that trade negotiations with China were going well sparked the advance. Here is what we have learned so far from earnings season. Overall, earnings and revenues once again show a slight upward bias against lowered expectations, consistent with …
October 25, 2019 – The stock market reflects a process of matching reality to expectations. This earnings season provides several examples of companies doing well but coming up short of exuberant expectations. Amazon is the most recent example.
Stocks continued to turn a mixed performance yesterday reacting to earnings news. It seems this year there have been a lot more meaningful beats and misses, perhaps reflecting uncertain economic times. But some of the volatility has related to a mismatch between expectations and reality. Let me explain and I will start with Amazon that …