The market continues to search for a bottom and some semblance of normalcy. Although the volatility index is down 40% from its highs, it is still well above every other peak for the past 25+ years outside of the housing bust. Whipsaws back and forth will continue. As the daily Covid-19 counts trek higher, investors …
April 1, 2020 – Markets fell again yesterday to end the worst first quarter in stock market history. April and May data are both likely to be horrid. But markets have already priced in much of that. The key is whether the worst is priced in or not. Expect markets to churn over the next few weeks as we approach the apex of new Covid-19 cases. How we reemerge from our collective cocoons remains the unknown that markets still have to resolve.
Stocks retreated once again yesterday as the worst first quarter in stock market history came to an end. Coinciding with the rapid spread of Covid-19, stocks fell from peak to trough by about 35% in less than 5 weeks, the steepest bear market on record. A modest rally over the past 10 days softened the …
March 30, 2020 – While the news over the weekend continued to scare us all, there was nothing that was unexpected. As a result, there is much less movement this morning in pre-market trading than has been the case the last few Mondays. Perhaps that suggests volatility will finally calm down. The market’s future direction over the next several weeks will be highly dependent on virus-related news, both from public health and economic standpoints.
After a strong three-day rally, stocks gave back some ground Friday afternoon, particularly in the last half hour. Nonetheless, last week’s rally, whether it proves to be the start of the bottoming process or just a mid-bear market relief rally, felt good after weeks of sharp declines. Over the weekend, there was little in the …
March 27, 2020 – A quick bill from the Government, along with recent Fed actions has propelled one of the strongest three-day rallies ever. The mass liquidation phase may be over. However, earnings announcements and any increase in the spread of Covid-19 can halt the upside. Patience after these gains is warranted
The bazooka approach is out in full force with fiscal and monetary policies ramping up. The Fed was the first to act. Lucky for them, they just had to dust off the 2008 – 2009 credit recession playbook and apply their learnings. Instead of taking over a year to get things approved and voted upon, …
March 25, 2020 – Markets soared yesterday as investors celebrated a pending aid package and hope that the economy can start to recover within the next month or so. Short covering accelerated moves to the upside. But when we open our doors and go back outside to assess the economic damage, we will see plenty of it. There is room for another 10-15% on the upside over the next few days or weeks. But when we see the extent of the economic damage, the road ahead will become a harder hill to climb.
Stocks soared about 9% yesterday, the most in one session since 1933. A variety of factors led to the gain. First and foremost, there was favorable news relative to the coronavirus. More on that in a moment. Second, the market had been deeply oversold. Bear markets often have extreme rallies accelerated by short covering. While …
March 23, 2020 – It was a historically bad week for equity investors, and there appears to be little let up in sight. The number of coronavirus cases escalated exponentially, cities and states locked down businesses, and Congress remains tied up in knots trying to come up with an aid solution to minimize the economic damage.
Even with a package from Congress, most assuredly to come in some form this week, it is likely that GDP in the second quarter could decline over 20%, 2x the largest post-WWII quarterly decline. Business didn’t slow, it stopped. The Federal government is caught in between the needs of public health and the economy. On …
March 20, 2020 – The market action is slowly showing some signs of normalcy. A handful of stocks and sectors may have hit their bottoms. Massive global money printing is providing a floor. We are hopeful there will be some cure in the coming months as new data looks promising. We are not out of the woods yet though.
The record books are being rewritten during this malaise. We’ve experienced eight straight days of at least 4% moves in the S&P that finally ended yesterday. The previous record was only six, dating all the way back to 1929. The very short end of US T-Bills turned negative out to six months at -0.02%. The …
March 18, 2020 – Yesterday’s rally marked the sixth straight 1000-point move in the Dow. Today is shaping up as another very volatile session, once again to the downside. The rush to liquidity continues. Even the algorithmic traders are rushing to reduce positions as volatility continues to spike. That explains the decline in Treasury prices, and the attendant spike in yields contrary to what logic might say. The overriding fundamental questions of when will the virus end, and how will small businesses and their employees survive, remain unanswered. As resolution gets closer, markets will ultimately find a bottom.
Once again, we experienced a 1000+ point move in the Dow Industrials. It was the sixth straight day of 1000+ moves. After Monday’s historic 3000-point loss, yesterday’s gain hardly felt overwhelmingly positive. We have now had over ten 1000-point daily moves in the market over the past four weeks. Today, 1000-point moves equate to about …
March 16, 2020 – The bad news continues, and emotions border on panic as all non-essential activities go into lockdown mode. But valuations are becoming increasingly compelling. At emotional peaks, it is hard to call a bottom. Generally, we look for two up days in a row before we are willing to make that call. Central banks are providing liquidity, and Congress ultimately will be required to pass a TARP-like package to save certain industries from collapse. It will, especially in an election year. The darkest days may be upon us. That suggests a bottom may be near.
Stocks went on a wild ride once again on Friday ultimately recovering much of Thursday’s record losses. The market on Thursday gave all signs of sheer panic. Investors were selling everything at virtually any price either to get out of the market or to meet cash requirements elsewhere. Valuation didn’t matter. On Friday investors were …
March 13, 2020 – Liquidation events like yesterday are typically seen at market bottoms. The sudden and massive declines in March have priced in much of, if not too much, bad news. We will get past this. Many stocks offer solid long-term values today. Aggressive investors will likely be rewarded over time.
This is not getting any easier to watch, to say the least. The market’s response to the lack of a coordinated government/fiscal plan, coupled with massive industry effects stemming from stopping inbound European flights, school closures, sporting event cancellations, theme park shutdowns, movie delays, the loss of productivity from employees working from home, fear of …
March 11, 2020 – Yesterday’s rally felt great, but it didn’t necessarily feel like a bottom. There has been little follow through in overnight trading. It would seem that real signs that the Coronavirus is at or near its peak are necessary before the final bottom is set. Markets do overreact and some nibbling at bargains is appropriate. But this is a market that requires patience. Many more closures and cancellations lie ahead with attendant economic costs.
Yesterday was another violent session, this time ending higher and recovering roughly half of Monday’s losses. After a very strong open, markets turned negative by mid-morning, then reversed and closed at their highs of the session. There was a general feeling that Monday’s losses were a bit overdone and there was hope that Washington would …
March 9, 2020 – Premarket moves suggest a miserable day for stocks is in store with European markets opening down over 6% and oil prices plummeting over 20% after Saudi Arabia announced production increases and price cuts. What may be good for public health, including all measures up to quarantine, is bad for stocks. Hopefully the pain is short and, for most, bearable. But some will fail and broken supply chains will take time to repair. Fear is palpable. While all this suggests a market bottom may be close, panicked selling may take several more days or weeks to run its course.
Last week was one of rapid whipsaw movements in both directions. But with that said, today is shaping up as one of the worst trading sessions in recent memory, sparked primarily by a failure of Saudi Arabia and Russia to agree on measures to reduce the supply of oil to match falling demand related to …
March 6, 2020 – Markets remain highly volatile. While the negative Coronavirus news may peak over the next week or two, the economic damage will take some time to repair. We lived in an oversupplied world pre-virus and a sharp temporary drop in demand only adds to the problems of oversupply. Inflation is falling. Fed rate cuts won’t solve an oversupply problem. They could even worsen it. Until the 10-year Treasury yield finds a floor, stocks will move erratically.
Stocks fell sharply once again amid more negative Coronavirus related news and rising fear of both recession and disinflation. The 10-year Treasury yield sank to below 90 basis points, and this morning is now below 80 basis points. While the downward trend in yield may simply be attached to the emotional state of the moment, …
March 4, 2020 – A big Biden win last night should allow markets to rally again this morning. They appear to be in a bottoming process. Whether market expectations match reality may not be known until companies report first quarter earnings. If the pain exceeds current expectations, quite possible in our view, then a retest of lows may await us.
What a difference a day makes. After rising a record 1200+ points on Monday in one of the biggest relief rallies in stock market history, equities reversed course and fell over 2% once again yesterday. This was despite a historic 50-basis point rate cut intra-FOMC meeting by the Federal Reserve. While one can argue that …
March 2, 2020 – It was a record week for stocks. The obvious question is whether the correction is largely over or not. Assuming a 10% negative impact to 2020 earnings, and recognizing that stocks were probably a bit overvalued before the crisis hit, the correction last week seems about proper. The speed of the correction was unnerving, and could continue into this week. But the bulk of the damage is probably priced in.
What a week! Stocks fell by 10-15% with all S&P 500 sectors falling at least 10%. Coronavirus fears dominated the news as cases spread around the world. Over the weekend, they spread further, and we are still in the early innings of a worldwide assault that won’t peak for several weeks, if not months. But …
February 28, 2020 – A 12% drop in just 6 days improves the risk/reward analysis. It is not time to get overly aggressive, but nibbling on world class companies here makes long-term sense. A bounce and retest of the lows is typical. Be selective and stick to your discipline.
The unrelenting selloff continues. The Dow Jones Industrial Averages tanked 1190 points, or 4.4% yesterday. This is the largest one day point drop ever and the worst performing day since August 2011. However, it doesn’t even rank in the top 100 of worst percentage days ever. We are now in “correction” territory with major averages …
February 26, 2020 – After world health officials warned of a possible pandemic, markets sank another 3%. The truth is no one knows, but health officials want to be as prepared as they can. But the virus won’t last forever, and its economic impact will be brief, although it could be sharp. Valuations have discounted what we know. An 8% correction can quickly become 10-20%, but when the virus starts to recede values will be restored.
Stocks fell sharply for the second straight day, extending losses since recent market highs to close to 8%. 62% of the S&P 500 is now in correction mode, meaning that they are down at least 10% from their highs. Overnight there have been no signs of buyers around the globe as nervousness related to the …
February 25, 2020 – Since the 2008-2009 bear market, buying the dip has always worked. That doesn’t mean it will always work in the future. The coronavirus threat will dissipate over time and life will return to normal. But the damage to fragile economies may last longer than anticipated. Recession risks are rising and so is the threat of Bernie. Nibble if you will but don’t dive head first into the pool until you know how deep the water is.
Special Tuesday Edition Stocks fell over 1000+ Dow points yesterday for the first time since a brief market panic in early 2018. Indeed, many traders recalled the trading pattern similarities of the market weakness over the past week to that correction. But, while any decline brings out its own set of fears, February 2018 was …
February 24, 2020 – Stocks face three fears today, why are interest rates collapsing again, how bad will the economic damage from the coronavirus be, and can Bernie Sanders really become the next President of the United States. Right now, the fears associated with all three are rising. That can’t be good for stocks over the near term.
Stocks tumbled both Thursday and Friday as coronavirus fears escalated once again. Bond prices soared as the 10-year Treasury marched towards its record low of 1.36%. The bond market is sending a signal that either the economy is ready to roll over or central bank liquidity is so great that the rush by investors to …
February 21, 2020 – Safety areas and growth sectors are viewing the same data from a different lens. Small cracks are forming in leadership stocks. Q1 earnings warnings are ramping up related to the virus outbreak. A brokered convention looms over the Presidential election.
Diverging market indicators may finally be coming to a head. It is very uncommon to see REITs, Utilities, Gold and the US Dollar indices make new highs while growth outperforms. Typically, safe havens either lead or lag depending on GDP expansion/contraction. Monetary stimulus and money printing has led interest rates down to record low levels …
February 19, 2020 – Worldwide oversupply, slowing population growth, disruptive technologies and overly accommodative central banks are the dominant themes that dictate asset prices. Some of these trends conflict while others promote higher asset prices. Understanding the roles of each is critical for any investor.
Stocks tumbled yesterday after Apple# warned that the coronavirus would negatively affect first quarter earnings. That didn’t come as a complete surprise. In fact, some impact was obvious. But the fact that Apple came out so soon in the quarter and was fairly explicit in its estimates spooked investors that other companies would likely do …
February 14, 2020 – A brief bull vs. bear debate as the major averages continue their upward rise.
The stock market continues its unrelenting pace with another positive week. The year-to-date gains are up to nearly 5%, despite many headwinds. Let’s debate the bull and bear thesis: Bulls say: • Interest rates: This has been the primary driver of higher P/E’s. As rates decline, multiples expand. Earnings have advanced in the low single-digit …
February 12, 2020 – A close race in New Hampshire last night means the race for the Democratic nomination is still wide open. Markets will like that outcome as they fear a progressive sweep. Fed Chair Powell’s testimony yesterday raised few eyebrows except for President Trump.
Stocks rose again yesterday although they finished off their best levels of the day. Federal Reserve Chair Jerome Powell testified before the House yesterday. His main message was that the Fed was monitoring the developing economic impact of the coronavirus and would adjust policies, if necessary, to combat any negative impact. Not only was that …
February 10, 2020 – While the immediate impact of the coronavirus appears likely to be limited to the first quarter, there are longer term impacts that will be more enduring. Supply chain disruptions and a build-up of excess commodity inventories are two examples.
Stocks fell on Friday even after the government issued another strong employment report. Some pundits suggested the decline was tied to ongoing coronavirus fears, but equities rose a good part of the week amid the same fears. I think profit taking was probably a better explanation. If the coronavirus was a cause for a modest …
February 7, 2020 – Jobs reports show a strong US economy but international data is mixed at best. Investors are keyed into lower rates and improved prospects that may not arrive until later in 2020 as the virus outbreak causes uncertainty to supply chains everywhere.
The overall market strength has been quite impressive. In spite of some less than stellar international economic data coming out and the near complete shutdown of the 2nd largest economy in the world due to a viral outbreak, the S&P 500 has managed to gain 3.6% this year with all of those gains coming in …
February 5, 2020 – Stocks soared yesterday as coronavirus fears were contained on a day when Democrats in Iowa couldn’t get their vote count straight. When results did leak out, the picture as to who will lead the party in 2020 was about as muddled as it was before the caucuses. In fact, if there was one certainty emanating from Iowa, it was that the caucus system is almost certainly to be discarded in the future, at least in Iowa.
Of course, the coronavirus story isn’t over yet. But the rate that contagion is spreading is starting to give investors hope that the economic impact will be mostly felt in the first quarter. By the time summer arrives, investors now hope it will be an event seen only in the rear-view mirror, without any lasting …
February 3, 2020 – Without much new news related to the coronavirus over the weekend, stocks appear set for a tepid recovery. But few believe the scope of this epidemic has been fully developed. Thus, it is way too early to sound the all-clear siren for stocks. In the meantime, earnings season continues. Management outlooks will be tempered by the virus’s impact.
Stocks tumbled Friday as fears of an expanding coronavirus epidemic spooked investors. While the number of cases continued to rise over the weekend, the news didn’t widen fears beyond what existed Friday. Thus, futures look tentatively higher, although any gains this morning won’t come close to wiping out Friday’s losses. I have received quite a …
January 31, 2020 – Earnings are moving individual stocks. The threats stemming from the coronavirus impact are moving the entire market. Momentum continues to lead the way, with many technology stocks seeing sizable daily moves.
Earnings continue to pour in leading to an increase in volatility, both on the up and downside. A large portion of the S&P reported this week which caused daily moves for individual stocks that are larger than normal. This is typical in the first quarter as full-year 2020 guidance is often offered. Predicting the next …
January 29, 2020 – Stocks bounced back yesterday from Monday’s sharp decline. There was no real news related to the coronavirus. Rather, investor emotions seemed to calm down a bit. Yesterday’s gains didn’t erase the losses of Monday and last week, but they did serve as an indication that investors aren’t going to panic over the impact of the disease.
On Monday, I laid out a case that the concentration in leadership for the S&P 500 might be a precursor to some sort of market correction. I noted that it was possible that the trigger for such a correction could be just about anything, including spreading concern that the coronavirus could impact economic growth to …
January 27, 2020 – As the S&P 500 has marched to new records, more and more of the advance has been concentrated in fewer and fewer names. History says that is a bad sign. Such concentration suggests a pending correction.
Stocks fell on Friday as concerns rose that the spreading coronavirus would escalate into an event of meaningful economic consequences. This morning, futures point to further declines. Whether the virus reaches the point where it significantly impacts world economies remains an open question. But a market that has gone too far, too fast doesn’t need …
January 24, 2020 – This could be the first yield curve inversion since 1950 to not end with a recession. Leading economic indicators must be monitored to ensure this is correct. Employment is the most important statistic to keep an eye on. Earnings so far have been well received but valuations are stretched
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 …