Stocks managed to eke out a small gain after trading lower for much of the session. With the next FOMC meeting less than two weeks away, the yield curve has flattened a bit reflecting investor optimism that lower rates could spur economic growth and a slight increase in the rate of inflation. This week has …
July 17, 1019 – As we await the flood of earnings reports to come over the next few weeks, it may be a good time to stand back and reflect on some of the major trends that have come to dominate our world today. Populism is one. The way politicians react as they hear the cries of their electorate will shape tomorrow’s world.
Stocks gave ground yesterday amid some profit taking. A sharp drop in energy prices nicked the oil sector. Late in the day, President Trump once again spoke of the possible need for further tariffs against the Chinese should trade talks fail to make progress. The markets reacted much less harshly than they have in the …
July 15, 2019 – The 3-month to 10-year yield curve is very close to uninverting. Fears of recession are waning and stocks march to record highs. Valuation remains a concern. A lot will depend on the moods managements display during earnings season which starts today as Citigroup reports.
Stocks continued to rally on Friday and most leading indices again closed at record high levels. With long Treasury bond yields continuing to press higher, the 3-month to 10-year yield curve, which has been inverted for a few months, is very close to uninverting, perhaps even before the Federal Reserve lowers the Fed Funds rate …
July 12, 2019 – Inflation remains missing in action. The world suffers from oversupply, and millennial debt levels are starting to strain spending. The Fed will cut rates at the end of July. The only open question is how much.
Stocks finished mixed yesterday. The Dow Industrials set a new record high crossing the 27000 barrier for the first time led by UnitedHealth Group which jumped sharply after President Trump stepped back from his proposal to ban rebates within the distribution channel for pharmaceuticals within government drug plans. On the flip side, the pharmaceutical stocks …
July 10, 2019 – The big event this week will be Fed Chair Jerome Powell’s testimony to Congress beginning today. Those wanting multiple interest rate cuts this year may be disappointed by Mr. Powell’s approach of being data dependent meeting to meeting. But, based on market action this week, investors appear to have adapted to Mr. Powell’s approach to monetary policy.
Stocks finished mixed yesterday recovering from a weak open. The big economic event this week is Fed Chair Jerome Powell’s testimony before Congress today. While it continues tomorrow all the reaction will happen today. Here’s the conflict. Markets love higher earnings and lower interest rates. That may sound like an oversimplification but it really isn’t. …
July 8, 2019 – Interest rates have been the driver for rising stock prices this year. Fed Chair Jerome Powell’s comments to Congress this week could give clues to the path forward.
After Friday’s strong employment report stocks fell as the likelihood of significant rate cuts later this year were diminished. But the losses were cut by half or more at the end of a very slow trading day. This morning, however, the downward response continues if futures are any indicator. As we have noted numerous times, …
July 5, 2019 – A strong employment report is good for the economy. A July rate cut is still an almost 100% likelihood, but future rate cuts will depend on the course of inflation and markets overseas.
Stocks rose on Wednesday as rates remained weak. But the big story today is the June employment report just released. Let me start by restating one truism that we shouldn’t ignore. The higher the net employment gain, the better it is for our economy. Period. In June, 224,000 net new jobs were created. After a …
July 3, 2019 – Lower rates mean higher P/Es. That continues to propel stock prices higher. While lower rates and a partially inverted yield curve could portend a recession, more likely they reflect a reaction to easier monetary policy worldwide and an effort to stimulate growth.
Stocks staged a mild gain once again yesterday, and the S&P 500 set another all-time high. 10-year Treasury yields fell below 2.0%. This morning they are trading at about 1.96% as yields throughout Europe tumble further into negative territory. Economic data this week continues to show some slowing in the pace of economic growth in …
July 1, 2019 – The good news coming from the Trump/Xi meeting may be less substantive than appears on the surface. While the removal of tariff threats is a relief, starting talks is a lot easier than reaching an agreement. In the meantime, nothing emanating from the summit is likely to change the GDP or earnings outlook.
Stocks rose again on Friday amid optimism that the G-20 meeting wouldn’t produce any unwanted surprises. The bond market was quiet with the 10-year Treasury yield settling around 2.0%. While there were a lot of headlines over the weekend related to the G-20 meeting and President’s Trump brief foray into North Korea, the news was …
June 26, 2019 – Stocks fell and investors accepted the likelihood of no trade deal this weekend. However, this morning, Mnuchin’s comments that we are 90% of the way there was taken encouragingly. The consensus of the moment is that no deal is achieved this weekend but new tariffs are deferred. Any deviation will cause immediate market action next week.
Stocks suffered their biggest decline in months yesterday. While profit taking would have been a good enough explanation, heightened rhetoric between the U.S. and Iran, a statement from a White House spokesperson to the press toning down expectations for the Trump-Xi summit this weekend, poor economic data out of Europe and weak housing data here …
June 24, 2019 – With stocks back to recent highs, risks start to increase and reward potential starts to decrease. Overcapacity worldwide is keeping inflation low. For equity investors, the attendant rise in P/Es is a plus. But central banks are pumping money to try and boost inflation. Cheap available funds often lead to bad decisions and economic bubbles as evidenced by the current frothy IPO market.
Stocks continued to chug along and now the Dow is within shouting distance of setting a new all-time high just as the S&P 500 did last week. But all isn’t perfect. German ten-year bund yields fell below -30 basis points overnight, and 10-year Treasury yields in the U.S. are down to 2.0% after reaching over …
June 21, 2019 – Markets set new highs yesterday as the Fed indicated a rate cut was likely in July. The IPO market continues to boom. This is clearly a risk-on market that is starting to flirt with euphoria. While it is nice to celebrate new highs, creeping euphoria sets off danger signals.
Stocks moved to new record high ground after the Federal Reserve strongly hinted that a rate cut would come at its July FOMC meeting. Markets are pricing in at least one more rate cut before the end of 2019. Normally, the Fed cuts rates to stimulate the economy. That is a likely outcome of a …
June 19, 2019 – Today’s Fed meeting and the outcome of Chinese trade negotiations will dominate markets for the next two weeks. After yesterday’s rally, optimism prevails. But there is plenty of room for disappointment. This is a hard market to chase.
Stocks staged a sharp rally yesterday after President Trump tweeted that he would have an extended meeting with Chinese President Xi at the upcoming G-20 summit and that trade talks with China are resuming. The move came in front of today’s conclusion of a two-day FOMC meeting. Results will be released early afternoon with a …
June 17, 2019 – A quiet market offers you time to upgrade your portfolio. Just as in sports, putting a team with superior skills on the field is likely to get you superior results, owning the best managed companies, over time, should be a winning strategy.
Stocks fell modestly on Friday ending a rather tranquil week following sharp gains the week before and a prior 6-week stretch of losses. Once again, there was little economic news. Most of the economic data last week highlighted the slow pace of inflation. For the next couple of weeks we are likely to get much …
June 14, 2019 – Against a relatively quiet backdrop today, three issues seem paramount: Fed policy, tariffs, and the 2020 election. How these play out will dictate the course of the market over the next several months.
Yesterday, stocks halted a two-day losing streak. A late afternoon rally helped shares finish near their best levels of the session. Attacks against tankers in the Persian Gulf helped to lift the price of oil stocks which have been in steep decline lately. The bond market was fairly quiet, and both the economic and corporate …
June 12, 2019 – Markets will be volatile in front of next week’s FOMC meeting. They clearly want to see a rate cut. A more likely expectation might be for a cut at the end of July. What is important for investors is that this Fed, led by Jerome Powell, wants to work with markets, not against them. If the need for lower rates is clear, it will act, if not now, then soon.
The Dow’s six session winning streak ended yesterday as a solid early morning rally faded. Continued dissatisfaction with the recently announced United Technologies/Raytheon merger drove the price of United# lower for the second straight session. That alone was enough to move the Dow Industrials into negative territory as United Technologies is a Dow component. With …
June 10, 2019 – A robust market last week brought stocks back within shouting distance of their April highs. To move higher, equity investors need to expect either earnings greater than consensus forecasts or a continued downward move in interest rates. More likely, we believe stocks have recovered to the top end of an 18-month trading range, and some caution right now appears warranted.
Before starting this morning, I want to thank my colleagues for pitching in so admirably during my vacation. Before switching back to the markets, I want to make one comment on infrastructure. Anyone who has traveled overseas knows that the gap between our roads, airports and rail systems compared with those of other nations, both …
June 7, 2019 – Although near term volatility seems to be creeping up, the major averages remain range-bound. There hasn’t been much in the way of equity gains in nearly 18 months. Digestion phases are appropriate times to refresh your portfolio while keeping an eye out for new opportunities.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Jim Vogt. Recent news events are leading the market to price in at least two Fed Rate cuts by the end of this year. It seems like the Federal Reserve made a mistake …
June 5, 2019 – Market rebounds on dovish Fed comments but fears of a global economic slowdown continue and news that U.S. government regulators are now targeting Google, Amazon, and Facebook shakes FAANG stocks.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Chris Gildea. The latest bout of volatility was ignited by news that U.S. government regulators are now targeting some of the largest tech companies on antitrust concerns. Whether or not any concrete actions …
June 3, 2019 – Increased market volatility is an opportunity to review risk tolerance, asset allocation and existing equity holdings, while resisting the temptation to time the market.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Ray Reed. As analysts and investors, we seek to understand what drives markets and individual stocks on a long-term basis in an effort to produce competitive investment returns for our clients and help …
May 31, 2019 – Markets are rattled with growing global trade tensions. Equities continue their decline for May. Trade tensions, slowing growth and tepid inflation are all causing investors to look towards the bond market for safety, driving yields down.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Dan Rodan. Trade tensions take center stage again as China hints at increased retaliations, and the White House signals 5% tariffs against Mexico if Mexico does not increase its efforts to slow the …
May 29, 2019 – Today’s market worries are likely to provide a buying opportunity in the fall.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Maris Ogg. Not much in the stock market has been clear lately. We saw the irrational decline in December of 2018 corrected quickly in 2019, which seemed to suggest that the domestic slowdown …
May 24, 2019 – Trade tensions continue to weigh on stocks. At the same time, high valuations created a buyer strike. In a period of little meaningful economic or corporate news, that has set stocks on a path drifting lower. This should continue until valuation creates bargains or the news flow gets more positive.
Stocks fell sharply yesterday with all leading averages falling more than a full percentage point. Most of the damage came early amid new trade fears and some elevated concerns about Brexit. But markets stopped falling by midday and actually rallied a bit into the close. Futures are higher this morning suggesting that without further news …
May 22, 2019 – Trade tensions continue to dominate markets. Yesterday, tensions eased and markets rose. This morning, the picture isn’t as bright and stocks are likely to give back part of yesterday’s gains.
Stocks rose yesterday after reports that Washington was softening its stance against Chinese telecom giant Huawei after realizing that a total ban on use of Huawei products would cripple wireless service over parts of the U.S. and would create immediate supply chain issues for other companies. It granted a 90-day cooling off period to allow …
May 20, 2019 – Economic forces are providing a slight headwind, including the pending impact of tariffs. Against this backdrop, avoid companies facing political headwinds until the pressure starts to dissipate.
Stocks finished a seesaw week to the downside on Friday in a rather listless session. With earnings season winding down, we are entering a period mid-quarter where we can expect a dearth of new economic or corporate news. What news does become available, therefore, can take on outsized meaning. With trade issues dominating the front …
May 17, 2019 – Although market volatility has risen, there isn’t a clear trend. The focus on trade may begin to dissipate as investors realize that the Chinese are the ones who have to make concessions. Delay will only hurt them. It may take time, but the U.S. economy will continue to grow in the interim.
Stocks rose yesterday for the third straight day. Combined the three sessions came close to wiping out Monday’s losses. But futures this morning are pointed lower again, and stocks are on course for their fourth straight weekly decline. After a straight-line increase of 25%, a 5% correction isn’t particularly worrisome. Of course, if it escalated …
May 15, 2019 – Yesterday’s rally looked more like a dead cat bounce than the real thing. The two events that could really generate a sharp move upward, a solution to the trade issues or a Fed rate cut, don’t appear imminent.
Although stocks staged a solid rally, a late afternoon selloff sapped any serious optimism that the gains were the start of a new move higher. It felt more like a dead cat bounce after the 600+ point decline of Monday. I’ll start today with the pessimistic side. First, valuations are high. They aren’t as inflated …
May 13, 2019 – The poor performance of the Uber offering on Friday will clearly impact pricing of future offerings. Investors want to see a path to profitability. They can’t with Uber and Lyft. On another front, a trade treaty with China no longer seems near. That means more tariffs and higher costs. Stocks will have to adjust to reflect the new reality.
Once again markets opened sharply lower on Friday but rallied in the afternoon, this time to finish with moderate gains. For the week, however, given the sudden negative turn in trade talks, stocks lost about 2% in value. In addition to the news on trade, the Uber IPO was a resounding disaster. I cannot remember …
May 10, 2019 – Although tariffs went up this morning, trade talks continue, and markets are still hopeful for a relatively quick resolution. Today’s other big story will be the IPO for Uber. The reception for that stock may be more influential to markets over the coming weeks than the trade talks.
Stocks fell sharply yesterday morning, but recovered much of their losses throughout the day as traders continued to worry whether the U.S. would raise tariffs on China. 12:01am has now passed, and the tariffs are on, at least for now. Supposedly Presidents Trump and Xi are going to have a phone call later today. The …
May 8, 2019 – Was yesterday’s decline a one-day hiccup or the start of a long awaited correction? We will learn a lot today. Without follow through to the downside, it is simply a one-day event that won’t interrupt the bull run. However, a weak market today will suggest it is time to play defense.
Stocks fell sharply yesterday posting their biggest one-day loss since January. Concerns that President Trump will enact higher tariffs on Chinese goods sent prices lower even as Chinese trade negotiators arrived in Washington in an effort to get trade negotiations back on track. Today, traders will be looking for any sign of progress. Few expect …
May 6, 2019 – Just when everything looked rosy, President Trump threatened to raise Chinese tariffs on Friday with more to come should China fail to negotiate quicker in good faith. That is likely to be taken with apprehension in equity markets and could spark a meaningful correction if the tariffs are implemented. After a 25% gain from the December lows, an orderly correction is in order.
Stocks closed up on Friday on the heels of a strong employment report and a 50-year low in unemployment. The economy continues to hum along with little inflation. But, alas, if only the economic data was the driver of stock prices. When things look like they can’t go wrong, look to Washington to throw a …
May 3, 2019 – While the economy is on track for stable solid growth with low inflation, the IPO market is starting to send signals that euphoria and complacency are settling in. That isn’t a good long-term sign
Stocks fell for the second straight session after Federal Reserve Chairman Jerome Powell noted that he saw no reason for a rate cut anytime soon. He said that the board believed the unusually low inflation numbers in the first quarter were transitory and didn’t yet warrant a cut in rates in order to stimulate more …
May 1, 2019 – With four up months under our belt, 2019 more resembles 2017 than 2018. While the pace of gains can’t be maintained, there are not big storm clouds today that suggest growth is going to die any time soon. A reflective look back at what have been the winners and losers to date can be instructive.
April finished on a mildly positive note. Earnings season has been generally upbeat but with some high profile fallen angels. Yesterday’s fallen angel was Alphabet#, whose shares declined by more than 10% after reporting lower than expected revenues and offering guidance that was less positive than expected. So far this year, stocks have risen each …
April 29, 2019 – Stocks continue to move higher amid better earnings, lower interest rates and a stable currency, a perfect environment for equity investors. The only potential fly in the ointment for now would seem to be valuation if stocks continue to rise as fast as they have for the past 3 months.
Once again, stocks set new record highs on Friday despite poor earnings reports and outlooks from Dow components Exxon Mobil# and Intel. The ideal for stocks is a combination of good earnings, low interest rates and a stable dollar. Friday’s GDP report was a surprise in two aspects. Growth of 3.2% was higher than expected …
April 26, 2019 – Technological disruption is an increasingly important part of our economic picture. Not all disruptors will succeed, and a rising stock market increases the risks of riding the wrong horse. But trying to avoid the risks by staying with the companies that are being disrupted may be an even worse approach.
Stocks were mixed yesterday as companies reacted in starkly different ways to earnings results. While Microsoft#, for instance, rocketed to a new all-time high, 3M# sank more than 10% as it fell well short of forecasts. In many ways, the current stock market and economy resemble the late 1990s. You may recall that in 1994 …
April 24, 2019 – Stocks have returned to record high ground as earnings beat expectations. But with interest rates lower than they were last September and earnings above levels at that time, stocks today appear more fairly valued than they were in late summer.
Stocks moved into record territory yesterday as both the S&P 500 and the NASDAQ Composite set new highs in the wake of generally favorable earnings reports despite a strong headwind caused by a strong dollar comparison year-over-year. Moreover, recent economic data has been positive suggesting that the slowdown that began last fall is now behind …
April 22, 2019 – As the IPO market starts to blossom, investors should be aware of the laws of supply and demand. In particular, when lock-up periods expire the supply of stocks available for sale could become a material headwind if not offset by other factors like rising earnings. Fortunately, we expect earnings growth to resume in the second quarter and to accelerate a bit for the rest of 2019.
Stocks moved higher again on Friday as two high profile IPOs, Pinterest and Zoom Video made their public debuts. But elsewhere, stocks show signs that the momentum that propelled stocks back close to their historic highs may be running out of gas just as we approach the heart of earnings season. Obviously, a major deviation …
April 17, 2019 – 5G is coming. The technological success of Huawei, a leading Chinese company connected to its government, is putting pressure on the West to take necessary steps to retain leadership. Yesterday’s settlement between Apple and Qualcomm is a step in the right direction. Alleged efforts by the Justice Department to stop the merger of Sprint and T-Mobile would be a step backwards.
Stocks were mixed yesterday dominated by weakness in the healthcare sector. As Democratic Presidential candidates start barnstorming the country and talk about radical overhauls of healthcare, investors have become spooked. While few believe we are headed for a single payer, Medicare for all solution anytime soon, significant changes could have major impact. What are the …