Briefly on the final debate. Lessons were learned. Mics being muted allowed for a much more “Presidential” showing. There were some jabs thrown at each other, but the tone improved vastly. With millions of votes already cast and many minds made up, the only question left is do enough independent voters exist to move the …
October 21, 2020 – Stimulus talks continue past Speaker Pelosi’s deadline. They are likely to reach agreement but not gain Congressional approval until after the election. After tomorrow’s debate, most voters will have made up their minds. Today, we outline how we see five different outcomes affecting the markets going forward.
As talks of additional stimulus failed to reach resolution, stocks fell yesterday. Adding to losses in the Dow was the poor reaction to IBM’s# results. While they met expectations on both the top and bottom lines, management did a poor job laying out future directions. Speaker Pelosi and Secretary Mnuchin continue to talk. There is …
October 19, 2020 – With the election just about two weeks away, besides Thursday’s debate, perhaps the most important remaining factor is the pace of the second wave of the pandemic. While President Trump claims the pain is behind us, increasing case counts suggest otherwise. The course over the next two weeks could be a swing factor.
Stocks drifted higher last week amid a light news period. Earnings season got off to a so-so start. Results generally matched expectations but forward looking guidance was cautious. Interest rates remained within a tight band. Perhaps the best news was the strong September retail sales figures. Those, however, are at risk without further stimulus. Earnings …
October 16, 2020 – Rising global Covid cases and stimulus delays are bringing more volatility to equities. New European lockdown policies put reopening efforts into question. We’re not out of the woods yet, but the long-term future still looks quite positive.
Short-term factors came back to the fore the past few days as rising Covid cases and an increasing likelihood of stimulus measures being pushed back wreaked havoc on markets worldwide. Major European indexes were down over 2%+ yesterday, led by Germany dropping 2.5%. China was able to hold it together after announcing even further stimulus …
October 14, 2020 – Earnings season is underway. Early results are encouraging. We are reminded, however, that our economic recovery to date has been built on a framework of fiscal support packages. Without another, the recovery will slow or it could collapse entirely if the recent Covid-19 upturn becomes a spike. But all this is known. Congress will respond. Timing and amount of support will dictate the outcome.
Stocks retreated yesterday after four days of gains. It was the start of earnings season. More on that in a moment. Perhaps the biggest news stories yesterday were twin announcements from Johnson & Johnson# and Eli Lilly that Covid-19 related drug trials were being halted for possible safety concerns. Both hope to resolve the issues …
October 12, 2020 – Last week’s strength came as events in Washington settled down a bit. Now both sides are ready to go back on the campaign trail, although most voters have already made up their minds. Earnings season starts this week but most major companies will start reporting next week. Results should exceed expectations and drive stocks higher as long as Covid-19 stays within a range of expectations.
Last week was the best week for equities since July. In July, however, the gains were totally dominated by the technology sector and other Covid-19 beneficiaries. Last week, the gains were much more spread out. The tech stocks did OK but financials and industrials were also gainers. It was a healthier advance. While last week’s …
October 9, 2020 – Trump’s 180-degree turn on stimulus negotiations is propelling markets back towards new highs. Money printing continues to boost equities, but a bipartisan agreement is never guaranteed. We examine a few scenarios and implications on timing.
The Trump tweet-induced decline on Tuesday has more than reversed itself after yesterday’s action. We are all accustomed to the “Art of the Deal”, and Trump quickly changed his tune, stating he is in favor of numerous small deals specifically aimed at airlines, small businesses and the unemployed. Overnight there were more rumblings of coming …
October 7, 2020 – Yesterday was classic Trump, the negotiator. He walks away from the negotiating table at the last minute only to pull a rabbit out of his hat at the last minute. He won’t dictate terms on his own, but the odds of a stimulus package before the election are probably no greater or worse this morning than they were yesterday morning. The key is whether Senator McConnell can line up the votes to pass any package.
Stocks fell sharply yesterday afternoon after President Trump tweeted that he was instructing his stimulus negotiating team to halt discussions with Speaker Pelosi until after the election. While the reaction was both instinctive and obvious, anyone who has watched Trump’s past behavior in negotiations knows that it is always darkest before the dawn. And only …
October 2, 2020 – President Trump and First Lady Melania test positive for Covid-19. Stimulus package negotiations continue. The labor market continues its slow recovery while the values of homes and financial assets like stocks and bonds have rebounded strongly. The long-term consequences of the government stimulus and extraordinarily low interest rates remain unclear.
Stock market futures are trading lower this morning on news that President Trump tested positive for Covid-19 shortly after news that his senior counselor Hope Hicks tested positive on Thursday. This news is likely to renew fears about the second wave and the virus’ continued impact on the economy. If Trump becomes very ill, there …
September 30, 2020 – Last night’s chaotic debate doesn’t appear likely to move the election polls all that much. Neither candidate got much of a chance to score positive points in their favor. Markets show little change this morning, perhaps a reflection of the notion that monetary policy is more impactful on markets than the choice of President.
Stocks fell modestly yesterday in front of last night’s debate amid little news. The debate turned out to be like none other. And I am not sure either side gained from it. President Trump, behind in almost every poll, came out swinging, interrupted constantly, played by his own rules, but made few points. It was …
September 28, 2020 – Markets are trying to regain their footing, but with so much election uncertainty looming that may take time. In the meantime, change caused by the pandemic continues to have a greater impact on individual companies than the Presidential election. The biggest mistake a company can make is to assume a post-vaccine world will look like 2019 all over again.
Stocks rallied on Friday as some bargain hunting took place. Otherwise, there was little news to move stocks. Economic data continues to show improvement, although the pace of gain is slowing. Weekly unemployment claims remain above 800,000, about four times what they were pre-pandemic. While some businesses continue to reopen or expand their allowed capacity, …
September 25, 2020 – Sideways action remains the name of the game this week. Housing and another round of stimulus proposals are bullish. Election uncertainty and rising Covid cases are bearish. There is a lot more for bulls and bears to chew on over the coming months.
It certainly looks like volatility is here to stay for a while. Markets hate uncertainty and we have a lot of it at the moment. Stocks fell precipitously on Wednesday, followed by another 1% drop Thursday morning. Fortunately, some great housing numbers and a possible Mnuchin/Pelosi stimulus meeting helped turn things around as the major …
September 23, 2020 -Despite concerns over the future of the Supreme Court, a rise in Covid-19 infection counts, and worries that we might not know who our next President will be until after November 4, stocks rallied largely because stocks react to future earnings and interest rates, not media hysteria.
Stocks staged a tentative rally yesterday that gained a bit of strength toward the end of the session. The Covid-19 winners led the rally, while those most impacted by the disease gave up ground. Over the past several days, there has been a lot of news that has created heightened investor confusion. The death of …
September 21, 2020 – A rise in Covid-19 cases in Europe and uncertainties related to the death of Justice Ruth Bader Ginsburg have markets pointed lower again this morning. Fall and school reopenings in Europe precede the U.S. It is unclear whether the pace of new virus infections will follow suit, but it is concerning. With that said, seasonal outbreaks only last a few months and our health infrastructure is better able to deal with the disease today than it was in March.
Stocks fell again on Friday marking the end to the third weekly decline after two very strong months in July and August. Tech leadership names continued to go down. However, the rally in stocks of companies most hurt by the pandemic could not sustain recent strength. Over the weekend, Covid-19 case levels rose at an …
September 18, 2020 – Market action continues to be range bound with a possible leadership change (again). A few weeks does not make a market, but stretched valuations and fear of another Nasdaq bubble are causing a reallocation into cyclical stocks that will see a boost post-Covid.
Fed comments were about as expected, with a slight hawkish lean towards a steeper yield curve. Fed Funds are going to be near zero for the foreseeable future. They will continue to keep the shorter end of the yield curve under control until (realistically, a big IF) inflation gets above 2% for an extended period. …
September 16, 2020 – Today the Fed ends its two-day FOMC meeting and will detail its framework of low interest rates for an extended period. The risk is that the Fed finds itself behind the curve in the future in the fight against inflation. Current trends related to the pandemic work to keep inflation low, but costs will rise as demand for services return.
Stocks were mixed yesterday, although the NASDAQ Composite managed a 1%+ gain ahead of the conclusion of the FOMC’s two-day meeting. The Fed is likely to give more details relative to its intent to keep short-term rates anchored near zero for an extended period of time. The low interest rate setting is not without risks. …
September 14, 2020 – Uncertainty grows as more Covid-19 spikes accompany reopenings of schools and restaurants. Governments compound the problem in some areas with heavy handed approaches. That may appeal to public health officials but it stifles the economic recovery. Ongoing weakness in the travel and leisure, restaurant, and energy sectors continue to be a drag on the overall economy.
Stocks were volatile on Friday, strong at the open, weakening sharply in midday, and rallying into the close. The end result was a modest decline with the NASDAQ leaders having another difficult day. Futures point to an extension of the Friday afternoon rally this morning, as several large M&A deals were announced and Pfizer suggested …
September 11, 2020 – Stocks started yesterday strong only to be met with afternoon selling after a Republican skinny bill failed to pass. Paired with uncertainty surrounding the upcoming election and fully valued momentum stocks, the future is cloudy over the coming weeks. However, new leaders are emerging.
Taking a step back, let’s look at some of the crazy action this year. In March, we had the fastest bear market decline and the highest percent of down days ever. From that bottom, we bounced back with the fastest return to a new bull market in history. Obviously, that means it was the shortest …
September 9, 2020 – Stocks fell sharply for the third day in a row. The NASDAQ Composite fell 4%. There was no apparent catalyst that precipitated the decline, although subsequent news reports related it to massive option trades by a Japanese investment company. That may be true, but the fact that one investment company, no matter how large, can cause a 10% or better decline in a large chunk of the stock market is cause for concern in and of itself.
Today, trying to get to the bottom of where we are, I am going to use a question and answer format. What caused the decline? While a large options trade may have been a contributing factor, the irrational sudden surge in stocks like Tesla and Amazon that sent both, and others, into a parabolic ascent, …
September 4, 2020 – : A long overdue pullback in momentum names is upon us. Corrections in bull markets are quick, painful and volatile. Underneath the negative big cap tech action, we’re seeing more positive fund flow in the reopening trade names. A rotation into a broader advance would be welcome news.
The bigger the pop, the bigger the drop! High flying momentum names finally took it on the chin yesterday. Overall, the Nasdaq was down 5%, while the Dow held up much better, declining 2.8%. Underlying weakness is hitting stocks that rose the most while some proceeds are going into 2020’s “loser” bucket, including airlines, hotels, …
September 2, 2020 – Despite a slowdown in the rate of economic recovery, stocks still move higher in an era where near-zero interest rates are the dominant factor.
Stocks continued to move higher yesterday, once again rotating back to growth names and away from the Covid-19 cyclicals that had led the market in recent days. The primary driver remains Fed policy to keep rates depressed as long as inflation stays anywhere near 2.5% or lower. It has been sustained above that rate for …
August 31, 2020 – New Fed policy ensures rates will be low for longer. Good for asset prices. But it runs the risk that inflation ramps up quicker than expected, forcing the Fed to step on the brakes. That is a year or more away. Thus, we expect prices of most tangible assets to continue to rise until inflation accelerates.
Stocks rose again on Friday after the Federal Reserve formalized its policy to back away from inflation targeting. Instead it is moving toward trying to keep inflation within a range that averages about 2%. Since inflation has been below 2% for some time, its previous target, the new averaging policy will allow the Fed to …
August 28, 2020 – Fed news dominated the headlines with an important change in policy. There are many implications from this but most are positive for equity investors. However, are we starting to create a bubble in tech land?
The market is digesting two pretty important events over the past few days, both of which could have dramatic implications for investors going forward. First and foremost, the Federal Reserve announced a historic change to their long-term mandates on inflation and employment. The Government’s recent helicopter money actions have also led to a new concern …
August 26, 2020 -Earnings continue to show that those that move quickly not only survive but can flourish within a pandemic. Those that simply hunker down and cut costs die a slow death. Tomorrow, the Federal Reserve will lay out a path to keep interest rates near zero for a very long time. That will set a framework for recovery, but the Fed alone can’t create economic growth.
Stocks finished mixed yesterday. But the real message came after the close. Salesforce.com beat earnings forecasts by a huge amount. Despite its high price, its shares surged about 8% in late trading. Toll Brothers# also had a great quarter, leading to a 3% gain in late trading. On the other hand, Nordstrom, which has been …
August 24, 2020 – It was risk-off again last week as unemployment claims grew and there were signs that the pace of recovery was slowing. This week, the Federal Reserve will remind us all that they have our backs. But the Fed can only set a favorable backdrop for recovery, it can’t create a recovery on its own.
Stocks were up again last week according to the broader averages, but 70% of stocks actually fell. In a world that has rotated from risk-on (favoring those stocks most affected by the pandemic) to risk-off (mostly big cap tech) and back again several times, signs that the recovery was slowing last week sent traders back …
August 21, 2020 – The S&P finally cracked new highs albeit with minimal participation. We know the culprits who took us there. Big box retailers did not disappoint as sales were exceptional. Is all the good news priced in?
In just 103 trading days from the bear market low in March, we are already making new highs in the S&P 500. This 55% return equates to a gain of 0.5% every single day. A truly amazing feat. Even more impressive, the tech-heavy Nasdaq started making new all-time highs back in June. That index is …
August 19, 2020 – Good investors find the real news underneath the front page. While the world dickers over mail fraud accusations, the real economy appears threatened by a lack of fiscal response from Congress. But this being an election year, you can almost guarantee a response is coming, although it is likely to be a lot less than what Democrats want.
The S&P 500 rose to a new all-time high in a mixed trading session. Once again, it was the tech stocks that led the advance led by Amazon and Alphabet#. But yields fell and the stocks of companies most adversely affected by Covid-19 were in retreat as the economy showed some signs of weakness now …
August 17, 2020 – As pandemic intensity fades, stocks keep moving higher. But as the economy recovers, at some point the Fed will take its foot off the monetary accelerator. When that happens, and it won’t happen until well into 2021 at the earliest, interest rates could rise and P/Es could fall.
Stocks were mixed Friday after retail sales in July continued to show some improvement. Risk-on stocks, those that would benefit from a fast recovery from virus quarantine, have been outperforming the growth stocks that led the bull market since March for the past few weeks. Gains in retain sales and an ebb in new hospitalizations …
August 14, 2020 – The counter cyclical rally slows for banks and energy stocks while big cap tech keeps on chugging along. A post-vaccine world is getting closer. Winners and losers are vastly different than this year’s market action.
A much needed broadening out of this market rally hit a wall again, with mega cap leaders handily outpacing their cyclical brethren the past few days. Another new milestone was set on Wednesday for the Nasdaq. The tech heavy benchmark jumped over 2%, a strong move for just one day, but the number of declining …
August 12, 2020 – Despite continued deadlock in Congress over a fourth Covid-19 relief bill, markets remain in a bullish trend. Yesterday’s sharp decline in precious metal prices was most likely a head fake. A shift toward value away from high-tech growth seems to have more legs that past similar rallies. The next few days should define whether that shift will be more enduring this time around.
Stocks fell sharply in the last hour erasing early day gains. Investors got excited early when Russia claimed to have approved a Covid-19 vaccine. They may have, but what they “approved” was nothing more than a drug passing Phase I clinical trials. It’s nice there is another vaccine candidate making progress, but that is all …
August 10, 2020 – As the summer Covid-19 spike wanes, investors are more inclined to view the economic recovery as real. That could mean the recent move toward cyclical stocks is real and sustainable for the first time since the pandemic began.
Stocks staged a late day rally on Friday to finish higher. Last week’s gains were marked by rotation toward cyclical industries in response to good economic news, and the lack of large new Covid-19 hotspots. Bonds were essentially flat for the week. While virus concerns have slowed the pace of reopening in much of the …
August 7, 2020 -Jobs, jobs, jobs! Multiple reports over the past few days lead to differing conclusions. One thing is clear though, female employment suffered much worse than in a normal recession. Executive orders are back and could wreak havoc during a precarious time.
Futures were down before the ever-important employment report data this morning. Executive orders came out of the White House that target data collecting technology apps from China, namely TikTok and the widely used WeChat (over 1 billion users) that is owned by Tencent. The order bars any transactions with the two companies due to national …
August 5, 2020 – Stocks were modestly higher yesterday. But yields remain depressed and the dollar continues to weaken, suggesting our path forward is getting a bit bumpier. In large part that is because the U.S. is not doing as effective a job containing the spread of Covid-19 as others. Testing regimens are the key difference. As fall approaches, more effective testing procedures should be contemplated.
Stocks gained ground again yesterday. Bond interest rates hovered near all-time lows. The dollar continued to weaken. In response, oil prices expressed in dollars, rose. As for the coronavirus, trends were mixed. Several of the recent hotspots, from Florida to California, showed some improvement. But the spread has widened and more states than not are …
August 3, 2020 – Tech stocks soared last week but the rest of the market did not. Uneven economic growth has put a temporary lid on the cyclical stocks. While some tech favorites marched to new highs, the move upward in the sector wasn’t uniform.
All the leading equity indices rose Friday but that hardly defined the market. Huge gains by both Apple# and Facebook# dominated weakness in cyclical issues. The Dow rose by more than 100 points, but without Apple it would have declined by well over 100 points. Thursday evening, after the market closed, Apple, Facebook, Amazon and …
July 31, 2020 -Big tech got even bigger last night after reporting blowout earnings. The new digital economy is not slowing down. However, there were many other important data points for the market to digest as we enter the last day of a solid July for equity investors.
There is a lot to report from the past few days. Some backward looking, some forward. Some good, some bad. We have a historic GDP report, Fed comments, Big-Tech quarterly earnings and another shoddy unemployment claims report. A lot to chew on, as usual. Let’s start with the old news. GDP, on an annualized basis, …
July 29, 2020 – The Fed concludes its two-day FOMC meeting today. Key is how it plans to provide further stimulus to the economy. One tool being considered is to control interest rates all along the curve. It is a powerful tool with both positive and negative long term consequences.
Stocks gave ground yesterday amid a mixture of good and bad earnings reports. In the absolute, earnings were down across the Board. But the Q2 declines had been priced in. What matters always during earnings season is performance relative to expectations. Managements had been guiding analysts for the worst. As a result, bad earnings were …
July 27, 2020 – While newspaper headlines suggest a virus out of control across the Sunbelt, data suggests the recent spike may be ending. But it isn’t receding. Economic growth rates are likely to slow down from here. Markets are headed into a transition window as both Congress and the Fed offer more support. The election will also come into more focus once earnings season ends and Conventions begin.
Stocks fell last week after three straight weeks of gains. Persistent Covid-19 eruptions added fuel to the decline. But the signature move last week was stepped up profit taking among the high profile tech companies. Netflix and Microsoft# both reported fine earnings, and yet their stocks tumbled, bringing most of the other tech names down …
May 11, 2020 – As more states are getting set to reopen, investors are watching a new phase of the economic response to Covid-19. We won’t know for several weeks or even months whether we are reopening too fast or not fast enough. But we certainly will have more facts by mid-summer. Public health officials still warn of a possible spike in the fall. If that happens, markets will react. If not, April was probably the low point.
Stocks continued to move higher last week despite the worst employment report since the Great Depression. And the damage is likely to get worse. The May report will show data based on numbers to be reported this week. The unemployment rate could soar to 20% or higher in May. But stocks look ahead, and the …
May 8, 2020 – – Leaders and laggards continued to diverge this week. There is reason for optimism on some companies who have not participated in the recent rally. The new post-Covid world will look different and the stock price movement may not reflect that fully. We still have an election to ponder as well.
We start the day with an unemployment report that spiked to 14.7% with 20.5mm jobs lost in April. Futures shrugged these numbers off as we look to open solidly higher. Clearly, optimism for successful reopenings around the world and an improving chance of beating this disease is winning the day. Thursday’s market performance aside, the …
May 6, 2020 – The message of the market is that we are past the abyss. April probably saw a drop of over 20 million jobs and more will be lost in May. But the world is reopening and the stock market is showing some optimism. Recovery will be very slow, but unless there is a resurgence of the virus that forces repeat closures, the direction is forward.
Stocks rallied once again yesterday but finished well off their morning highs. The economic news continues to be poor but survey data, which is real-time, suggests that the low point was in early April, the time of maximum quarantine. As the country slowly reopens, and the emphasis is the word slowly, investors will be watching …
May 4, 2020 – Threats of new tariffs are weighing on stocks. Some profit taking was in order anyway. States are starting to reopen. Markets want to know how fast the economy might recover. They will learn a lot over the next 30-45 days.
Stocks fell sharply on Friday, partly on profit taking and partly related to yet another threat of tariffs against China by President Trump. The most recent tariff agreement puts some burden on China to accelerate the purchase of American goods, particularly agricultural products. Obviously, the current pandemic throws a monkey wrench on that commitment. Chinese …
May 1, 2020 – Stocks posted one of the better months in a while. A lot of good news has been priced in. Much work needs to be done from here. The bull story has legs but timing may be more uncertain.
Last month brought one of the strongest equity market returns in a long time, posting the best advance since 1987. Coming after we saw negative interest rates, negative oil prices and a near complete shutdown in the economy is saying something! In total, the S&P advanced 12.7% and the technology heavy NASDAQ gained 15.4%. May …
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 …