Weekly Update

Business Cycle Analysis


Published January 20, 2023

 

Fidelity Investments presents information in the context of the longer-term business cycle. The current look at the business cycle shows all global economies in or approaching recession. (more…)

Weekly Update

Overseas Stocks Are Rallying. Is the Bottom In?


Published January 13, 2023

Stocks have been moving higher. What began in Europe, spread to China, and is now beginning to show up elsewhere. Here are some charts displaying the shift in market tone in these areas. First up, a clear uptrend has formed over the past 3+ months in Europe. Fears of a natural gas shortage during the winter simply did not materialize. (more…)

Weekly Update

Are International Stocks Turning the Corner?


Published January 6, 2023

 

After the dot.com market crash of 2000-2002, international stocks went on to outperform U.S. stocks until the 2008 Great Financial Crisis. That rise was driven by two factors: 1) the “buildout” of China which pushed any and all commodity-related stocks (e.g. industrials, materials thus emerging markets) higher, and 2) the decline in the dot.com darlings which had become outrageously priced.

It usually happens that the leader of the market in one cycle becomes the laggard in the next as the excess is worked off. So it was post-2002 as the chart below shows with the black line highlighting the period where international stocks outperformed. (more…)

Weekly Update

What Happens to the Market if We Have a Recession?


Published December 30, 2022

 

Below is a high-level summary of the past year and potential decline levels for the S&P 500 if a recession comes about. Thanks to the folks at Delta for the summary information and to our friend Ravi Palaiyanur for the bottom chart.

“Two of the most robust, leading indicators of recession are the inverted yield curve and a negative six-month moving average of the Leading Economic Index (LEI). The six-month moving average of the LEI turned negative in June and the 2yr/10yr treasury inverted in July. (more…)

Weekly Update

A Survey of Market Risks


Published December 23, 2022

 

Below we continue our parade of 2023 outlooks. This time, we share Schwab’s view of the biggest risks facing markets.

“History shows us that the biggest risks in a typical year aren’t usually from out of left field (although that sometimes happens, as it did in 2020 with the COVID-19 outbreak). Rather, they are often hiding in plain sight. As goes one of my favorite quotes often attributed to Mark Twain: “It ain’t what you don’t know that gets you in trouble, it’s what you know for sure that just ain’t so.” (more…)

Weekly Update

Is Globalization Dead?


Published December 16, 2022

 

We found this opinion piece from Merryn Somerset Webb to be interesting as we turn our attention to 2023 projections. Ms. Webb writes for the Financial Times, among many other publications. Her commentary below obviously refers much to her home country of the UK. But many, if not most, of her observations apply globally. Of course, our models are agnostic to economic trends such as those discussed here. Instead, we focus only on the price and volume trends in the market – up or down – and attempt to react accordingly. (more…)

Weekly Update

2023 Outlook – Part 1


Published December 9, 2022

 

The 2023 market outlooks are beginning to flow. Below is an overview of next year possibilities put together by Delta.

“Since the Great Financial Crisis (GFC, 2008-09), the stock market trended higher on low interest rates, double digit GDP growth in China, and robust non-cyclical growth from the major technology companies. What would happen if the Fed Funds rate jumped from zero to 4% in a single year? What would happen if China’s GDP growth became hobbled by non-stop Covid lockdowns? What would happen if big-cap technology stocks stopped offering consistent earnings growth and became the worst performing major segment of the U.S. stock market? (more…)

Weekly Update

Investors Love Powell’s Softer Tone


Published December 2, 2022

Investors increasingly believe the Federal Reserve has seen peak inflation and, recession or no, will very soon pause their interest rate hikes. Stock markets are responding as if the market has bottomed; with the question now how slow 2023 global economies will be. While employment layoffs are regularly in the news, labor markets remain strong with metrics of consumer activity holding at high levels. At worst, the economic data has become mixed, compelling investors to shift away from the hand-wringing that characterized the late Summer/early Fall. China appears to have pulled back on the most restrictive Covid measures. Supply chain issues have all but disappeared. The FTX crypto implosion looks to be limited to the landscape of crypto companies and investors, not spreading outward to threaten any systemic trouble. Investors now seem to look forward to a 2023 without the storm clouds they once feared. (more…)

Weekly Update

Searching for the Market’s Low Point


Published November 25, 2022

 

The stock market began its decline one year ago. We posted the first chart below around that time to point out the danger ahead from the failed break higher in smallcap stocks.

Since that failed breakout, we have seen an absolute assault on markets by the Federal Reserve with interest rates being raised at an almost unprecedented pace. The short-term 2-year interest rate has jumped from near zero to 4.50% in twelve months (second chart). (more…)

Weekly Update

What Will Get the Bulls Really Running


Published November 18, 2022

 

The folks at Delta have provided a good succinct overview of the state of the stock market and what needs to happen for a sustainable uptrend to occur. Here’s what they have to say:

“Since mid-October, the Bull has shown some life. The S&P 500 is up by about 5% from the closing low on October 12. Bullish drivers of the market include:

  • An expectation for typical seasonal strength in November and December
  • A perfect history of 18 – 0 of positive S&P 500 performance from November through April in mid-term elections years dating back to 1950
  • Mid-term elections that deliver a divided U.S. Congress which is expected to reduce the likelihood of any new taxes and major fiscal expenditures
  • Earnings reports are not as bad as feared
  • Maybe the Fed will stop raising rates sooner rather than later

(more…)