Uncategorized, Weekly Update

A Market in Search of Leadership


Published December 14, 2018

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2018 was supposed to be the year that financial stocks took charge. Rising interest rates were expected to provide profitable fuel for banks to substantially increase profits. Instead, financial stocks are some of the worst performers of the year. (more…)

Uncategorized, Weekly Update

Stocks React to Election Results and a Split Congress


Published November 9, 2018

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It was no surprise that stocks rallied this week once the midterm elections had passed. Just as in 2016, and before most elections, investors become cautious ahead of elections. They usually breathe a sigh of relief afterwards. Stocks have gone higher after EVERY midterm election over the past almost 70 years, on an annual basis. With this election producing a split in Congress, is that bullish or bearish for stocks? The following research provides some data on that question: (more…)

Uncategorized, Weekly Update

Was This Historic October Selloff the Beginning of a Bear Market?


Published November 2, 2018

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October is one of the two best months of the year here in Austin, Texas (the other being April). “Best” being defined as a break from the sweltering heat that drags along from May through September. In April and October, skies are sunny, temperatures are moderate, and our city is a joy. However, this year, we have experienced unprecedented rainfall that has washed away much of our prized October. The result of all the rain has been a swollen, mud-filled river through our city that has overwhelmed our water treatment facilities causing us to spend a week boiling water if we wanted to use it. It’s been a dramatic unraveling of our normally blissful month.

The stock market has experienced its own October unraveling. After a period of immense calm, stock investors have been rocked by a crushing series of volatile trading days, most often leaving market indexes heavily in the red. The sharp selloff ranks among the top 10 most damaging 35-day periods in the past 65 years. (more…)

Uncategorized, Weekly Update

No, the Stock Market Does Not Predict Recessions


Published October 26, 2018

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Below is a good post from Ben Carlson regarding the ability of the stock market to predict recessions. The data says the stock market is bad at such predictions, rising half or more of the time in a 3-6 month window ahead of the onset of a recession. So, if the stock market “looks ahead” by 6-9 months as we are often told it does, the market is no better than a coin flip in foreseeing recessions. It may not look ahead all that well is the point. (more…)

Uncategorized, Weekly Update

Explanations for the Market Drop


Published October 19, 2018

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Our post last week noted that the October selloff in stocks likely had drivers other than the oft-noted rise in interest rates as some of the most interest rate-sensitive sectors, such as utilities, were holding up just fine. We also noted that the wave of geopolitical issues that seem to be ever-widening were unlikely to be a major cause of the selloff as investors were not pouring money into bonds, as they typically do during periods of angst. A recent note from Oppenheimer points to persistent and increasing weakness in non-U.S. economies as being the primary catalyst for the current stock market correction. (more…)