Published October 15, 2021
There is always plenty of talk about whether the stock market is ‘fairly’ valued, expensive, or cheap. It is a question without an answer; there are only opinions. Because in the marketplace, the price is determined solely by what investors are willing to pay. (more…)
Published March 26, 2021
Market corrections are typically defined as a decline of at least -10%. But they can also be corrections “through time”. A case in point is the chart of Amazon below. After leading the way higher for stocks from the initial Covid-19 plunge, Amazon has traded sideways for the past nine months, correcting in time. (more…)
Published March 12, 2021
Below is the most recent analysis from Schwab’s Liz Ann Sonders. While some have struggled with the seeming disconnect between the stock market and economy over the past year, Ms. Sonders outlines how the market and economy have been much more in sync than we might realize. (more…)
Published March 5, 2021
The market’s preferred narrative has changed over the past month leading to a selloff in the tech & consumer-heavy Nasdaq. When the current market rally started way back in April 2020, the argument was that the stable earnings growth and global presence of the mega-cap tech and consumer stocks like Amazon, Facebook, Nike, et al. would be the best place for stock investors to park their money. These brands are substantially online or ‘digital’ in their business operations, and less likely to be impacted by the new stay-at-home lifestyle. (more…)
Published February 12, 2021
It is no secret that money is chasing stocks, creating what some are calling ‘bubbles’ of valuation here and there (if not in the market overall). We talked last week about how valuation doesn’t really matter, supply and demand does. Right now, investors see no reason to hold back on the demand piece. We find no better example of this behavior than the massive (and sharply quick) run-up in shares of the most risky of companies, broadly speaking. That would be the smallest companies in the market – the microcaps. (more…)
Published October 23, 2020
With the Nasdaq 100 (QQQ) index as the focus of our models, we spend a lot of time talking about that index and its major components – e.g. Amazon, Apple, Microsoft, et al. Another trend in the market, and one that might be poised to outperform the Nasdaq, is the old line industrials. (more…)
Published October 16, 2020
The stock market has a pretty good track record for determining who will win a presidential election. The indicator looks at the market return over the three months leading up to the election. A positive return suggests a win for the incumbent. The data below, going back to 1928, shows an 87% success rate for the stock market in picking the ultimate election victor.
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Published July 17, 2020
A few miscellaneous notes this week that describe the current market outlook, foggy though it be. Starting at the highest level with the wide range of earnings projections for the S&P 500. Currently, the S&P 500 index trades around 3200. If we look at the chart below, we see a 2021 earnings per share for the S&P 500 range of $135-170. At $135, the S&P 500 is trading at price-earnings ratio of 23, on the high end of “normal”.
Published May 22, 2020
The stock market has rallied hard off the March 23rd bottom, surprising almost everyone in the strength and lift of the move. This rally has brought the Nasdaq 100 (QQQ) back to positive on the year, a stunning development given the dire economic situation. That positive year-to-date print for the Nasdaq reflects the seeming fact that Covid-19 has served to accelerate trends which benefit these top companies of the digital economy – e.g. Amazon, Facebook, Google. That the Russell 2000 small-cap index remains down almost -20% year-to-date, while the equally-weighted version of the S&P 500 is down -16%, is perhaps a better stock market gauge of the overall economy’s troubles. (more…)
Published April 17, 2020
The stock market’s recovery from its March plunge has seen a few groups and stocks rise to the top. Many of those favored groups and stocks are heavyweight members of the Nasdaq 100 stock index, trading under the symbol QQQ. (more…)