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…)
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…)
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…)
Published August 19, 2022
It has been quite a long time since we have seen such disparity in the narratives flowing down Wall Street. How long and hard the Fed will tighten rates is one source of contention. But it’s not the biggest. That would belong to where corporate earnings are headed, which is sort of a Street barometer for whether or not the economy falls into a recession (how deep that recession is a third dimension discussion floating around also). (more…)
Published August 12, 2022
The article below from Zacks provides a good overview of the key economic indicators to look for as we move into the second half of the year.
“The Federal Reserve is actively trying to curb demand in the economy by raising rates, and all the talk is about whether they can usher a ‘soft-landing’ without triggering a deep recession. So, the Fed will be a key factor to watch in the second half of the year. But I also have three other economic fundamentals investors should put on their watchlists, as they could be key in determining the path of the economy and markets over the next year. (more…)
Published August 5, 2022
The stock market is at a crossroads having recovered the entirety of its June plunge. Prior to that plunge, stocks ran in place for several days as the bulls and bears fought mightily. That standoff was won by the bears, and the plunge ensued. The counter-rally, once it got going, has been almost as swift. (more…)
Published June 10, 2022
Investors are facing a tremendous amount of uncertainty these days as inflation continues to push out the timeline for when the Federal Reserve might pause interest rate hikes. Friday’s “hot” inflation data offered the Fed no new cover for backing off their inflation-fighting posture. (more…)
Published April 8, 2022
The recent inversion in the yield curve has certainly generated a lot of headlines. The inversion occurs when short-term interest rates become higher than long-term interest rates. The driver of the inversion is usually a Federal Reserve raising rates while investors are skeptical about the long-term economic strength. Thus, the interest rate curve reflects a sort of temporary spike in rates. This inversion often suggests a recession is upcoming as the economic cycle has overheated to the point where the Fed has had to step in to slow it down. (more…)
Published April 1, 2022
This week saw a strong move in growth stocks with breakouts in small-cap growth, software, semiconductors, real estate and other beaten-down growth and cyclical areas. This is a positive development for the broader stock market as the rally expands its reach beyond the commodity and defensive leaders of the past few months. (more…)
Published March 25, 2022
The stock market has settled down quite a lot in recent days as this chart of the volatility index shows. When volatility jumped down over that blue trendline, and kept going down, it was a likely sign that stock investors could breathe a little easier. Nevertheless, we also note that volatility has been generally elevated since mid-November and has a ways to go before true calm returns to the market. (more…)