Published October 22, 2021
The stock market is driven by earnings + liquidity + sentiment. With the Federal Reserve providing money at near-zero interest rates, the liquidity piece of the formula has been overflowing. Sentiment, or how optimistic/pessimistic investors are regarding the economy and markets, has generally been favorable. Corporate earnings have been stellar, rebounding strongly from the Covid-induced weakness. (more…)
Published September 3, 2021
The S&P 500 has spent ten straight months above its 50-day moving average, one of history’s longest stretches of calm. Ultra-low interest rates from an extremely cautious and accommodative Federal Reserve have supported risk-taking investors by keeping the cost of money near zero. Very strong corporate earnings have rewarded investors by expanding the ‘E’ in the P/E ratio, justifying the market’s run upward. (more…)
Published August 20, 2021
The following content from MarketWatch highlights the reason why we are model-driven investors. It is all too easy to get caught up in speculation about what markets “should do” and let that drive our investment decisions. We find it far more productive for our money to row with the market’s price trend, recognizing that market prices move up as well as down, and allowing ourselves the flexibility to pursue gains regardless of market price direction.
Published July 2, 2021
Last week we brought you a global outlook from Schwab. This week, we bring a mid-year outlook published by Invesco, the company responsible for the Nasdaq 100 ETF (symbol: QQQ) that our models focus on. Needless to say, Invesco is very positive on the outlook. (more…)
Published June 18, 2021
This year’s stock market has been all about rotation with money moving into value stocks and out of growth stocks. The narrative has been that rising inflation would push up interest rates. The hike in rates in turn raises the denominator of the classic stock price valuation (e.g. earnings/interest rates) which devalues high-flying growth stocks. The beneficiaries of this narrative have been cyclical sectors like materials, industrials, and energy. This week that narrative took a beating. (more…)
Published June 11, 2021
This week’s inflation report generated plenty of alarming headlines. As the chart below shows, inflation hit its highest point since, well, the end of the last economic crisis. Which points to one of the reasons why the alarming headlines are misleading. (more…)
Published June 4, 2021
While there remain many places still struggling with Covid-19 and its myriad effects, the broad U.S. economy is, less and less, one of those places. This week, the Federal Reserve made clear they are ready to begin backing out of the unprecedented market supports they put in place a year ago. It will be a good while before the Fed takes any action on interest rates. For now, they are beginning to sell off the assets accumulated during the height of pandemic uncertainty. Those assets are the corporate bonds and ETFs purchased by the Central Bank last summer to shore up wavering market confidence. (more…)
Published May 7, 2021
The predominant narrative right now in the markets is that inflation will rise as economies reopen and recover. While it’s easy to find inflationary movements in the price of some goods like lumber, houses and food, the primary driver of overall inflation comes from rising wages. Pre-pandemic, wages had been stagnant for years. (more…)
Published February 26, 2021
Interest rates have ripped higher along with stocks as expectations for a very strong post-pandemic economic recovery gain traction. This week, however, that rise in rates appeared to reach a point where concerns crept in. Stocks tumbled as investors worried that the rise in rates was too high, too fast. (more…)
Published December 18, 2020
We recently noted the strength of non-U.S. stock markets. One of the primary reasons for that strength has been currency-related. The U.S. dollar, often a safe haven in times of stress, has been declining as investors focus on a recovery in global economies in 2021. (more…)