There’s an old Wall Street adage: “When the wind blows hard enough, even the turkeys fly.” Based on the sophisticated meteorological instrument known as the “price chart,” the wind died down considerably beginning in January 2018, leaving airborne only late-stage leadership themes like defensive, Large Cap, and Growth stocks.
Many increasingly fear the global economic recovery is in severe peril because overused economic policies have become futile. Bloated central bank balance sheets, large fiscal budgetary fiascos, and the unprecedented global phenomenon of widespread negative bond yields leaves an impression that economic help is spent!Read more
The stock market is re-testing its August 5th collapse low, the U.S. 10-year bond yield is nearing its lows of this recovery, yet another yield curve inversion (tens vs. twos) was breached this week, silence from the Federal Reserve, negative yielding global debt now totaling more than $15 trillion, an escalating riot in Hong Kong, and trade-war negotiations hanging by a thread as ongoing communications are now only by phone! Whew, it’s tough being a bull. Maybe foolhardy?
Adding to current anxieties are the growing fears that businesses may be curtailing spending plans. Real nonresidential investment spending declined in the second quarter for the first time since early 2016. However, this decline was due entirely to ‘old-era investment spending’ while ‘new-era spending’ remains healthy.Read more
Investor sentiment seems to be unusually conflicted these days. There are worries aplenty, including numerous political skirmishes of consequence around the world, a slowing global economy, and lofty U.S. equity valuations. On the other hand, fiscal stimulus is high for this stage in an economic cycle and the Fed is easing monetary policy, two policy drivers it rarely pays to bet against.Read more
Our group coverage spans most of the traditional groups as defined by Standard & Poor’s and Morgan Stanley Capital International. At times, we found ourselves in disagreement with the S&P/MSCI “standardized” group delineation, but this structure was maintained, with minimal modifications. We have, however, added additional component stocks to all groups and adopted our proprietary approach to component weightings.Read more
This is why financial market prognostications are so difficult and why some believe fruitless! Currently, two recession indicators – both with equally impressive accurate historical prowess – are giving entirely contradictory signals? As shown by the accompanying charts, the yield curve has inverted while fiscal stimulus has been expanding. At least since 1965, this has ‘never’ happened.Read more
Despite the current drama, the stock market will not likely be sustainably driven by the Federal Reserve, ongoing trade negotiations, or by presidential politics. Although these spectacles will continue to bounce the market around, ultimately, its direction will most likely be tied to corporate earnings.Read more
Whew, what a week! Confusion reigned surrounding monetary policy on Wednesday after Chairman Powell’s press conference, and then trade policy uncertainty surged on Thursday when President Trump announced new tariffs on Chinese goodsRead more
Will this economic cycle end with “fire” (overheating) or “ice” (a whiff of deflation)? Interestingly, hedges against both outcomes have performed well in recent months, with both gold and Treasury bonds spiking. For many reasons, though, we believe the U.S. expansion is more likely to end in a deflationary bust.Read more
Despite a widespread impression that business confidence is declining under the weight of ongoing global uncertainties, it was reported yesterday that, after being flat for almost a year, new orders for nondefense ex-air capital goods (core business capital goods spending) rose to a new recovery high in June.Read more
The Momentum category improved despite last week’s modest market losses, with some of the longer-term trend work improving. Daily and weekly 52-week lows for the NASDAQ remain elevated, reflecting the increasing concentration of strength in Technology stocks.Read more
Little is expected from the current earnings season. At best, corporate profits may eke out a small gain compared to last year’s second quarter. Moreover, with Trump’s trade war still threatening to worsen, the yield curve still inverted, and because the U.S. economy is now in the longest expansion in its history, many are understandably worried that earnings growth may remain challenging.Read more