Author: Ken

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Believe It or Not: Stocks go Up AND Down

There seems to be a lot of shock out in the world that markets are down as if people have forgotten stocks don’t go only straight up but also go down. I certainly understand it from younger investors who have really never been through a bear market / recession before, but I’m surprised to see so many more experienced people also caught off guard.

The reality is out of the 97 years from 1926 through 2022, the U.S. stock market was up 71 of those and down the other 26 years. That means, on average, stocks lost money in 1 of every 4 years. Continue reading “Believe It or Not: Stocks go Up AND Down”

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Quick Follow-Up to “Bonds Haven’t Been Here…”

Last week I mentioned yields on Treasuries hitting (or even exceeding) 4% now. So, let’s bring this full circle.

Two weeks ago I wrote a note titled, “No, Stocks Are Not Cheap Yet.” And in that note I provided a range of returns for the U.S. stock market over the next twelve years under a variety of good, average, and bad conditions (see below).

 

The range of returns from this analysis was -5.4% to +3.5% annualized. That means even an optimistic case for U.S. stocks (at least for the conditions in the matrix above) is about a 3.5% annualized return over the next 12-years with an average expected return of about 0%. Continue reading “Quick Follow-Up to “Bonds Haven’t Been Here…””

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Bonds Haven’t Been Here In Over A Decade (And the impact on clients’ financial projections)

Last night the U.S. 10-Year Treasury yield did something it hasn’t done since 2010… it hit 4%.

Just two years ago the 10-year was yielding a measly 0.5%! It’s certainly been a wild, parabolic move in rates.

See chart below of 10-Year Treasury Rate since the eve of the Great Financial Crisis…

Continue reading “Bonds Haven’t Been Here In Over A Decade (And the impact on clients’ financial projections)”

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No, Stocks Are Not Cheap Yet

With the stock market down about 20%, I’ve been getting asked if stocks are now cheap. I’ve also heard some folks state, rather matter-of-factly, that stocks are now reasonably priced.

However, stocks are neither cheap nor even fairly-priced…yet.

To illustrate why I believe stocks are not yet cheap, it helps to contrast current conditions to those of a period when stocks were actually objectively fairly-priced in the past. Continue reading “No, Stocks Are Not Cheap Yet”

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Are We In A Recession?

The initial estimate for the quarter ended 6/30/2022 is that the economy contracted for the second consecutive quarter.

This is a major news story because two consecutive quarters of contraction has typically been the rule of thumb for the big “R” word: recession.

GDP contracted 1.6% in the first quarter and 0.9% in the second quarter.

Although, the body responsible for officially declaring recessions, the National Bureau of Economic Research (NBER), does not use two consecutive quarters in its technical definition. It considers a variety of other factors so we cannot say for certain that we are in a recession yet. Continue reading “Are We In A Recession?”