Strong Secular Trends

There have been very strong secular trends in play for the last decade. So, I wanted to take a moment to highlight those for you.

The last ten years have been largely characterized by a domination of U.S. large cap growth stocks over every other major asset class.

  1. The U.S. stock market has dominated foreign markets and commodities
  2. Within the U.S. market, large cap stocks have dominated small cap stocks
  3. And within U.S. large cap, growth stocks have dominated value stocks.

Continue reading “Strong Secular Trends”

Quarterly Market Update – 2020.Q3

Below you’ll find the returns for various asset classes spanning stocks, bonds, precious metals and the U.S. Dollar for the last month, quarter and year-to-date.

We observe that the dispersion year-to-date is extremely interesting. For example, there is a massive discrepancy in the performance between U.S. large companies and U.S. small companies. The S&P 500 (large companies) made 5.57% on the year while small caps lost 8.64% on the year. Foreign developed country stocks haven’t fared much better as they’ve lost over 7% on the year. I’ve talked about the recent concentration of returns in the five major tech names previously (Apple, Amazon, Google, Facebook and Microsoft) here and here.

The performance of silver has also caught my eye. It was by far the worst performer in September suffering a 15.5% loss but, even with that loss, silver remains the best performing asset on the list for the year making almost 30% in nine months!

The best performer in September was the U.S. Dollar with the USD ETF (Symbol: UUP) returning 1.68% in the month. Continue reading “Quarterly Market Update – 2020.Q3”

Debt and Valuations

The U.S. stock market was able to set a new closing all-time high last week exceeding the prior record set February 19th before the 34% selloff.

In other words, the market is now higher than it was when GDP was positive / expanding and unemployment was at 3.5% even though GDP contracted by about 33% in Q2 and millions and millions of people have become unemployed, the national debt has exploded and many businesses have since declared bankruptcy. Continue reading “Debt and Valuations”

Tesla Q2 Earnings Update

Yesterday, Tesla released their Q2 earnings. I believe we are witnessing an extremely interesting case study in real-time that will be studied by future generations of investors and business students. So, I will continue to comment on it in real-time. There is simply so much to learn from this case, and it’s not often we have the opportunity to witness such an interesting situation as it unfolds.

Tesla closed yesterday with a market cap (the total value of all outstanding shares of stock) of about $300 billion and a per share price of $1,592. To put that in perspective, BMW’s market cap is about $40 billion. So, Tesla’s stock is worth about 7.5x that of BMW’s with just 1/7th the global sales! Continue reading “Tesla Q2 Earnings Update”

Market Concentration Update and Action Items

About a month ago I commented on the record concentration in the top 5 names of the S&P 500.

I want to briefly follow up on that and also summarize some action items I’m taking within portfolios.

This updated chart from Charles Schwab shows that concentration in the top 5 names has now reached 22% of the entire S&P 500!

top 5 stocks weight of S&P 500

Source: Charles Schwab, Bloomberg, as of 6/30/2020. Past performance is no guarantee of future results. Continue reading “Market Concentration Update and Action Items”