Category: Markets

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Too Early for a Victory Lap, but…

I’d like to review my comments on bonds over the last couple years. The financial media, and retail investors along with their advisors, tend to focus a lot on stocks as stock markets are perceived as “sexier” while the bond markets often receive the cold shoulder.

Honestly, this is largely the reason that bond and credit markets are “smarter” than the stock markets. After all, how many retail investors do you know that open a brokerage account so they can trade bonds? Almost none (I’ve never known a single retail investor to do this actually).

In other words, there’s a lot more retail money “investing” in the stock markets than in the bond markets.

With that being said, let me summarize some comments I’ve made regarding the bond markets over the last couple years and include a chart to see how those comments have stacked up. Continue reading “Too Early for a Victory Lap, but…”

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Market Update – Only Two Other Times in History

The rally that began around Christmas Eve continued with strength through last week.

It’s been such a strong rally that U.S. large company stocks (as measured by the S&P 500 index) even eclipsed the prior record high from last September…admittedly, an event of which I was skeptical.

Specifically, on September 21st the S&P 500 set a new intra-day high at $2,940.91. However, last Wednesday the S&P 500 touched $2,954.13 before closing down to $2,923.17. As I write this commentary on May 6th, the S&P 500 is trading around $2,910.

Now, unfortunately, the S&P 500 was the only major index to set a new high. U.S. small company stocks (Russell 2000) are still down over 8% from their August 31st record. The global stock market more broadly, including foreign developed and emerging markets (MSCI All Cap World Index), is still down over 6% from it’s all-time high set almost 16 months ago on January 26th, 2018. Yes, the global stock market is still technically in a bear market.

Here is the interesting part, when reviewing one of the most reliable valuations metrics available from John Hussman, we find that the U.S. stock market has experienced current extremes only two other times in history (1) 1929: on the eve of the Great Depression and (2) 2000 – on the eve of the Dot Com Bubble burst. Neither of those events ended well, and I don’t expect the current dislocation to end well either. Continue reading “Market Update – Only Two Other Times in History”

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Updated: The Price You Pay Determines Your Return

When most people are sleeping, I’m either working out or researching. Today, how about I just share my weekend research with you?

“In the short-run, the market is a voting machine… but in the long-run, the market is a weighing machine.” – Warren Buffett paraphrasing his mentor Benjamin Graham

My interpretation of this brilliant, succinct statement of the types we’ve come to expect from Warren Buffett, is that in the short-term, markets trade based on investor emotions (or things like high-frequency trading), but, over the long-term, fundamentals ultimately determine price. In other words, over the long-term, price will accurately reflect the fundamental value of a company even if there is a bunch of noise in the interim. Continue reading “Updated: The Price You Pay Determines Your Return”

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A Couple Interesting Market Stats

There have been a couple interesting developments since my last commentary from even a couple days ago. Most important of which is that the Federal Reserve openly acknowledged the slowing growth I warned about previously here, here, here, here, here, here, and here.

In response, the Federal Reserve announced they do not expect to raise interest rates again in 2019 and will end their balance sheet tapering in September. Therefore, the balance sheet will stand at about $3.5 trillion once the Fed is done. That’s about 4x larger than it was on the eve of the Great Recession of 2008! Continue reading “A Couple Interesting Market Stats”

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QUICK NOTE: Fourth Best Start to a Year Ever and FOMC Confirms Slower Growth

“Thru 55 trading days, 2019 is now the 4th best start to any year ever on [the S&P 500 Index].” – @OddStats

Here’s a list of those four best years, the return through day 55 and the return from that point forward for the rest of the year.

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Also, yesterday the Federal Reserve essentially announced they are aborting quantitative tightening (interest rate hikes and balance sheet reduction) due to concerns of slowing growth as I also mentioned yesterday.