Monday, October 14, 2019
The world breathed a sigh of relief last week when the United States and China took a step toward a trade-war truce.
Financial Times reported the United States agreed to not increase tariffs from 25 percent to 30 percent on $250 billion of Chinese imports next week. (Current tariffs remain in place, and it is possible new tariffs will be imposed on additional Chinese goods – electronics, apparel, and other consumer items – in mid-December.)...
Monday, October 7, 2019
From trade wars to impeachment inquiries, investors had a lot to ponder during the third quarter. Toward the end of September, they appeared to become more cautious, although it’s difficult to say which issues weighed most heavily. Here are a few questions they may have been asking:
Is recession looming closer?...
Monday, September 30, 2019
They say bull markets climb a wall of worry.
Investopedia’s Will Kenton explained the idea like this:
“…a bull market isn’t a peaceful place. When times are good, investors are constantly tense, wondering how long they will keep rolling, fretting about when a seemingly inevitable correction will finally put a stop to the market elation. As a market continues ascending, the decision can become increasingly agonizing whether to take profits in a position or let it ride.”...
Monday, September 23, 2019
There’s a new theory in town.
Renowned economist Robert Shiller’s new book suggests investors may be able to predict and prepare for economic events by tracking popular stories.
Applying the theory might have been a challenge last week. There were so many stories with potential to move markets and affect the economy it was difficult to guess which would be the most influential.
Monday, September 16, 2019
If you enjoy searching for Waldo, the visual nemesis in a red-striped sweater and cap, you may appreciate the quandary of central bankers in many wealthy nations. For almost a decade, they’ve been they’ve been trying to find inflation.
Last week, there were reports of a sighting in the United States.
Monday, September 9, 2019
Remember the movie Groundhog Day?
Bill Murray’s character is a crotchety newsman who lives the same day over and over again. After exhausting other options, he chooses self-improvement and eventually escapes the cycle.
The movie came to mind last week when the United States and China headed to the negotiating table. Again.
Global stocks rallied on the news. Again.
Monday, September 3, 2019
What, me worry?
About this time last year, Time Magazine reported on anxiety in America. Almost 40 percent of Americans reported being more anxious than they were the previous year.
The performance of stock and bond markets this summer may have pushed those numbers higher.
Last week finally brought some relief. It was the best week for major U.S. stock indices since June. The Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite all gained between 2 and 3 percent, reported Ben Levisohn of Barron’s.....
Monday, August 26, 2019
Have you ever watched a lake in a thunderstorm?
Heavy rain pummels the surface. Dark clouds drop the sky closer to the water. Gusty winds crash waves ashore. Up top, on land, damage may occur. Underneath, in the deeper water, things often....
Monday, August 19, 2019
Don’t let volatility get you down.
Last week was the 40th anniversary of BusinessWeek’s infamous cover headline: ‘The Death of Equities: How inflation is destroying the stock market.’ The publication’s current iteration, Bloomberg Businessweek, reported it is still getting grief over the headline and subsequent bull market. In its defense, stocks trended lower for about three years after the magazine hit newsstands....
Monday, August 12, 2019
Quick comeback. Investors boomeranged from stocks to safe havens and back as trade tensions between the United States and China intensified last week. The Economist reported:
“On August 1st President Donald Trump warned that he would soon impose a 10 percent levy on roughly $300bn-worth of Chinese goods that have not already been hit by the trade war. Four days later China responded by giving its exchange rate unaccustomed freedom to fall. The yuan weakened past seven to the dollar, an important psychological threshold, for the first time in over a decade. And stock prices in America duly fell...” ...
Monday, August 5, 2019
Tariffs strike again.
The Federal Open Market Committee completed what it called ‘a mid-cycle adjustment’ with a quarter-point rate cut last week. Some investors were unhappy when Fed officials implied there would not be another reduction this year. They’d been hoping for at least one, reported Barron’s.
Despite the disappointment, investors settled and U.S. stock markets rallied on Thursday....
Monday, July 29, 2019
It has been said there are two sides to every story. Just look at world financial markets. Stock markets and bond markets are telling very different stories.
In the United States, stock markets were blue ribbon winners last week.
The Standard & Poor’s 500 Index rebounded to a record high. The Nasdaq Composite also set a new record. Barron’s reported U.S. stock markets were supported by abundant optimism inspired by expectations for solid earnings growth and a Federal Reserve rate cut in July....
Monday, July 22, 2019
Did last week mark the start of a new policy for the Federal Reserve?
The U.S. Federal Reserve has a reputation for providing little transparency about the timing and direction of potential rate changes. That reputation was challenged last week.
In back-to-back speeches, two of the three most influential members of the Federal Open Market Committee (FOMC) – Federal Reserve Vice-Chairman Richard Clarida and Fed Bank of New York President John Williams – made a case for lowering the Fed funds rate to support economic growth, reported Financial Times. ....
Monday, July 15, 2019
The bulls are running.
Last week, the Standard & Poor’s 500 Index set a new record, closing above 3,000 for the first time. Other major U.S. stock indices also finished at record highs, reported Barron’s.
Company fundamentals, investor sentiment, and geopolitics all have the power to push stock prices higher. However, according to Financial Times, last week’s gains were attributed to Federal Reserve Chair Jerome Powell’s testimony before Congress and the expectation the Federal Reserve will lower the Fed funds rates in July....
Monday, July 8, 2019
What will the Federal Reserve do now?
There was unexpected economic news last week. On Friday, the Bureau of Labor Statistics announced 224,000 new jobs were added in June, which was more than analysts had anticipated. The gains were offset a bit by reductions in April and May employment estimates. However, overall, the pace of jobs growth during second quarter was fairly consistent with jobs growth during the first quarter, reported Matthew Klein of Barron’s.
Strong employment numbers invigorated some investors. As a result, the Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite finished the week near record highs....
Monday, July 1, 2019
In the infamous words of Mortimer Snerd, “Who’d a thunk it?”
After U.S. stocks dropped sharply during the last weeks of December 2018, investors were not optimistic about the future. Early in January 2019, the State Street Investor Confidence Index dropped to its lowest point since 2012, and the American Association of Individual Investors (AAII) Sentiment Survey showed just about 31.6 percent of investors as bullish. The long-term average for bullishness is 38.2 percent.
How things have changed!...
Monday, June 24, 2019
Everything went up – and that’s unusual.
Randall Forsyth of Barron’s explained, “Like our major political parties, the stock and bond markets seem to live in two different worlds these days. The former sits at record levels, suggesting we live in the best of all possible worlds. The latter sees things as bad and only getting worse.”
Here’s what happened last week: ....
Monday, June 17, 2019
Are we on the cusp of change?
The United States is doing quite well. Randall Forsyth of Barron’s reported:
“…the U.S. economy and stock market both seem to be doing better than OK, thank you, as the expansion and bull market celebrate their 10th anniversaries. Unemployment is around the lowest level in a half-century. The worst thing seems to be that inflation continues to run slightly below the Fed’s 2 percent target, a problem that might strike some as similar to being too rich or too thin.”....
Monday, June 10, 2019
Surprise! It was a great week for markets.
Since the U.S.-China trade conflict resumed in early May, investors have been off balance. The possibility of escalating tariffs on Mexico heightened economic uncertainty. Then, last week’s unemployment report arrived with less than stellar news – just 75,000 jobs were created in May. The number was well below expectations. The Bureau of Labor Statistics revised March and April employment numbers downward, too.
We know investors hate uncertainty. So, why did major U.S. indices rally?....
Monday, June 3, 2019
Just two weeks ago, the U.S. government lifted tariffs on Mexico and Canada. So, it was a surprise last week when President Trump tweeted the United States would impose an escalating tariff on all goods imported from Mexico until the flow of migrants to the United States’ southern border stops.
The pending tariffs have potential to hurt both American and Mexican economies, reported The Economist. “Two-thirds of American imports from Mexico are between related parties, where one partner owns at least 10 percent of the other, so any tariff will cause problems along tightly integrated supply chains.”.....
Tuesday, May 28, 2019
U.S. stocks have had a great run.
During the past decade, the profitability of U.S. companies increased rapidly. Strong corporate earnings helped the U.S. stock market outperform markets in other nations by a significant margin. According to Capital Economics, “Since the start of this decade, the average annual return from the MSCI USA index of mid- and large-capitalization U.S. equities, which closely tracks the S&P 500, has been roughly 13 percent. This compares to only 7 percent from the MSCI World ex USA index of comparably-sized equities in 22 other developed economies.”
Performance was measured in local currency......
Monday, May 13, 2019
Trade talk trouble took a toll last week. Major U.S. stock indices moved lower when trade talks between the United States and China broke down.
The Standard & Poor’s (S&P) 500 Index, Nasdaq Composite, and Dow Jones Industrial Index all finished the week down between 2 percent and 3 percent, reported Ben Levisohn of Barron’s. Despite the weak weekly performance, the S&P 500 remains up 14.9 percent year-to-date. The deadline to settle U.S.-China trade issues was Friday. When it passed without any resolution, the U.S. increased tariffs on Chinese goods to 25 percent, reported the BBC.....
Monday, May 6, 2019
The Standard & Poor’s 500 Index is off to its best start in 20 years.
Despite the exceptional performance of U.S. stock markets year-to-date, and data that suggest economic growth remains steady, some analysts and investors have been pecking at Federal Reserve Chair Jerome Powell. They’re keen for the Fed to implement a rate cut, which could stimulate economic growth and help push stock markets higher, because inflation is lower than ideal, reported Howard Schneider and Ann Saphir of Reuters....
Monday, April 29, 2019
It wasn’t an ‘Avengers End Game’ spoiler, but there was big news last week.
Economic growth in the United States was strong during the first quarter. The Bureau Of Economic Analysis (BEA) announced gross domestic product (GDP), which is the value of all goods and services produced in the United States, increased by 3.2 percent....
Monday, April 22, 2019
And the answer is…
A Jeopardy! contestant captured the nation’s attention last week by setting multiple records for the most money earned in a single episode. The Standard & Poor’s 500 Index has been setting some records, too.
Michael Mackenzie of Financial Times explained:
“Less than four months through the year, the S&P 500 including the reinvestment of dividends has returned to record territory, along with the technology sector…Around the world, many benchmarks enjoy double-digit gains, led by China’s CSI 300 index, having risen more than a third already during 2019.”,...
Monday, April 15, 2019
Investors took an intermission.
The curtain appeared to close on the first act of 2019 last week – and what an impressive act it was. The Standard & Poor’s 500 Index delivered some dramatic returns and is less than 1 percent away from a new all-time high.
Despite relatively few shares changing hands, major U.S. indices eked out gains. Ben Levisohn of Barron’s explained:
“Trading volume was tepid at best. This past Monday, fewer shares changed hands than on any day since December 24 – when the market closed early for Christmas. Tuesday’s volume was lower than Monday’s,...
Monday, April 8, 2019
The first quarter of 2019 brought a welcome reversal.
Last year, Barron’s published a group of market strategists’ expectations for 2019 performance. The article came out in mid-December, before the steep year-end stock market decline. At that time, all of the strategists agreed: The S&P 500 Index would move higher during 2019.
Their expectations appeared to be wildly optimistic when the Index lost 3.5 percent during the last two weeks of 2018, and finished the year down 6.2 percent....
Monday, April 1, 2019
That’s how Michael Arone, an investment strategist, described the U.S. market environment to Avi Salzman of Barron’s: “‘Stocks are rallying, but bond yields are reflecting much lower growth.’
Stocks rose during the quarter because the Fed backed away from raising interest rates, and investors grew more confident that the U.S. and China would sign a trade deal, Arone said. The market was also rebounding from a very rough fourth quarter – ‘conditions at the end of the year were wildly oversold,’ he noted.” ...
Monday, March 25, 2019
Wonder what the Federal Reserve’s 40-yard dash time is?
On Wednesday, the Fed juked like an NFL running back and left investors wondering whether they should buy or sell. Heather Long of The Washington Post reported the U.S. central bank:
1. Lowered its 2019 estimate for U.S. economic growth to 2.1 percent
2. Announced its intention not to raise rates in 2019
3. Indicated it will stop shrinking its balance sheet in September...
Monday, March 18, 2019
Markets were rattled last week.
Stock and bond markets rallied.
Last week, major U.S. stock indices finished higher for the 10th time in 12 weeks. Bond markets moved higher, too, with the yield on 10-year Treasuries dropping just below 2.6 percent, reported Randall Forsyth of Barron’s. Yields on 10-year Treasuries haven’t been this low since January 2018.
The simultaneous rallies are curious because improving share prices are often an indication of a strong or strengthening economy. Improving bond prices tend to be a sign of weakening economic growth, reported Michael Santoli of CNBC....
Monday, March 11, 2019
Markets were rattled last week.
The market hates surprises, especially when the surprise comes from a central bank. Last week, the European Central Bank (ECB) unexpectedly reversed course and took a more accommodative stance on monetary policy in an effort to encourage stronger European economic growth. Tom Fairless of Barron’s explained:
“Officials are seeking to shore up an economy that has been rattled by shocks ranging from a slowdown in China to mass protests in France and bottlenecks in Germany’s crucial auto industry. They are threading a careful path between providing sufficient support for the region’s softening economy while avoiding any appearance of panic, which could ricochet through financial markets.”...
Monday, March 04, 2019
Is it a soft landing?
Economists use aviation metaphors to describe the results of central banks’ efforts to manage rapidly growing economies. If the Federal Reserve lifts rates enough to prevent the economy from overheating without jolting it into recession, then it has engineered a soft landing, according to Investopedia. (Rate increases that drop a country into recession are hard landings...
Monday, February 25, 2019
Investors were pleased with the Federal Reserve’s (Fed) new approach to its balance sheet.
The Fed delivered its semi-annual Monetary Policy Report to Congress last week. The report recapped the events of late 2018 and reiterated the Fed’s intention to “…be patient as it determines what future adjustments to the federal funds rate may be appropriate to support the Committee's congressionally mandated objectives of maximum employment and price stability.”...
Monday, February 19, 2019
Why did the stock market do that?
The great mystery of stock markets reared its head last week. With no clear driver, the Dow Jones Industrial Average gained more than 3 percent, while the Nasdaq Composite and Standard & Poor’s (S&P) 500 Index moved higher by about 2.5 percent. It was a puzzler. Ben Levisohn of Barron’s explained:
“Given those gains, we’d expect a heaping helping of good news, but not much was forthcoming. Earnings reports from [two large multinational companies] left investors wanting...
Monday, February 11, 2019
Central banks take a turn.
At its first policy meeting of 2019, the U.S. Federal Reserve changed direction. After four rate increases in 2018, Chair Jerome Powell announced interest rates were on hold. Last week, banks in the United Kingdom, Australia, and India followed suit by either reducing rates or cautioning rate reductions were likely, reported Sam Fleming and Jamie Smyth of Financial Times.
The dovish tone of central banks owes much to slowing global growth. January’s International Monetary Fund World Economic Outlook lowered global growth estimates for 2019 and 2020. Changing expectations were fueled both by factors that slowed momentum in the second half of 2018 and by issues that pose a potential risk to continued economic growth. These included:...
Monday, February 4, 2019
And, U.S. stock markets celebrated.
Last week, the Federal Reserve put itself on hold. The Federal Open Market Committee met on Wednesday, January 30, 2019, to discuss the state of the economy and determine policy. After the meeting, Fed Chair Jerome Powell offered a positive assessment of U.S. economic strength that was leavened with a few concerns.
We continue to expect that the American economy will grow at a solid pace in 2019, although likely slower than the very strong pace of 2018…Despite this positive outlook…Growth has slowed in some major foreign economies, particularly China and Europe....
Monday, January 28, 2019
Like competitors who’ve completed a difficult section in an endurance race, U.S. stock investors took a breather last week.
The Standard & Poor’s 500 Index, which has gotten off to its best start since 1987, ended the week with a slight loss, while the Dow Jones Industrial Average and Nasdaq Composite finished slightly higher, reported Ben Levisohn of Barron’s.
News the U.S. government shutdown would end, albeit temporarily, appeared to be of little interest to investors. Barron’s suggested the markets’ muted response to the government reopening was in balance with its response to the shutdown – there wasn’t much of one. In fact, the S&P 500 has gained 10 percent since the federal government closed.....
Tuesday, January 22, 2019
We’re off to a good start.
Investors who remained steady during December’s wild ride are probably pleased with their decision as stocks have gotten off to a strong start in 2019. Unfortunately, those who reduced their exposure to the asset class may be feeling the sting of missed opportunity.
Last week, the Dow Jones Industrial Average gained about 3 percent. The Index is up 5.9 percent year-to-date, which is its best start in more than a decade, according to Ben Levisohn of Barron’s. The Standard & Poor’s 500 Index (S&P 500) and NASDAQ Composite also moved higher last week....
Monday, January 14, 2019
People love rules of thumb.
Sometimes, mental shortcuts are helpful. Other times they are not. When it comes to investing, seasonal shortcuts are not uncommon. In fact, January boasts two:
The January Effect explains why U.S. smaller company stocks tend to outperform the market in January. The original theory held that tax-loss harvesting pushed stock prices lower in December, making shares more attractive to investors in January....
Monday, January 7, 2019
Investors will think of the last quarter of 2018 for years to come, but they won’t remember it fondly. The Economist described it like this,
“After a rotten October and limp November, the S&P 500 tumbled in value by 15 percent between November 30th and December 24th. Despite an astonishing bounce of 5 percent the day after Christmas, the index finished the year 6 percent below where it started...”
Wednesday, January 2, 2019
Investing during the month of December was like traversing an icy mountain stream. It delivered a staggering shock to the senses that triggered the instinct to, “Get Out!”
When it comes to investing, that instinct is called loss aversion. For many people avoiding a loss is more important than realizing a gain. Simply put, not losing $100 is more important than gaining $100....
Monday, December 17, 2018
It never feels good when the stock market heads south, and that’s what happened last week. The Standard & Poor’s 500 Index (S&P 500), Dow Jones Industrial Average, and Nasdaq Composite all moved into correction territory, which means the indices have fallen 10 percent or more from their previous peaks....
Monday, December 10, 2018
We’re off to a slow start.
December is usually the best month of the year for the stock market. It has been since 1950, according to Randall Forsyth of Barron’s, but not so far this year.
Two issues made investors particularly uncomfortable last week which helped trigger a sell-off that pushed major U.S. stock indices lower....
Monday, December 3, 2018
Hold on to your hats!
Recently, stocks have delivered a wild ride. During Thanksgiving week, U.S. stock markets took investor uncertainty on the chin, suffering a 3.8 percent drop, which was the worst performance in eight months. Then, last week, stocks reversed course. The Standard & Poor’s 500 Index and the Nasdaq Composite delivered their strongest weekly gains in seven years, reported Ben Levisohn of Barron’s.:...
Monday, November 26, 2018
It was a turkey of a week.
The United States and China continued to spar over trade and other issues. An expert from Moody’s told Frank Tang of the South China Morning Post (SCMP) the United States-China dispute will not be easily resolved:...
Monday, November 19, 2018
Keep your eyes on the horizon.
Motion sickness happens when your body receives conflicting signals from your eyes, ears, and other body parts. One way to manage the anxiety and queasiness that accompany the condition is by keeping your eyes on the horizon....
Monday, November 12, 2018
How are you feeling about financial markets?
Some votes are still being counted but investors appear to be happy with the outcome of mid-term elections. Major U.S. stock indices in the United States moved higher last week, and the American Association of Individual Investors (AAII) Sentiment Survey reported:...
Monday, November 5, 2018
Stocks recovered some ground last week and then stumbled over unemployment.
Major U.S. stock indices faltered Friday after the Bureau of Labor Statistics (BLS) reported on a popular ‘lagging’ economic indicator – unemployment. (Remember, lagging indicators describe what has happened in the past.) The BLS reported:...
Monday, October 29, 2018
Why did the stock market fall when the economy is doing well?
The answer is that one reflects the past and the other anticipates the future. Last Friday’s advance estimate from the Bureau of Economic Analysis showed the U.S. economy grew 3.5 percent during the third quarter of 2018. Harriet Torry of The Wall Street Journal reported:...
Monday, October 22, 2018
The world remains full of opportunities and challenges.
Although we’ve seen global markets moving in tandem in recent years, Sara Potter of FactSet pointed out,
“…we’re starting to see the end of the synchronized global growth that has prevailed over the last two years. While the U.S. economy remains strong, growth in Europe and Japan is moderating, and emerging markets are under increasing economic and financial market pressure."...
Monday, October 15, 2018
Like an unexpected gust of wind that blows the hat off your head or flips your umbrella inside out, last week’s stock market performance startled investors.
Looking back, it’s easy to identify some of the factors that may have contributed to investors’ unease and shaken confidence in the markets. Ben Levisohn of Barron’s offered a brief rundown that included:...
Monday, October 8, 2018
The stock market tends to be a leading economic indicator.
Last week offered some insight to economics and stock market behavior. The U.S. unemployment rate reached its lowest level since 1969 and wages moved higher, yet major U.S. stock indices lost value.
Why didn’t stock markets move higher?...
Monday, October 1, 2018
It wasn’t headline news…
But, if newsprint was still popular, last week’s key economic news would have appeared below the fold.
The Federal Reserve raised rates for the third time in 2018, as expected. In addition, the Federal Open Market Committee projects economic growth will continue for three more years, although its median numbers show growth slowing from 3.1 percent in 2018 to 1.8 percent in 2021. (Remember, forecasts, no matter how venerable the source, are best guesses and not bedrock.)...
Monday, September 24, 2018
Did you hear the news?
A tech company introduced a microwave you can turn on using Wi-Fi – as long as you have one of the company’s voice assistants at home, reported Kaitlyn Tiffany of Vox. Soon, the voice assistants will be built with neural networks that will formulate hunches about whether their owners might like to be reminded to lock the door or turn off a device....
Monday, September 17, 2018
All investors are consumers, but not all consumers are investors.
The September installment of University of Michigan’s Consumer Sentiment Survey reported Americans are feeling pretty optimistic. Consumer sentiment rose to the second highest level since 2004, and consumer expectations reached the highest level since 2004. Surveys of Consumers chief economist, Richard Curtin, wrote:
“Consumers anticipated continued growth in the economy that would produce more jobs and an even lower unemployment rate during the year ahead…The largest problem cited on the economic horizon involved the anticipated negative impact from tariffs. Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months.”...
Monday, September 10, 2018
Remember: Volatility is normal.
Major U.S. stock market indices climbed into record territory during August. They gave back some gains last week. Peter Wells of Financial Times explained:
“Speculation about a fresh round of tariffs on Chinese imports from the Trump administration weighed on U.S. stocks, handing the S&P 500 its first four-day losing streak in a month. A strong jobs report only hardened expectations that the Federal Reserve views the U.S. economy as healthy enough to withstand a probable interest rate rise later this month.”...
Tuesday, September 4, 2018
Where is our country’s biggest export market?
Markets were fired up last week after the United States and Mexico agreed on new trade rules. The Standard & Poor’s 500 (S&P 500) Index reached an all-time high and finished the month of August up about 3 percent, reported Michael Sheetz, Thomas Franck, and Alexandra Gibbs of CNBC....
Monday, August 27, 2018
Not everybody loves meetings and even fewer enjoy reading the minutes, but investors make an exception with the Federal Reserve. This week the Fed published the minutes from its August 1 meeting. While no changes were made to interest rates, the minutes did provide insight to how the Fed sees the U.S. economy.
• The economy is strong. The economy is poised for its best annual growth in a decade due to stimulation from tax cuts and federal spending. The current nine-year bull market is about to be the longest bull market in history and the stock market hit a new high last week. Inflation is back to the 2 percent range, after missing for several years, and the already tight labor market continues to tighten, reported The Wall Street Journal.....
Monday, August 20, 2018
As Maxwell Smart used to say…
Missed it by THAT much! After a rocky start, the Standard & Poor’s 500 Index came within 1 percent of an all-time high last week, reported Ben Levisohn for Barron’s. It’s significant because the Standard & Poor’s 500 Index has been trading below its January record all year. The article suggested the lack of progress begs the question: Are we still in a bull market?
It’s the old ‘Shrink Global Markets with Corporate Buybacks’ trick. Last week, Robin Wigglesworth of Financial Times reported, “The global equity market is shrinking at the fastest pace in at least two decades, as a wave of corporate share buybacks swamps the overall volume of companies going public, issuing new stock or selling convertible debt.” ....
Monday, August 13, 2018
Let’s talk Turkey!
So, how did a country that represents just about 1.4 percent of the world’s economy spark a global selloff?
Turkey was once a rising star. The country’s Prime Minister Recep Tayyip Erdogan took office in 2003 and his “conservative, pro-business policies helped pull the country back from an economic crisis,” reported Financial Times.
As Turkey’s economy strengthened, investors saw opportunity. Investments from outside the country averaged about $13 billion a year, according to World Bank figures cited by Financial Times, although investment slowed after terror attacks in 2015. ....
Monday, August 6, 2018
Capital gains tax reform comes with a big price tag: $100 billion over 10 years.
A capital gain is any increase in the value of an asset, such as an investment, a home, land, etc., between its purchase and its sale. The amount of a gain is determined by subtracting the purchase price from the sale price.
Last week, the White House proposed capital gains be adjusted or ‘indexed’ for inflation before they are taxed. Princeton Professor Alan Blinder explained the idea in The Wall Street Journal:
"Why index gains? Suppose you own a stock for many years, during which time overall prices have doubled because of inflation. Over the holding period, the value of your stock also has doubled. When you sell, the proceeds have precisely the same purchasing power as the original purchase. There’s no gain, no loss. But under current tax law, you owe taxes on the phantom ‘gain.’ Worse, if your stock went up by less than the cumulative inflation, you’ll still get taxed despite your loss. This is unfair and dysfunctional.”....
Monday, July 30, 2018
Is it a sugar rush or something more sustainable?
Economic growth in the United States was strong during the second quarter. Gross domestic product (GDP), which is the value of all goods and services produced in the United States, grew by 4.1 percent. That’s the fastest growth in four years, reported the BBC.
The news was received with varying levels of enthusiasm. President Trump said the gain is “an economic turnaround of historic importance” and thinks the economy should continue to grow rapidly, reported Shawn Donnan in Financial Times. ....
Monday, July 23, 2018
Last week, there was some good news and some notable news.
Here’s the good news: Corporate earnings have been strong. As of July 20, 17 percent of the companies in the Standard & Poor’s 500 Index had reported second-quarter results. More than 85 percent of those companies reported positive earnings surprises, according to FactSet, which means they earned more than expected.
“It appears the lower tax rate is more than offsetting the impact of rising costs, resulting in a record-level net profit margin for the index for the second quarter,” explained FactSet. ....
Monday, July 16, 2018
Investors are becoming more discriminating.
Trade tensions escalated as the U.S. administration expanded tariffs on Chinese goods last week. You wouldn’t have known by watching the performance of benchmark indices, though. Just four of the 25 national stock market indices tracked by Barron’s – Australia, Italy, Spain, and Mexico – moved lower.
However, if you look a little deeper into the performance of various market sectors, you discover an important fact: The market tide wasn’t lifting all stocks. . ....
Monday, July 9, 2018
What a rollercoaster of a quarter!
When it comes to the American Association of Individual Investors (AAII) Sentiment Survey, respondents tend to be more bullish than bearish about U.S. stock markets. The survey’s historical averages are:
• 38.5 percent bullish
• 31.0 percent neutral
• 30.5 percent bearish
As the second quarter of 2018 began, investors were feeling less optimistic than usual. (About 36.6 percent were bearish and 31.9 percent bullish.) Their outlook was informed by a variety of factors, according to an early April article in The New York Times, which said:
“First there was the risk that the economy might be growing too fast, which could prompt central banks to hike interest rates sooner than expected. Then there was the risk of a trade war ignited by the White House imposing tariffs on certain products, an action that quickly prompted countries like China to erect trade barriers of their own. Next came the threat of a government crackdown on technology companies, after revelations of their misuse of customer data.” ...
Monday, July 2, 2018
There’s a bear in China – and it’s not a panda.
The Shanghai Stock Exchange (SSE) Composite Index, which reflects the performance of all shares that trade on the Shanghai Stock Exchange, dropped into bear market territory last week, reported CNBC. The Index has fallen more than 20 percent from its previous high. It appears some investors saw an opportunity and bought the dip since the SSE Index bounced higher last Friday, gaining more than 2 percent.
Slower economic growth and rising trade tensions were responsible for much of the red ink in China, reported Barron’s, but the Chinese government may be playing a role, too...
Monday, June 25, 2018
What time is it?
The yield curve may be the pocket watch of economic indicators. It’s been around for a long time and it’s often right, but not always.
The yield curve is the difference between the interest paid on two-year government bonds and 10-year government bonds. In normal circumstances, an investor would expect to earn a higher rate of interest when lending money to a government for 10 years than when lending money for two years because there is more risk associated with lending for a longer period of time....
Monday, June 18, 2018
Deal or no deal?
Last week opened with heightened trade tensions between the United States and its allies. It closed with the United States imposing new tariffs on $50 billion of Chinese goods. The Chinese declared it was the start of a trade war, reported Financial Times.
U.S. markets largely ignored the potential impact of trade wars on multiple fronts. Barron’s reported the Dow Jones Industrial Average, which includes companies that are vulnerable to tariffs, moved slightly lower. However, the Standard & Poor’s 500 Index shrugged off the possibility of trade wars, and the NASDAQ Composite gained more than 1 percent. ....
Monday, June 11, 2018
Never before could the Group of 7 (G7) Summit have been mistaken for reality TV.
The generally dignified annual meeting of leaders from the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom (along with the heads of the European Commission and European Council) was a lot more contentious than usual, reported Reuters.
Disagreements about trade were the reason for heightened tensions among world leaders. At the end of May, the United States extended tariffs on aluminum and steel imports to U.S. allies. They had previously been exempted. These countries “account for nearly two-thirds of the [United States’] $3.9 trillion annual merchandise trade,” reported The Washington Post. ....
Monday, June 4, 2018
If the countries were instruments, last week sounded like a fifth grade garage band.
World markets were buffeted by a clamor of good, bad, and unexpected news last week. Events that captured media and investor attention included:
- Taxing America’s allies. Early in the week, investors weren’t the only ones riled by the administration announcement it would impose hefty trade tariffs on American allies. “Brussels’ top trade official vowed to respond to Donald Trump’s new tariffs on imports of steel and aluminum from the EU, Canada, and Mexico with measures of its own, and warned that the EU has “closed the door” on trade talks with the U.S.” ....
Tuesday, May 29, 2018
Geopolitical uncertainty didn’t dent U.S. stocks last week.
Geopolitics is the intersection of geography, economics, and politics. Last week, there were some fine examples of the ways geopolitical events can create uncertainty. Barron’s reported:
“President Donald Trump began the week suggesting that a trade war with China was on hold, before later ordering his administration to explore penalties on imported automobiles. The president also canceled talks with North Korea. Italy’s bond market melted down following the emergence of a Euroskeptic government, while Turkey’s lira tumbled over concerns that President Tayyip Erdogan would take control of its central bank, raising concerns about emerging markets.”....
Monday, May 21, 2018
Too much? Too little? Or just right?
U.S. stock markets were relatively calm, although they finished the week lower. U.S. Treasury yields hit a 7-year high and finished the week above 3 percent. While these were notable, the most remarkable events last week occurred beyond our borders. These include:
- The Vatican publishing a position paper on financial markets. Its opening was, “Economic and financial issues draw our attention today as never before because of the growing influence of financial markets on the material well-being of most of humankind….
Monday, May 14, 2018
How do employers lure staff in a tightening labor market? The curly tail grubs and spinnies of the business world are higher wages and better benefits.
During the past decade, the employment picture in the United States has shifted dramatically. In mid-2009, 15.4 million unemployed Americans were chasing 2.2 million available jobs. At the end of 2017, just 6.6 million Americans were unemployed, and employers were casting eagerly to fill 6.6 million open jobs, reports Barron’s ....
Monday, May 07, 2018
A lot happened last week.
Some of the notable events included:
- Trade talks between the United States and China. The talks were described as “frank, efficient, and constructive,” although significant issues have yet to be resolved.
- A Federal Open Market Committee meeting. The Federal Reserve indicated it expects to raise rates during 2018, but did not do so last week.
- Low unemployment in the United States. U.S. unemployment fell to 3.9 percent, which is the lowest it has been since 2000. Typically, low employment is a sign of a strong economy.
- Sky-high rates in Argentina. In an effort to shore up the nation’s currency, Argentina’s central bank “…hiked rates to 40 percent from 33.25 percent, a day after they were raised from 30.25 percent.”
- Katy Perry roasted Warren Buffett. Katy Perry revealed the ‘Left Shark’ – a backup dancer famous for being out of sync during Perry’s 2015 Super Bowl performance – was Warren Buffett." ....
Monday, April 30, 2018
A meeting of the minds.
The Federal Reserve and the U.S. bond market appear to be in agreement about the direction of interest rates. For more years than anyone cares to count, investment professionals have been predicting the end of the bull market in bonds. Bond guru Bill Gross called the end of the bond bull in 2011 – and called it again in 2013. He wasn’t alone. Strategists who participated in Barron’s Outlooks anticipated rising interest rates in 2014 and 2015, too.
The Federal Reserve began encouraging interest rates higher in December 2015 when it increased the Fed funds rate for the first time in a decade. However, the yield on 10-year Treasuries remained stubbornly low. In fact, it fell below 2 percent following the rate hike and stayed there until November 2016. ....
Monday, April 23, 2018
The world is in debt.
The April 2018 International Monetary Fund (IMF) Fiscal Monitor reported global debt has reached a historically high level. In 2016, debt peaked at 225 percent of global gross domestic product (GDP) (the value of all goods and services produced across the world). Public debt is a significant component of global debt. The IMF wrote:
“For advanced economies, debt-to-GDP ratios have plateaued since 2012 above 105 percent of GDP – levels not seen since World War II – and are expected to fall only marginally over the medium term…In emerging market and middle-income economies, debt-to-GDP ratios in 2017 reached almost 50 percent – a level seen only during the 1980s’ debt crisis – and are expected to continue on an upward trend.”....
Monday, April 16, 2018
What do you think?
- Are you bullish, bearish, or neutral about the U.S. stock market?
- Are U.S. stocks undervalued, overvalued, or fairly valued?
- What is the biggest threat the U.S. stock market faces this year?
During the first four months of 2018, U.S. stocks have experienced not one, but two, 10 percent declines. These short-term reversals are known as corrections…..
Monday, April 09, 2018
You could almost hear the spurs jingling.
Trade tensions ratcheted higher last week as the United States and China staked new positions on the not-so-dusty main street of trade. It was the latest round of posturing in what has the potential to become a trade war between the world’s largest economies. Barron’s explained:
“The trade battle has escalated since President Trump announced steel tariffs in March….
Monday, April 02, 2018
In like a lion…
Investors roared into 2018. During the first week of the first quarter of the New Year, the Dow Jones Industrial Average rose above 25,000 for the first time ever. Less than two weeks later, it closed above 26,000. The Standard & Poor’s (S&P) 500 Index and NASDAQ Composite also reached new all-time highs.
Strong performance was supported by strong fundamentals. In December 2017, Mohamed A. El-Erian wrote in BloombergView economic and policy fundamentals, including synchronized global recovery, progress on U.S. tax reform, improved certainty around Brexit, and orderly acceptance of changing U.S. monetary policy, “…reinforce the prospects for better actual and future growth, thereby increasing the possibility of improved fundamentals validating notably elevated asset prices.”
Monday, March 26, 2018
Why am I saving and investing?
After a week like last week, it’s an important question. There are many reasons people save and invest, including to:
- Live the life they want today and in the future
- Accumulate resources so they’re prepared for any bumps in the road
- Provide an education for their children
- Offer assistance to parents
- Support a young person with a disability
- Do good in the world
- Live comfortably in retirement without anxiety....
Monday, March 19, 2018
It’s a good time for a gut check.
Last week, after sliding lower for four days, the Standard & Poor’s 500 Index recouped some of its losses on Friday. The reasons behind the week’s poor showing were diverse. Barron’s reported:
“The market is so discombobulated right now that it can’t even decide what it’s afraid of. What do we mean? When the Standard & Poor’s 500 index suffered its first correction since the beginning of 2016 last month, the cause was easily identified – a good old-fashioned inflation scare caused by a larger-than-expected increase in wages and a rapidly rising 10-year Treasury yield, which almost hit 3 percent…Fast-forward more than a month and those fears seem almost quaint.” ....
Monday, March 13, 2018
It’s a bird…It’s a plane…It’s a labor shortage!
There is little doubt the Millennial generation has been reshaping our world. One of the most remarkable aspects of this demographic group is a preference for experiences over consumer goods. “Three out of four millennials would rather spend their money on an experience than buy something desirable. This “experience generation” is now a third of the U.S. population,” reported Eventbrite.
Well, a new experience has arrived – a labor shortage in the United States.....
Monday, March 05, 2018
As Yogi Berra once said: It’s déjà vu all over again.
Last week, global stock markets took a bit of a dip after President Trump announced a 25 percent tariff on steel and a 10 percent tariff on aluminum. Tariffs are taxes on goods imported from other countries. In general, governments impose tariffs to enhance revenue and/or protect domestic industries from competition abroad.
Tariffs tend to spark fierce debate about protectionism and free trade. Proponents suggest tariffs may protect domestic companies and create jobs. Critics suggest tariffs may slow economic growth and drive prices higher. ....
Monday, February 26, 2018
U.S. Treasuries are offering a lesson in supply and demand.
Last week, the U.S. Treasury auctioned $258 billion in bonds. Treasury auctions are the way the United States government finances its debt. The Treasury sells short-, intermediate-, and long-term IOUs, known as bills, notes, and bonds. When investors and governments purchase bonds, they agree to lend money to the United States.....
Monday, February 19, 2018
As New York Fashion Week ended, inflation strutted its stuff.
Ever since the Federal Reserve began raising the Fed funds rate in 2015, analysts have been anticipating higher inflation. The fact that price increases remained relatively small was a perplexing mystery. Then, last week, inflation increased faster than expected.
The Bureau of Labor Statistics reported the Consumer Price Index (CPI), one measure of inflation, rose 0.5 percent in January. As you might expect, the cost of some items rose faster than others....
Monday, February 12, 2018
Back to reality...
After months of eerie calm, stock market volatility has returned. The CBOE Volatility Index (VIX) – a measure of how turbulent investors expect stock markets to be during the next 30 days – appeared to fall asleep in November 2016. For more than a year, a level of serenity that is rarely associated with stock markets prevailed and U.S. share prices moved steadily higher.....
Monday, February 05, 2018
It was not a good week for stocks.
Last week, stock markets around the world lost value. In the United States, the Standard & Poor’s 500 Index (S&P 500), Dow Jones Industrial Index (Dow), and NASDAQ all finished lower ....
Monday, January 29, 2018
The numbers are coming in.
Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter’s sales and earnings are reported during the first quarter of the year, and first quarter’s sales and earnings will be ....
Monday, January 22, 2018
Last week, the United States government might as well have hung a sign on the front door of the Capitol that read, “Gone negotiating. We’ll be back in…however long it takes.”
In 2013, the U.S. government closed for 16 days. About 850,000 federal workers were furloughed and 6.6 million workdays lost. The shutdown affected ....
Tuesday, January 16, 2018
Inflation, inflation, where’s the inflation?
The U.S. Federal Reserve has been raising interest rates in anticipation of higher inflation.
In its 2018 forecast, Goldman Sachs indicated it expected to see “a gradual increase in global core inflation, albeit to levels that are still ....
Monday, January 8, 2018
Whoosh! Bang! Flash! Fizz! Whistle!
U.S. stock markets delivered their own version of fireworks to celebrate the New Year. During the first week of 2018, the Dow Jones Industrial Average hit a new all-time high, moving above 25,000 for the first time ever. The NASDAQ Composite and Standard & Poor’s 500 Indices also....
Monday, January 2, 2018
How good was 2017?
It was so good, the Standard & Poor’s (S&P) 500 Index finished in positive territory every month for the first time ever (on a total return basis), reported Barron’s. All major U.S. indices finished the year with ....
Monday, December 18, 2017
Here we come a tax-reforming…
The reconciliation of Congressional tax reform bills proceeded apace last week, and Congress is expected to vote on the measure early this week. If tax reform passes, Dubravko Lakos-Bujas, head of U.S. equity strategy with JPMorgan, thinks we may see value stocks ....
Monday, December 11, 2017
“It's the hap- happiest season of all.”
While holidays don’t make everyone happy, investors should be feeling festive. The Standard & Poor’s 500 Index is up more than 18 percent year-to-date. The Dow Jones Global ex U.S. Index is up about ....
Monday, December 4, 2017
What will it take to shake investors’ confidence?
From the perspective of unsettling events, last week was jam-packed. North Korea claimed to have the capability to strike the United States with a nuclear missile, tax reform continued to travel a controversial path through the House and Senate, and former national security adviser Michael Flynn pled guilty to ....
Monday, November 27, 2017
There was a lot to be thankful for last week.
Stock markets around the world may have ripened to full-slip sweetness this year. Emerging markets have delivered the most attractive returns year-to-date. The MSCI Emerging Markets Index was up 34 percent year-to-date, last week. The United States and Europe have marched....
Monday, November 20, 2017
Are investors more like tigers or African wild dogs?
It appears investors – retail and institutional – have become rather like predators. They patiently stalk shares, waiting for a dip, and then they strike – buying stocks when prices.....
Monday, November 13, 2017
Most of the companies in the Standard & Poor’s 500 (S&P 500) Index have reported third quarter earnings per share (EPS), which is the profit earned per share of stock outstanding during the period. Many have done quite well. With more than 90 percent of companies reporting, the total EPS growth rate for the S&P 500 has ....
Monday, November 6, 2017
U.S. Supreme Court Justice Oliver Wendell Holmes’s statement is engraved on the front of the Internal Revenue Service building in Washington, D.C. Some people agree with the sentiment. Others believe it to be....
Monday, October 30, 2017
The last full week of October was a box full of surprises. First, U.S. economic growth exceeded expectations. The devastation wrought by Hurricanes Harvey, Irma, and Maria was widely expected to stifle U.S. quarterly growth, according to NPR. The Atlanta Federal Reserve predicted 2.5 percent gross domestic product (GDP)* growth for third quarter, down from 3.1 percent the previous quarter. Instead, U.S. GDP grew by 3.0 percent....
Monday, October 23, 2017
And the hits just keep on coming. Last week was the anniversary of Black Monday. On October 19, 1987, the Dow Jones Industrial Average (Dow) lost 508 points, or more than 20 percent of its value, as it fell from the previous...
Monday, October 16, 2017
There’s a new kid in town: narrative economics. Last week, Richard Thaler was awarded the Nobel Prize in economics. His work in behavioral economics and finance recognizes not all economic and financial decisions are...
Monday, October 9, 2017
Slow and steady... It has been 332 days since the Standard & Poor’s 500 (S&P 500) Index experienced a 5 percent drop, reported Barron’s. If there isn’t a selloff on Monday or Tuesday, this will become the...