A broadening out in market performance would help bolster a more sustainable stock rally, but that hinges on increasing clarity for monetary policy, recession risk, and bank stress.
The concentration of gains up the cap spectrum isn't itself a precursor to weakness; it's the lack of participation from the "average stock" that warrants some caution.
Leadership shifts at the sector and style levels warrant some additional caution, as well as a closer look as to what investors are buying when it comes to "growth vs. value."
In the face of banking stress and a hawkish Federal Reserve, stocks have advanced impressively so far this year, but narrow breadth doesn't bode well for continued strength.
Given the topsy-turvy nature of the market thus far in 2023, it remains crucial for investors to know what they are buying—especially as it relates to growth, value, and quality.
Weaker economic trends will likely form heading into 2023 as the Fed battles inflation, but a (hopefully) mild recession may help set stocks up for a better second half of the year.
Much attention has been paid to the elevated risk (and announcement) of a recession, but investors should instead focus on signals coming from leading economic indicators.
The August jobs report delivered something for both economic bulls and bears, but what matters more in the near term is the Fed's focus on seeing a continued easing in labor demand.
Second-quarter earnings growth will mark an expected deceleration in profits, but focus will likely continue to shift to the pace at which outlooks are downgraded.
Rising inflation, rate hikes, supply-chain problems and the Russia-Ukraine war have contributed to growing recession fears.
Sharp, countertrend rallies may continue this year, but aggressive Fed policy, the turning of the liquidity tide, and slower economic growth will likely keep pressure on stocks.
It was quite a month.
Recession chatter has picked up increasingly for numerous reasons, not least being the spike in oil prices, slowdown in economic growth estimates, and the Fed's transition from accommodative to tighter monetary policy.
There is no shortage of headwinds facing both the market and the economy: the tragic Russian invasion of Ukraine and attendant commodity/energy crisis; the Federal Reserve's transition from accommodative to tighter monetary policy; and increased chatter of a recession on the horizon; among others.
The war between Russia and Ukraine—and subsequent economic and financial ripple effects—has exacerbated stress in global markets and ushered in an acute risk-off environment.
“Jobs day” last Friday was a bit of a dud.
Bear with us as (no pun intended) you read this longer-than-usual outlook!
With less than two months left in what has been an extraordinary (and mystifying) year on multiple fronts, stocks have maintained a largely uninterrupted trek higher (at the index level) in the face of myriad headwinds...
The speculative exuberance around special purpose acquisition companies (SPACs) seems to be over, but investors still have questions about them.
Special purpose acquisition companies (SPACs)—also known as blank-check companies—have gained immense popularity among investors since the beginning of 2020, despite being around for decades.
In what shaped up to be a very impressive first half of the year for both the economy and stock market, stellar earnings growth has been a key ingredient.
As Shakespeare might put it, “full of sound and fury, signifying nothing” is perhaps an apt way to describe the character of the market so far this year.
U.S. stocks continue to trade near their all-time highs but recent hiccups in trade talks have re-emphasized that a deal remains elusive, decisively unpredictable, and incomplete. Key components of the first phase have yet to be put in writing and major structural issues—such as intellectual property theft and forced technology transfers—will remain unaddressed for the foreseeable future, confirming that little-to-no material progress has been made.
While volatility has remained subdued and U.S. stocks are at all-time highs, a near-term concern is that investor sentiment may be getting a bit too frothy. The potential signing of a “phase one” U.S.-China trade deal and rollback of some tariffs has contributed substantially to the rally; yet the proposals made have yet to be corroborated by anything in writing.
While volatility has receded lately and geopolitical tensions haven’t heated up, little-to-no progress has been made on a comprehensive U.S.-China trade agreement; while the timetables for Brexit continue to shift. Although U.S. stocks are trading near their all-time highs, investor hesitation has persisted due to mixed economic data, the questionable effects of monetary policy and trade uncertainty. We continue to recommend that investors use volatility to rebalance and stay near their strategic asset allocations; maintaining our neutral stance on U.S. equities (with a bias toward large caps at the expense of small caps), and our neutral stance on both developed international and emerging market equities.
Volatility has resurfaced due to a revival in trade tensions, heated political fighting in Washington, and confusion over whether the Fed will continue to ease or hold off on rate cuts later this month. Stocks have dropped back into a tight range and have still yet to breach their all-time highs. With the market still highly reactionary to major headlines and struggling to find its footing, we continue to recommend that investors stay near their long-term asset allocation. We also continue to recommend using volatility as a means of rebalancing; and maintaining a bias toward large-cap stocks at the expense of small caps. So long as myriad uncertainties continue to mount, we believe stocks will remain under some pressure and headway will be limited.
