Results 151–200 of 239 found.
Zero Yields & The Debt Ceiling
The Treasury issued new three-month Treasury bills (T-bills) at 0% yield at auction last week and is on pace to do so again on October 13, 2015. Zero percent T-bill yields, or even lower, are not new, but 0% prevailing at an auction is unusual and made media headlines.
Gauging Global Growth: An Update for 2015 & 2016
The market continues to expect that global gross domestic product (GDP) growth will accelerate in 2015 (3.0%), 2016 (3.4%), and 2017 (3.4%) from 2014’s 2.0% pace, aided by lower oil prices and stimulus from two of the three leading central banks in the world.
Third quarter earnings season will potentially look a lot like the second quarter. This quarter’s earnings preview could almost be a copy and paste of the second quarter preview: It looks like we will get meager earnings growth, if we get any at all. The media will again tout earnings recession, which we discussed on April 6, 2015. The big headwinds from energy sector weakness and a strong U.S. dollar remain. And the big overseas worries are again unlikely to have much impact on earnings overall, as business conditions in the U.S.?—?outside of the energy sector?—?are pretty good.
It Ain't Over 'Til It's Over
Yogi Berra passed away last week at the age of 90. One of the greatest baseball players of all time, Berra was probably known more for his funny sayings (so-called “Yogi-isms”) than he was for his impressive career as a New York Yankee that lasted from 1946 until 1963 and included 3 MVP awards and 10 World Series championships. Some of these Yogi-isms are relevant for investors, including: 1) it ain’t over ‘til it’s over, 2) déjà vu all over again, and 3) the future ain’t what it used to be. Berra also famously once said, “Make a game plan you can stick to…unless it’s not w
Yes, and No
The title of this commentary is our answer to the question: Does the Fed know something we don’t know? Many market participants and pundits were asking this question late last week after the Federal Reserve’s (Fed) policymaking arm, the Federal Open Market Committee (FOMC), decided not to raise interest rates at the conclusion of its two-day policy meeting on Thursday, September 17, 2015. Market participants were asking the question although they had priced in just a 30% chance of a rate hike prior to the meeting.
The Federal Reserve’s (Fed) decision not to raise interest rates at its September 17 policy meeting was undoubtedly the biggest event of last week. Although not a big surprise, besides Donald Trump (and perhaps China), the Fed is all that anyone is talking about these days. This week we share some of our perspective on what the Fed’s decision may mean for the stock market and offer some investment ideas.
Should Emerging Market Investors Fight the Fed?
Emerging market stocks have not won much lately, but the Fed may be a winnable fight. The Federal Reserve, which announces its policy decision on September 17, 2015, is on the verge of starting a rate hike cycle for the first time in more than 10 years. We have previously written that the start of Fed rate hikes has not marked an impending end to bull markets for U.S. stocks (despite the popular Wall Street adage “don’t fight the Fed.”) In reality, the first rate hike has told us we are about halfway through the cycle as discussed in our Weekly Market Commentary of August 25, 2014.
How Much, How Far, How Fast, Not When?
The policymaking arm of the Federal Reserve (Fed), the Federal Open Market Committee (FOMC), will hold its sixth of eight meetings of the year this week. On Thursday, September 17, 2015, at the conclusion of the two-day meeting, the FOMC will release a statement and a new economic and interest rate forecast. In addition, Fed Chair Janet Yellen will conduct her third post-FOMC meeting press conference of the year.
Beige Book: Windo on Main Street
The latest Beige Book suggests that the U.S. economy is still growing at or above its long-term trend, indicating that some of the “transitory factors” that held the U.S. economy back in the first quarter of 2015 have faded. Comments also indicate that concern over China’s impact on the U.S. economy has increased and that some upward pressure on wages is beginning to emerge.
Consulting Our Technical Playbook
When markets are tough, emotions can take over. The natural emotional response to sharp stock market declines is to sell. In periods like these, especially when the media sensationalize every gloomy angle as they tend to do, an objective look at the data can be reassuring and help us make better investment decisions.
12 Questions for a 12% Correction
The recent market downdraft and related uncertainty in China have led to many investor questions. The strong 6.5% rebound in the S&P 500 over the last three trading sessions (August 26, 27, 28, 2015) has cut the S&P 500’s losses from the 2015 peak (2130 on May 21, 2015) to 6.7%. In response to the S&P 500’s recent 12% correction?—?the first decline of more than 10% since 2011?—?we answer 12 investor questions. Bottom line, we do not expect the latest correction and China uncertainty to lead to the end of the U.S. economic expansion or the end of the six-and-a-half-year old bull
Music from four players continues to influence events in the bond market this summer: the Federal Reserve (Fed), China, oil prices, and the U.S. dollar. The music from these four players has led to a mixed response in the bond market: disturbing for short-term securities, melodic for long-term bonds.
What We Can Learn by Going Back to School
The summer has flown by and some children are already going back to school this week. The back to school shopping session is considered the second most important selling season for retailers (after the Christmas/winter holidays), which we think is a good reason to check in on the health of the U.S. consumer and provide our latest thoughts on the consumer discretionary sector. Expectations for this season are low, but several consumer spending tailwinds suggest the sector may be poised to outperform over the rest of the 2015.
All eyes are on jobs this week. The U.S. Department of Labor’s July Employment Situation report (due August 7, 2015) will likely show that the U.S. economy created 225,000 jobs in July 2015, close to the average job creation over the past 12 months (245,000) according to the consensus of economists polled by Bloomberg News.
Earnings Update: Corporate Resilience
Once again, earnings season highlights corporate America’s resilience. Investors were braced for an earnings decline in the second quarter of 2015 but will almost certainly end up with another quarterly earnings gain despite the significant drags from the oil downturn and strong U.S. dollar, largely thanks to effective cost controls that have propped up profit margins. With more than two-thirds of S&P 500 companies having reported second quarter 2015 results, we provide an earnings update.
U.S. Dollar Still Stands Tall
The U.S. dollar remains strong, defying some skeptics. As has been the case since late 2008 when the Federal Reserve (Fed) began its quantitative easing (QE) program, there has been a great deal of concern recently among some market participants that the dollar is on the verge of a significant decline. Although the dollar may have lost some market share relative to other global currencies in recent decades, it remains the dominant global currency (often referred to as a reserve currency) and we expect it to remain so for the foreseeable future.
Parsing Puerto Rico
Puerto Rico municipal bond prices continue to reflect a significant probability of a potential default or debt restructuring. Puerto Rican difficulties are coming to a head: The commonwealth is suffering through a recession that began in 2006, a severe cash crunch has increased the prospects of a missed bond payment, and a greater than forecast budget deficit means that revenue fell short again and more cost reductions are needed.
The Future is Already Here
A good idea of what the future will look like for bond investors is already here. The three-year average annualized total return of the Barclays Aggregate Bond Index, a broad measure of high-quality bond performance, stood at a very modest 1.8% at the end of June 2015. This is an average return, and shorter-term returns have been both higher and lower over the past three years, but it provides an approximation of what investors may expect over a longer time frame.
Greece’s critical referendum took place this weekend and the Greek people resoundingly voted “no”?—?rejecting the latest bailout deal from creditors. The referendum result, which some interpreted as a vote to exit the Eurozone, throws Greece’s future in the currency union firmly in doubt. The unexpected result has led to a roughly 2% decline in the broad European indexes but only a modest decline in the S&P 500 (as of 3 p.m. ET today, July 6, 2015). The negative market reaction in Europe is not surprising, given polls heading into the weekend suggested a vote for the bailout was
The Fed After the "No"
The “no” vote in the Greek referendum on July 5, 2015, will potentially raise the level of economic and financial market volatility in the coming weeks as global investors assess the market and economic risks associated with an increasingly likely Greek exit (Grexit) from the Eurozone and from the Eurozone’s common currency, the euro.
Batteries Not Included: Midyear Stock Market Outlook
Expect the bull market to continue through 2015. In the stock market, 2015 has felt like déjà vu. In 2014, the year began with a tough first quarter and finished strong. After a weak start to the year, we believe that corporate America will provide a much needed boost for the second half and 2015 may also finish strong?—?providing the seventh year of positive returns, in the 5?–?9% range we forecast.
Putting the Pieces Together: Midyear Economic Outlook
We continue to expect that the U.S. economy will expand at a rate of 3% or slightly higher over the remainder of 2015, once economic conditions recover from yet another harsh winter—and other transitory factors—that held back growth in the early part of 2015. This forecast matches the average growth rate over the past 50 years, and is based on contributions from consumer spending, business capital spending, and housing, which are poised to advance at historically average or better growth rates in 2015. Net exports and the government sector should trail be hind.
Beige Book: Window on Main Street
The latest Beige Book suggests that the U.S. economy is still growing at a pace that is at or above its long-term trend, indicating that some of the “transitory factors” that held the U.S. economy back in the first quarter of 2015 have faded and that some upward pressure on wages is beginning to emerge. Overall, the Beige Book described the economy as expanding at a “modest or moderate” pace in most districts. In general, optimism regarding the economic outlook far outweighed pessimism throughout the Beige Book, as it has for the past two years or so.
The bond market tried to end the month of May on a high note but did not quite make the mark. The last 10 days of May 2015 witnessed fairly steady improvement in high-quality bond prices after a difficult five weeks, but it was still not enough to offset losses for the month. The broad Barclays Aggregate Bond Index still finished 0.24% lower in May and posted consecutive monthly declines for the first time since the last two months of 2013.
Taper Tantrum Redux
After a brief reprieve at the end of last week (May 4–8, 2015), the global bond sell-off resumed Monday, May 11, 2015, with 10- and 30-year Treasury yields rising to year-to-date highs of 2.28% and 3.04%, respectively. Treasury yields have now broken out of their recent ranges and have done so quickly.
Earnings Recap: Good Enough?
The first quarter 2015 earnings season is virtually over and the results relative to lowered expectations were quite good. Investors were braced for an earnings decline and the possible start of an “earnings recession,” but it looks like they will end up with a better than feared, year-over-year earnings growth rate of about 2%, according to Thomson Reuters data. This pace is impressive considering the significant drags from the oil downturn and strong U.S. dollar. Here we recap the first quarter 2015 earnings season and share our earnings outlook for the rest of 2015.
Made In Europe
A weak finish to the month of April 2015 was “made in Europe” as expectations of better global growth weighed on bonds. On Monday, May 4, 2015, the 10-year German government bond yield closed at 0.45%, more than quadrupling over the past two weeks. European strength combined with a dovish Federal Reserve (Fed) meeting outcome continued to arrest U.S. dollar strength, a primary driver of the steady decline in inflation and investors’ inflation expectations from mid-2014 through the first quarter of 2015.
Cross currents continue to push and pull the bond market, leaving bond prices and yields range bound ahead of another Federal Reserve (Fed) meeting and key batch of monthly economic reports. Intermediate to long-term Treasury yields increased by 0.01% to 0.11% for the week ending April 24, 2015, despite weaker economic data.
Sizing Up Small Caps
The Russell 2000 Index hit a fresh all-time high last week (on tax day, April 15, 2015) and has outpaced large caps by 205 basis points (2.05%) year to date. Although valuations are on the high side, the factors that have driven recent small cap strength, in our view, remain largely intact. Small cap technicals appear bullish, with positive relative strength and an upward sloping 40-week moving average.
Gauging Global Growth: An Update For 2015 & 2016
Global growth is likely to be a recurring theme for investors this week. The health of the global economy and key regions (U.S., Eurozone, Japan, China, etc.) is likely to get plenty of attention from corporate managements as they discuss Q1 2015 results and provide guidance for the rest of the year. In addition, the International Monetary Fund (IMF) will release the spring 2015 edition of its widely read World Economic Outlook on Tuesday, April 14, 2015, and China will release its Q1 2015 gross domestic product (GDP) that same day.
China: New Year, New Opportunity?
China will release its first quarter 2015 gross domestic product (GDP) report this week on April 14, 2015, with the market expecting a 7% year-over-year increase. Regardless of whether China hits that target, its stock market has already been positive so far this year. In this year of the goat in 2015, global investors have not been sheepish about buying Chinese stocks, powering the Shanghai Composite 25% higher so far in 2015 amid prospects for more monetary stimulus and policy reforms.
Words with Friends
Words matter. As investors brace for the unofficial start of the S&P 500 earnings reporting season for first quarter 2015 (see this week’s Weekly Market Commentary, “Earnings Recession?” April 6, 2015, for details), the financial media is swirling with words and phrases like “rig count,” “strong dollar,” “port strike,” and even “bad weather.”
Earnings season kicks off this week (April 6?–?10) with Alcoa set to report first quarter 2015 earnings on Wednesday, April 8. This earnings season has received a great deal of attention in recent weeks because it may produce the first year-over-year decline in S&P 500 operating earnings since the tail end of the financial crisis during the third quarter of 2009. We preview earnings season and highlight reasons not to fear a potential decline.
Market's March Madness
With the NCAA Final Four set, we share our own Final Four for stock market investing: economy, earnings, technicals, and valuations. With valuations above average and the economy slowing during first quarter of 2015, our championship game comes down to earnings and technicals. Based on our assessment of these four factors, we expect stock market investors will be “cutting down the nets” due to potential mid- to-high-single-digit stock market gains in 2015.
Breaking Up is Hard to Do
The high-yield energy sector has kept pace with the broader high-yield bond market in 2015 even as oil prices weakened, a notable difference from 2014. Although we don’t believe the high-yield bond market will return to the June 2014 peak, the current yield spread may still represent good value given still strong corporate fundamentals and low defaults.
The Dollar's Ripple Effect
In technical analysis, “intermarket analysis” looks at the way in which various markets interact. Intermarket analysis primarily looks at four market sectors: currencies, commodities, bonds, and stocks. From a technical analyst’s perspective, focusing our attention on only one market without considering what’s happening in the others leaves us in danger of missing vital directional clues and potential profits. The dollar, which has appreciated 24.4% since June 30, 2014 (as of March 19, 2015), has had an unusually strong intermarket effect of late.
The Fed faces a number of obstacles now and may require greater justification to suggest raising interest rates as soon as June. Bond market reaction to recent Fed meetings has been initially bearish but muted overall. Maintaining the word “patient” could have different implications for segments of the bond market.
FOMC Preview: When, How Often, and How Much
What the FOMC says, if anything, about the rising dollar and its implications, could have ramifications for monetary policy over the next several quarters and beyond. In addition to “when,” market participants may start asking “how much” and “how fast” rates may increase once the Fed begins to raise the rates. We are watching several factors to gauge when the Fed may begin to hike rates, including wages, the output gap, inflation, and inflation expectations.
Beige Book Suggests Continued Modest Economic Growth
The latest Beige Book suggests that the U.S. economy is still growing at a “modest or moderate” pace that is at or above its long-term trend, and that some upward pressure on wages is beginning to emerge. Optimism on Main Street remains high despite the recent barrage of bad news on the economy. Over the past three Beige Books, the BBB averaged +85, in-line with the +89 average reading in all of 2014.
Happy Birthday Bull Market
The current bull market celebrates its sixth birthday today (March 9, 2015). Bull markets do not die of old age, they die of excesses, and we do not see evidence of excesses emerging today. Some of our favorite leading indicators suggest the economic expansion and bull market may continue through the end of 2015.
Hot and Cold Bonds
January 2015 was the best month for high-quality bonds since December 2008. In February 2015, high-quality bonds posted their worst monthly performance since June 2013 and the taper tantrum sell-off. High-yield bonds experienced ups and downs thus far in 2015. After a muted January, high-yield bonds returned 2.4% in February, the largest single month gain since October 2013. After a wild first two months, we expect more muted returns over the remainder of 2015.
The Nasdaq Composite just hit 5000 today as this report was going to press and is nearing its all-time record closing high of 5048. Even with the Nasdaq at 5000, we do not believe stocks have reached bubble territory. The Nasdaq has a much stronger foundation today of valuations, profits, and sentiment.
The Misery Index
Reports on the CPI and unemployment rate for January 2015 sent the Misery Index down to 5.6%, its lowest level in 56 years. Despite the low reading of the index, headlines and polls indicate the index may not be capturing the nation’s mood. Wage growth may be the key to improving consumer sentiment about the state of the U.S. economy.
Are Expectations Too High?
The market’s continued ascent has caused some to ask if the stock market reflects excessive optimism. The pace of economic surprises as measured by the Citigroup Economic Surprise Index suggests expectations remain reasonable. We view recent economic disappointments as largely temporary, and would expect the surprise index may reverse recent declines as expectations have come down, providing support for cyclical sectors.
Global GDP Tracker
The top 25 global economies make up 90% of global gross domestic product (GDP). Through Friday, February 13, 2015, 13 of these economies (including countries and political unions) have already reported Q4 2014 GDP results, including the four largest economies (U.S., Eurozone, China, and India). As this commentary was being prepared for publication, Japan, the world’s fifth-largest economy, released Q4 GDP results.
Results 151–200 of 239 found.