The Capital Growth Channel

This Is What A Bubble Looks Like

Take the US tech bubble of the 1990s, add the subsequent real estate bubble of the 2000s, multiply by two, and you have a good approximation of the events leading to Japan's stock market crash in 1990. The Nikkei stock index rose more than 900% in the 15 years before it finally topped. It was a frenzy powered by a belief that Japan Inc. was on its way to taking over nearly every major industry worldwide. The stock market bubble was further fueled by a massive real estate bubble at least twice the size of the one the US experienced in the 2000s. Tokyo alone became more valuable than all the land in the US. In short, it was the product of a tsunami of monumental and concurrent events that are unlike anything present in the US today.

Brexit One Year Later, in Five Charts

Although the British economy is showing signs of slowing down, the country has not contracted or imploded as many Brexit opponents had predicted. In fact, certain British sectors such as exports and manufacturing continue to expand.

What We Want and What We Get: Error Bias in Investing

As we observe events in realms such as financial markets, politics, or weather, we tend to form beliefs — be they explicit or implicit beliefs — about cause and effect, or whether the events were positive or negative, good or bad. Science has formalized this process: testing a hypothesis with empirical data. One of the tradeoffs when evaluating beliefs in light of evidence, or a hypothesis in light of data, is the type of error we would prefer if our beliefs turn out to be wrong. In the investment realm, this bias can affect our beliefs and behaviors, such as our tolerance for risk and our allocation choices. Several examples will help illustrate this point.

Schwab Market Perspective: Shifting Sentiment?

A bit of volatility returned to Wall Street, with indexes pulling back from record highs and the leading sector performer to this point in the year, technology, experiencing a decent-sized pullback. Meanwhile, we've seen a flattening of the yield curve, which suggests the bond and stock markets may be sending conflicting economic signals.

Harnessing Uncertainty: Five Opportunities in the Core Bond Market

This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.

ECRI Weekly Leading Index: WLI YoY Lowest Since August 2016

Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 143.7, down 0.3 from the previous week. Year-over-year the four-week moving average of the indicator is now at 5.36%, down from 5.45% the previous week and its lowest since August 2016. The WLI Growth indicator is now at 3.4, down from the previous week.

RecessionAlert Weekly Leading Index Update

RecessionAlert has launched an alternative to ECRI's Weekly Leading Index Growth indicator (WLIg). The Weekly Leading Economic Index (WLEI) uses fifty different time series from these categories: Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, Credit Market Composite. The latest index reading came in at 25.3, up from the previous week.

S&P 500 Snapshot: Third Consecutive Daily Loss

The S&P opened Thursday above Wednesday's close and rose for the first couple of hours. It was flat for the remainder of the day until dropping within the last hour. The index ended the day with a loss of 0.05%, its third consecutive daily loss.

Value Update: Where Is the Next Pocket of Opportunity?

A year ago, Templeton Global Equity Group’s Norm Boersma, Cindy Sweeting and Heather Arnold penned an article for Beyond Bulls & Bears discussing the signs of a revival in value stocks. With the nascent rally in global value stocks underway, the trio return along with their colleague Tucker Scott to outline where they now see the next pockets of overlooked potential opportunities for patient bargain hunters.

MSCI to Add China A-Shares to Emerging Markets Index: What Does It Mean for Investors?

The decision brings better representation of the entire Chinese economy.

Exploring Routes to China After MSCI A-Shares Move

MSCI has announced that China A-shares will be included in its emerging-market (EM) index next year, as we anticipated. Now, global equity investors need to consider how to access the vast universe of stocks traded onshore in China.

Does Coal Stand a Chance Against Renewable Energy?

You might have heard the news that the first new coal mine in a decade opened this month in a small Pennsylvania town called Friedens. The Acosta Mine—the output from which will be used in the production of steel—is expected to employ between 70 and 100 people over 15 years, with salaries ranging between $50,000 and $100,000.

Conference Board Leading Economic Index: Continued Growth in May

The Latest Conference Board Leading Economic Index (LEI) for May increased to 127.0 from a revised 126.6 in April and is currently at an all-time high. The 0.3 percent month-over-month gain was better than the 0.2% increase forecast by Briefing.com.

Macron Majority Gives His Reforms Momentum

With a new majority in the French National Assembly, President Macron has increased the chances parliament will pass his ambitious reforms aimed at labor and economic growth. But France also faces some hard fiscal realities that may take some time to fix.

The Q Ratio and Market Valuation: Z.1 Update

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies.