Rate hikes will be far fewer than the markets currently expect.
“Don’t Fight The Fed.” But, unfortunately, that mantra has remained a “call to arms” of the financial markets and media “bullish tribes” over the last decade.
Passive ETFs are hiding a bear market in stocks.
“Speculative” is a word that aptly sums up the year 2021.
Here are my New Year “investor” resolutions for 2022.
The reality is that despite media commentary to the contrary, debt-driven government spending programs have a dismal history of providing the economic growth promised. As a result, the disappointment of economic and earnings growth over the next year is almost a guarantee.
During bull markets, investors have a concise memory of previous bear markets. Such is why, throughout history, cycles repeat as lessons must get learned and relearned.
When the Fed initially starts hiking rates, it is usually during a strongly trending bull market. Much like a car rolling downhill in neutral, tapping the brakes initially doesn’t do much to curb the momentum. However, keep pushing on the brake pedal long enough, and the car will slow to stop. There are two things to take away from the chart below.
“Wipe Out” is an appropriate description of what is happening beneath the calm surface of the bull market.
Going to all cash in your portfolio to avoid a crash can be just as costly as the crash itself. A recent CNBC article quoted a $200 billion money manager suggesting “every stock market investor should be ready to go to cash.”
Financial history is littered with the remains of ideas that marked the peaks and troughs of markets over time. From magazine covers to the world’s tallest skyscrapers to new investment products and strategies. Most proved to be the result of the psychology at that time, whether it was excessive bullishness or overwhelming fear.
The market is disconnected from everything. Throughout history, there are correlations you would expect to hold constant between the market, consumer confidence, and the economy.
The Fed’s monetary policy has screwed Americans. Such is the basic premise of a recent Washington Times article discussing inflation.
Inflation vs. deflation – while headlines get filled with “inflation” concerns, historical data shows “deflation” remains a threat.
Could the Fed trigger the next “financial crisis” as they begin to hike interest rates? Such is certainly a question worth asking as we look back at the Fed’s history of previous monetary actions.
Do rising interest rates matter to the stock market? Many in the financial media and advisory community are scrambling to locate periods where rates rose along with stocks. Has it happened? Absolutely. However, it was only a function of timing until it mattered.
While the Fed notes valuations are elevated, the crucial message to investors gets obfuscated. From current valuation levels, the expected rate of return for investors over the next decade will be low.
“Is cash a good hedge?” It’s a focus of a recent article discussing “fast” versus “slow” risk which examined the financial impact on equities and cash over long-term periods.
Charting the stock market “melt-up” in prices, and the Fed’s naivety of the laws of physics may be of benefit to younger investors. After more than a decade of rising prices, accelerating markets seem entirely normal, detached from underlying fundamentals. As a result, new acronyms like “TINA” and “BTFD” get developed to rationalize surging prices.
Fundamentally speaking, there are more than a few indications that 2022 earnings estimates are still overly exuberant. However, the bullish optimism currently supports rising stock prices.
What If I told you that 40% of the bull market rally over the last decade was from buybacks alone? That may not be as crazy as it sounds.
While the promise of a continued bull market is very enticing, it is essential to remember that all markets ultimately complete a “full cycle.” Therefore, if your portfolio, and eventually your retirement, depends on the thesis of an indefinite bull market, you should at least consider the following charts.
Like all rules on Wall Street, Bob Farrell’s rules are not hard and fast. There are always exceptions to every rule, and while history never repeats exactly, it often “rhymes” closely.
We dig into the bullish and bearish case for the market as we head into the end of the year. Currently, investors face a conundrum between year-end seasonality and the Fed starting to taper its bond-buying program.
Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.
No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?
The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.
On Monday, stocks solidly cracked below the 50-dma, but the bounce off the lows has investors asking if it’s “time to buy?”
After 40-years of economic erosion, there are still deficit deniers.
We don’t disagree the S&P 500 could well hit a target of 5000. But, let us be honest about the reasons why...
Gold. What’s wrong with it? From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.
As the Fed started to talk about “taper,” the “bulls” sent a stern warning with a 2% “crash” they shouldn’t. After a couple of weeks of several Fed speakers discussing the need to reduce monetary accommodation, a quick sell-off brought had Powell singing a “dovish” tone at the recent Jackson Hole summit.
The question of Japanization in the U.S. continues as the S&P 500 tracks the Nikkei of 1980.
Young investors are taking on personal debt to invest in stocks.
“Pet Rocks” first appeared in the mid-70s as a novelty item. Just recently, digital NFT’s of “pet rocks” sold for over $100,000.
In the fastest bull market in history, the S&P 500 doubled from its pandemic lows.
Did the Fed’s “monetary policy experiment” fail?
The question I get most often is “when is the next bear market?” There are three specific items that tend to predict bear markets and recessions with some accuracy.
The data shows the Fed is behind the surging wealth gap.
Was the second quarter the peak of economic growth and earnings?
“Past Performance Is no guarantee of future of results.” Such is the disclaimer below every performance chart produce by the financial marketplace.
A few years ago, Paul Wallace penned an article entitled: “GDP Is A Grossly Defective Product.” The recent release of the Q2-2020 report reminded me of it as the media fawned over the 7.6% print.
In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.”
It’s now official that the recession of 2020 was the shortest in history.
Monetary policy is not expansionary despite widespread belief otherwise.
Knowledge vs. experience. When it comes to investing, such is what separates long-term success from failure.
Is the retail investor rampage over?
Bond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.
“Warnings From Behind The Curtain” almost sounds like the title of a good “Cold War” fiction novel.
In Part-2 of “Capitalism” does not equal “Corporatism,” we delve into why bailouts support corporatism and how to fix the system.
