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Gliding to Year End?
Although we remain optimistic, the path to year-end may have some potholes. US stocks are among the more attractive investment options available, but there is the risk of a pullback in the near term should sentiment conditions continue to be elevated. There is also a risk of a melt-up in stocks given recent momentum. Europe is dealing with falling inflation and weak growth, although expectations are low, leaving investment opportunities somewhat attractive. Both Japan and China appear to be at a crossroads and we are watching political and monetary developments carefully.
Why Worry About a Melt-Up?
by Liz Ann Sonders of Charles Schwab,
The risk of a melt-up in stocks is garnering more attention; and is something weve been discussing recently, too. Sentiment does appear stretched in the near-term and warns of a possible pullback. But there are few, if any, bubble-like conditions present and fundamentals ex-sentiment appear healthy.
Glory Days: Could They Come Back for US Equities?
by Liz Ann Sonders of Charles Schwab,
A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.
In Other News
It will take some time to gauge the full impact of the government shutdown and data is likely to be somewhat skewed over the next couple of months. However, sitting on the sidelines isnt a great option and stocks still appear to us to be the best place to invest money for the longer term. International growth, although not robust, appears to be more supportive as we head into 2014 than it has since the financial crisis, and we favor developed over emerging markets for the time being.
Debt Ceiling Debate Takes Center Stage as Government Shutdown Continues
It appears likely the first government shutdown since 1996 will not be resolved quickly. We believe Congress will seek to package reopening the government with a debt ceiling increase. Despite the brinksmanship, we dont expect to see a downgrade of U.S. government debt by the major ratings agencies.
Countdown to a Government Shutdown (Sept. 30)
by Liz Ann Sonders of Charles Schwab,
Unless an 11th hour deal is struck, the government will shut down at midnight tonight. Memories are fresh from similar "fiscal follies" in the summer of 2011 and well compare and contrast. The last shutdown was 17 years ago and a look at that history may also be instructive.
You Never Know
Surprises come at any moment in the investing world, reinforcing the need to have both a long-term view and a balanced/diversified portfolio. We believe signs are pointing to better US and European growth, a near-term rebound in China, and some possible positive momentum building in Japan. But near-term fiscal policy risks abound. Investors that need to add to equity positions should use pullbacks to do so.
In a Little While: Market's Not Out of the Woods Yet
by Liz Ann Sonders of Charles Schwab,
Since moving into the "pullback" camp in early August, the market has had a mini-correction and it may not be over. Sentiment and technical conditions have improved; as has the economic backdrop, but risks remain. Until we get past Syria, Fed tapering and the debt ceiling, volatility may remain elevated.
Buckle Up
Caution is warranted near-term. For investors that have a solid strategy of dollar-cost averaging into the market, we dont recommend deviating from that path. However, for investors who are more tactical, better entry points are likely yet to come. Longer-term, we remain bullish on US equities and prefer developed international markets over emerging markets.
The Calm Before the Storm?
Record highs in US equities have resulted thus far in only modestly elevated investor sentiment and it appears retail investors are returning to the market, which could fuel further gains. However, volatility is likely to increase with political and Fed issues on the horizon. Europe remains attractive, along with Japan, but we are watching the potential consumption tax increase closely, while Chinas valuations are improved but concerns remain.
Arc of a Diver: The Budget Deficit's Plunge
by Liz Ann Sonders of Charles Schwab,
The budget deficit has been cut by more than halffrom over 10% of GDP to less than 5% today. June saw a budget surplus! The health of the private sector (given its deleveraging since 2007) more than offsets the drag from public sector deleveraging.
Calming Downand Changing Focus
Markets are calming and investors seem to be focusing on fundamentals againa nice change from recent history. The bar is relatively low for earnings season but focus will be on the commentary surrounding releases. We believe more sideways movement in both US equities and Treasury yields could prevail over the next couple of months, with summer months muting action; but remain optimistic about stocks longer-term. Likewise, Japan could tread water until new elections are held, but we believe the eurozone provides opportunities that should be looked into at the expense of investments in China.
Long Train Running: Why Stocks Are Rebounding
by Liz Ann Sonders of Charles Schwab,
Why the June swoon occurred and why it might already be over. Feds move toward policy normalization may have a lot to do with pricking perceived asset bubbles; not a more hawkish economic stance. Sentiment has improved notably; but technical conditions may need a bit more repair.
The New, Old Normal
We believe the recent volatility will be relatively short lived and provides an opportunity for investors who need to adjust their portfolios to do sowith long-term goals in mind. The risks associated with fixed income have been illustrated over the past couple of weeks and rising yields have caused equity volatility and a pullback. But we remain optimistic about US equities as well as developed international markets; particularly relative to emerging markets.
Pride: In the Name of the US Manufacturing/Energy Renaissance
by Liz Ann Sonders of Charles Schwab,
Manufacturing/energy renaissance in the United States is a long-term theme; not a short-term trade but its underway. The list of companies "reshoring" to the United States are powerful and growing. Can the United States become a global exporting powerhouse?
Changing Picture
We could be in the beginning stages of an adjustment toward a more "normal" monetary policy environment, with attendant volatility. This once again illustrates the importance of diversification and focusing on long-term goals when investing. We continue to believe the US equity markets are an attractive place for assets and recommend buying on pullbacks to the extent that you need to add to equity exposure. Additionally, continue to exercise caution around fixed income allocations and focus more on the developed markets vs. EM.
Omissions of the Omen: "Hindenburg Omen" and the Selloff Last Week
by Liz Ann Sonders of Charles Schwab,
Rising US Treasury bond yields and Fed "taper talk" not to mention a "Hindenburg Omen" sighting hit stocks last week. A look inside the Omen should calm fears of impending doom. The market is likely not out of the woods, but we dont expect an overly sinister correction.
Remarkable Resilience
We saw how the prospect of a sooner pullback in purchases in bonds by the Fed rattled the market both in the US and globally, but the picture, to us, has not changed to any great degree. A very gradual pullback, not even going to zero, in quantitative easing due to an improved economic situation doesnt spell disaster to us. We continue to urge investors to pay attention to both sides of the risk equation when making decisions and to keep the longer-term perspective in mind. Short-term swings are inevitable, but should not be the basis for sound decision making.
Everybody Wants Some: Central Banks and Bond Funds Step up Buying of Stocks
by Liz Ann Sonders of Charles Schwab,
The stock market has broken out of its "triple top" formation, which started in 2000, yet remains reasonably valued. Supply within the stock market has been dwindling thanks to near-record company buybacks. Demand for stocks is coming from some seemingly unlikely sources: global central banks and bond mutual funds.
Tenuous Times?
US stocks continue to make new highs, yet commodities have struggled and Treasury yields remain low, albeit up from recent near-record lows. Although not the standard playbook, we remain optimistic but acknowledge an equity pullback can occur at any time. Manufacturing data has been soft, the employment picture is mixed, and housing continues to improve. The European Central Bank (ECB) has joined the easing arty, illustrating the continued disappointments coming out of the eurozone.
No Escape
Global economic growth has weakened, while the US economy hasnt reached "escape velocity." US stocks have held up relatively well. With few other attractive alternatives, domestic equities appear to be the best house in a rough neighborhood. With the Fed committed to easing, housing improving, and valuations reasonable, the trend should continue. Risks remain and diversification and some hedging strategies are recommended.
Soft Patch - Part Four?
Stocks continue to trade at all-time highs, but concerns are rising over a possible pullback and downturn in economic growth. A consolidation of gains is likely, but trying to trade around a pullback can be quite difficult. A potential tapering of Fed asset purchases continues to be discussed, but the Fed also appears nervous over the potential for a spring downturn. Cooler heads appear to be gaining traction in Washington and at least some marginal progress is being made. Economic improvement is gaining traction in Japan, raising hopes of sustainable change, while Europe continues to suffer.
Market Resilience
After a stellar first quarter performance from US stock markets, which showed impressive resilience to continued headwinds, a pullback is certainly possible but we dont suggest investors who need to add to allocations wait. In a relative world, the US stock market continues to look like an attractive place to invest, although there may also be opportunities in Japan and Europe as well. The upcoming earnings season could tell the story for the market over the next couple of months, but we continue to advocate a long-term point of view and maintaining a diversified portfolio.
Finally!! Now What?
Surprise! We dont know whats going to happen in stocks over the next few weeks. But we are seeing an environment that we believe can foster further gains in the US as economic data remains generally positive, the Fed maintains its accommodative stance, and small progress is being made in the fiscal realm. Investors concerned about a pullback may want to hedge their portfolios, but maintain adequate exposure to equities.
Critical Juncture?
Headwinds have reemerged and investor concern is heightened yet again. We still believe stocks can run further, but a pullback is more likely in the near-term. The sequestration is now in affect but that doesn't necessarily mean it's here to stay and more budget fights loom, particularly in advance of the potential government shutdown on March 27. Meanwhile, some members of the Fed are in favor of scaling back its quantitative easing (QE) program, rattling markets a bit.
Seeing the Forest
Equity markets continue to be resilient and investor confidence is elevated in various sentiment indices, suggesting a near-term pullback is possible. But there are longer-term trends developing that give us hope that the US economy's expansion and market's rally are sustainable. Federal spending cuts via the "sequestration" appear sure to happen, but there will continue to be debates about the nature and size of the cuts. Similarly, questions are increasing as to the potential unwinding of current Fed policy with regard to timing and rapidity.
Rehab: An Update on Housing Recovery
by Liz Ann Sonders of Charles Schwab,
The National Association of Home Builders' Housing Market Index has staged a record-breaking run higher. Home prices have been rising and are feeding into real mortgage rates, consumer confidence, household net worth...and pushing fence-sitters off the fence. Housing's contribution to job growth could push the unemployment rate down more quickly than many believe.
Taking Care of Business, DC-Style, to Avert the Fiscal Cliff
by Liz Ann Sonders of Charles Schwab,
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
Looking Back to Look Ahead
Markets have been more focused on short-term forces; not least being Washington and the fiscal cliff negotiations. But taking a step back and gaining some longer-term perspective can help investors better weather short-term volatility. Even beyond the fiscal cliff, Washington and fiscal policy will likely remain in focus next year. Monetary policy is also front-and-center with the Fed maintaining its extremely accommodative policy and targeting specific economic conditions instead of providing calendar guidance. Europe managed to make it through the year, but challenges and risks remain.
Market at Mercy of Fiscal Cliff Until Resolution
by Liz Ann Sonders of Charles Schwab,
Politics and the fiscal cliff are dominating market action and adding to the uncertainty factor.
Sentiment is better, technicals are mixed and valuation is reasonable, but until we get past the cliff, fundamentals won't matter a lot.
There are some coiled springs forming that could help offset any fiscal-cliff related contraction next year.
The How Matters
Market focus has clearly been on fiscal cliff negotiations. An agreement that averts the cliff would likely ignite a further near-term rally, but the ultimate solution and its components could have longer term consequences that may not be as market-friendly. US economic data has been impacted by Hurricane Sandy, but it appears modest growth is continuing; although business investment has fallen off. Housing continues to provide support and the Fed is staying the course. There are some signs of growth stabilization globally, notably in some of the emerging economies, including China.
Helplessly Hoping...That a Market Riot Isn't Needed for Fiscal Cliff Fix
by Liz Ann Sonders of Charles Schwab,
A status-quo election puts the "fiscal cliff" front and center. The stock market's knee-jerk reaction was to sell; could further weakness light a fire under politicians? Good news has come from recent economic numbers, but sentiment will remain under pressure until the fiscal cliff is resolved.
Fiscal Cliff, US Economy and Election ResultsWhat Happens Next?
by Liz Ann Sonders of Charles Schwab,
Even if the United States falls off the "fiscal cliff," the hit to the economy will probably be gradual. And while the fiscal cliff probably figured into the recent market pullback, it's not the only contributor. Resolution to this issue, the continuation of positive trends in housing and manufacturing, and fundamental tax reform could help give the economy a boost.
No New News From the Fed
by Liz Ann Sonders of Charles Schwab,
Given that it's just two weeks before the presidential election and that the Federal Reserve made several key announcements after its last meeting in mid-September, we weren't expecting any fireworks from today's Federal Open Markets Committee (FOMC) meeting.
What Now?
The market appears to be in a "wait-and-see" mode in advance of the elections, but looking beyond November 6th is important for investors. The election is only one piece of the puzzle, and certain aspects of the political landscape likely won't be much clearer after Election Day. Earnings season has been somewhat disappointing, even though there was a relatively low bar to hurdle. We see more signs that the slowdown in the United States may be ending, however, with strength in housing particularly noteworthy.
Results 501–550
of 663 found.
