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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.
Teetering on the Edge?
Concerns about a possible US recession remain elevated in light of the pending "fiscal cliff," resulting in some lackluster stock market action. The fiscal cliff and uncertainty around tax and regulatory policy appear to be influencing business decisions to the detriment of economic growth. While worst-case scenarios for Europe may have been taken off the table by the ECB, Spain's reluctance to ask for aid is causing consternation. And although we see continued weak growth in China, signs indicate the global slowdown may be turning around.
Don't Bring Me Down: Not Swayed by Pessimism at BCA Conference
by Liz Ann Sonders of Charles Schwab,
We present highlights, key takeaways and perspective on the recent BCA Research Investment Conference. The eurozone crisis and China's slowdown remain risks, but are somewhat offset by optimism about US markets. Politics will remain a force underpinning uncertainty and volatility.
Schwab Market Perspective: Disrespected RallyCan It Continue?
US equities are trading near five-year highs but numerous measures show investors remain skeptical. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus.
Central Banks Take Center Stage
Accommodative central banks have traditionally been good for equities and stocks have responded positively to recent action. However, each market reaction to US Fed action has been shorter in length and challenges persist. Although recent economic data has been beating relatively low expectations, it is still not meeting the Fed's hopes. We appreciate the sentiment of wanting to stimulate growth, but the Fed's power is limited. It's down the street in Washington where the real power to stimulate growth lies.
Profit Motive: If Earnings/Margins Are Peaking, What About Stocks?
by Liz Ann Sonders of Charles Schwab,
Earnings growth has peaked, but don't necessarily assume the same about margins. Present pace of earnings growth has historically been accompanied by decent market performance. Margins are increasingly driven by domestic and foreign earnings, but peaking margins have historically been accompanied by strong market performance.
Young Americans: The Death of Equities May be Exaggerated
by Liz Ann Sonders of Charles Schwab,
PIMCO founder Bill Gross believes the "cult of equity is dying" let me take the other side. Mutual-fund flows suggest that we may have lost a generation of investors. However, demographics suggest there may be another generation that could be the stock market's savior.
Schwab Sector Views: Cautiously Cautious
by Brad Sorensen of Charles Schwab,
We remain slightly defensive with our sector recommendations but admit that we're a bit concerned over doing so. While we certainly believe this is the appropriate positioning given the continued elevated uncertainty in the market, combined with sluggish economic data, we also acknowledge that some defensive areas appear extended and the possibility of a near-term cyclically-based rally exists.
Dog Days
We now appear to be firmly in the dog days of summer. Low volume and little conviction may dominate but investors need to stay vigilant and now is a good time to prepare for the fall. The recent Fed meeting yielded no new action, but policy makers reiterated that they will act if necessary. We are skeptical that more stimulus measures will have a lasting impact. A waiting game has ensued in Europe as investors look for action following hopeful comments from various officials. But despite concerns over corn prices, central banks will continue to ease, helping to support global growth.
Housing: Good Vibrations
by Liz Ann Sonders of Charles Schwab,
It's time for an update to January's report on housing, and the news continues to get better. Household formations are key. Household formations are moving higher but housing completions aren't keeping pace. Real mortgage rates plunge into negative territory. Key housing market index indicates continued sales (and pricing) recovery.
Treading Water
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
Muddling Through, But for How Long?
Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.
Jump: Market Rallies Sharply on EU Summit News
by Liz Ann Sonders of Charles Schwab,
Friday's sharp rally on better European news is followed by weaker economic news this week, keeping debate alive about what the market's priced in. When markets expect nothing and get something it can be a recipe for a rally. Investors of every ilk have de-risked, unleashing a scramble last Friday. The US economy is at stall speed, but still looks better than much of the world.
Fat Tails
Stocks have moved modestly higher and may now be in a relatively large trading range. US economic growth remains sluggish and is drifting dangerously close to stall speed. Policymakers in Europe appeared to make some progress in the most recent summit, but much is left to be done and time is running out. Meanwhile, global growth is slowing and central banks are attempting to stem the decline.
Achilles Last Stand: Greeks Vote in Favor of Euro
by Liz Ann Sonders of Charles Schwab,
The June 17 Greek elections favored the pro-bailout party and allow for a likely coalition to be formed probably the least-tumultuous outcome. However, kicking the can further down the road doesn't solve the eurozone's structural problems, nor does it stem contagion. Next on investors' radar is this week's Federal Reserve meeting, where additional easing is expected.
Schwab Market Perspective: Time for Action
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
Our House: Is the United States the Best House in a Bad Neighborhood?
by Liz Ann Sonders of Charles Schwab,
I won't try to put lipstick on the pig that was last Friday's May jobs report, but I will try a little lip gloss. Somewhat lost in the mire of the dire reaction to the report were several other more-positive readings on the economy. That's testament to the likelihood that there are many more drivers to today's malaise than just jobs growth, or lack thereof. It seems clear we're in the midst of the third consecutive mid-year economic slowdown, driven by similar forces, most dominantly the eurozone debt crisis.
It's All Relative
Equities have pulled back and are flirting with correction (-10%) territory. We believed this was a needed process, and remain modestly optimistic that economic data will rebound and the market will eventually resume its move higher over the next several months. The Federal Reserve has made clear that it stands ready to act should the US economy deteriorate, or the European debt crisis escalate, but we remain skeptical. The more important issue in our view is how the coming "fiscal cliff" is addressed.
Month of May: Sell and Go Away, or Hang in There?
by Liz Ann Sonders of Charles Schwab,
We believe the stock market's correction is likely to be less severe this year relative to 2010 or 2011.
Be aware of the possible perils of following a "sell in May" trading strategy.
For now, macro concernsincluding Europe and the looming "fiscal cliff"are trumping better micro news.
Here We Go Again....or Not?
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
Roller Coaster Returns
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
One Step Closer: Fed Keeps Rates Low But Gets More Hawkish
by Liz Ann Sonders of Charles Schwab,
The Federal Reserve's Open Market Committee (FOMC) made no change to short-term interest rates, but provided no hints that a third round of quantitative easing (QE3) was in the offing. As usual, the committee repeated its comment about keeping the Fed's balance sheet under review and being willing to act "as appropriate," while also confirming its pledge to keep rates "exceptionally low" through 2014. For the third consecutive meeting, there was one dissenterRichmond Federal Reserve Bank President Jeffrey Lackerwho believes the first increase in rates will be necessary in 2013.
Ride the Wave of Crude?
by Brad Sorensen of Charles Schwab,
Crude-oil prices have moved steadily higher over the past several months, but the move may not be sustainable.
Geopolitical tensions are unpredictable, but the response in demand to rising prices has become more rapid, and we see other downside risks.
Investing directly in the energy sector may not be the best way to try to benefit from rising oil prices, given new investing options, along with companies' various costs and sources of revenue.
Schwab Market Perspective: Concern or Correction?
Economic data has softened a bit lately but still indicates growth in the US. After a long stretch of relative calm in the markets, we've seen the markets pull back, possibly fulfilling the correction that was overdue. We believe the longer-term trend is higher but near-term risks continue to be elevated and earnings season could bring more volatility. The minutes from the most recent meeting of the Fed seemed to solidify that another round of quantitative easing (QE3) is not in the offing. Although the stock and bond markets initially reacted negatively, we are heartened by the rhetoric.
Comfortably Numb: Have Investors Become Too Complacent?
by Liz Ann Sonders of Charles Schwab,
The market has had its best first-quarter start in 14 years!
But with the rally has come elevated optimism, a contrarian indicator.
The market may be vulnerable in the short term, but we think optimism longer-term remains warranted.
Let's get right to the point: It was the best first quarter for the stock market since 1998. The total return of the S&P 500 index was 12.6% for the quarter; up nearly 30% from the October 3, 2011 low. What was particularly notable about the surge since then has been the attendant plunge in volatility.
Shifting Winds-Turbulence Ahead?
Treasury yields have moved somewhat higher, while stocks have largely continued to rise. Recent correlations appear to be breaking down, which could lead to increased volatility but we remain relatively confident in equities. Perception as to the next moves by the Fed appeared to be shifting, but Bernanke reiterated their easy monetary stance. Uncertainty is rising and the Feds goal of increased clarity through more transparent communication is under scrutiny. Liquidity concerns in Europe have eased but economic risks remain, while Spain and Italy face deal with their ongoing debt crises.
Results 1,051–1,100
of 1,205 found.
