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36 results found.
The Debate Over Guns or Butter Returns
by Robert Stimpson of Oak Associates,
In economics, “Guns or Butter” compares the impact of government spending on defense and non-defense categories. The Russia invasion of Ukraine has implications for investors and categories associated with defense, energy and industrials. Sectors deemed in the national interest should benefit from better appropriation, less regulation and bipartisan support.
Q3 2021 Market Commentary Answers to Our Most Recent Client Questions
by Robert Stimpson of Oak Associates,
US stocks, as seen by the S&P 500, ended the third quarter unchanged, having shed over 4% in September as fears over the debt ceiling and the Fed’s options erased the summer’s progress. Certainly, the market environment has changed a lot over the past 18 months. Valuations are up, economic data is varied, and the prospects of potential Fed action are growing.
Play Ball
by Jeffrey Travis of Oak Associates,
Baseball fans returning to ballparks has been a definitive symbol of the optimism emanating from the reopening of the US economy. While the enthusiasm from consumers and investors alike is warranted, Jeff uses his version of the old-western movie title ‘The Good, The Bad, and The Ugly’ to describe Oak’s current view of the investment landscape.
The Heavy Lifting
by Robert Stimpson of Oak Associates,
Wall Street and Main Street are two different zip codes. In 2020, one neighborhood struggled with rising economic uncertainty, while the other posted strong gains underscored by a loose fiscal and monetary environment. In 2021, we expect the neighborhood's economic fortunes to converge.
Submerging Markets
by Mark Oelschlager of Oak Associates,
It has been a dreadful start to the year for stocks, with the S&P 500 Index down more than 10% as we write this. As is usually the case, this correction is being driven by concerns about a slowing economy. The emerging markets and the commodity sectors are the primary culprits this time, and the fear is that the weakness in those areas will spill over into the broader US economy.
Dot-Communism
by Robert Stimpson of Oak Associates,
In this commentary, Portfolio Manager Robert Stimpson discusses the effect the sharp correction in Chinese equities, the unwinding of the commodity supercycle, and the Federal Reserve’s decision to delay interest rate increases have had on US markets. Whether China’s own equity market China Syndrome will cause lasting damage to global markets - or simply a short-term spike in volatility and poor investor sentiment - is difficult to assess. Underlying fundamentals continue to suggest that corporate earnings are strong.
ETFs: “Like Handing an Arsonist a Match”
by Mark Oelschlager of Oak Associates,
The popularity of ETFs has grown among market participants who, in the aftermath of the financial crisis, want to be able to reduce market exposure or shift between sectors when they sense danger/opportunity. The recent correction has brought to light the role of ETFs in the market, and the volume statistics are mind-boggling. Innovation is generally good, but like many things in life, there is a downside, and we would argue the downside to using ETFs to engage in frequent portfolio repositioning is particularly steep.
Sharp Selloff
by Mark Oelschlager of Oak Associates,
In a matter of a week the stock market has gone from historically low volatility to historically high volatility. The good news is that, in our estimation, the current events are not enough to throw the US economy into recession. The nature of a selloff can be quite informative as to its meaning or duration, and there are many signs that this correction may be ephemeral and that stocks may bounce back.
Policy Paranoia
by Robert Stimpson of Oak Associates,
The present version of policy paranoia encompasses concerns over impending interest rate hikes, the rapid appreciation of the US dollar, a bloated US government balance sheet, weak international economies and increased probability of a crisis in certain Latin American countries. While legitimate, we do not believe the current ghosts are any more imminently destructive today than over the past six years.
Volatility Takes a Sabbatical
by Mark Oelschlager of Oak Associates,
The theme of the second quarter was low volatility, as stocks continued to grind higher. As June ended, the S&P 500 had gone 51 consecutive trading sessions without moving 1% or more in either direction. Not since April 16 has the index moved at least 1% in a given day. This is a remarkable streak and quite a contrast with the volatility of recent years. Naturally, when something like this happens, the inclination is to try to figure out what it means for the market going forward.
Resisting the Sirens
by Mark Oelschlager of Oak Associates,
There has been an interesting shift in the market over the past several weeks, as high-growth stocks (an area to which we have limited exposure, given our preference for more fairly-valued growth opportunities) have suffered a significant correction after being the darlings of the market since June of last year.
Putin and the Naughty Chair
by Robert Stimpson of Oak Associates,
On the surface, the first quarter of 2014 appears to be decent. The S&P 500 eked out a gain of 1.8% in the first three months of the year, despite heightened geopolitical tensions, a changing of the guard at the Federal Reserve, and frigid weather hampering economic growth. Accounts managed by Oak Associates have topped the S&P 500 year-to-date. That being said, signs of internal weakness are present in US equities.
Where are Margins Headed?
by Mark Oelschlager of Oak Associates,
The fourth quarter was another good one for stocks, with the S&P 500 returning 10.5%, and 32.4% for the year. This was the best calendar-year performance by the index since 1997. All four quarters of 2013 produced positive returns, with the first and fourth quarters, typically the strongest seasonally, both hitting double-digits. For the year Consumer Discretionary and Healthcare were the standout sectors, while Utilities and Telecom lagged. The laggards are not surprising, as they are income-oriented - an area of the market that was hurt by the backup in bond yields.
Third Quarter Market Commentary: Let's Reminisce
by Robert Stimpson of Oak Associates,
US stocks have risen each quarter of 2013, outperforming most other asset classes and emerging markets along the way. In the third quarter, the S&P 500 Index rose 5.24% and pushed the year-to-date gain to 19.79%. All sectors within the S&P 500 have produced positive returns this year, although the pro-cyclical groups have outperformed the defensive ones.
Second Quarter Market Commentary
by Mark Oelschlager of Oak Associates,
The market posted another positive quarter, with the S&P 500 returning almost 3%. In recent years, Q2 has witnessed a growth problem, in which softening economic data prompted investors to sell stocks. But this year that did not happen, as the data actually improved. While new job creation is less than some would like to see, there has been a clear acceleration over the past six months.
First Quarter Market Commentary
by Mark Oelschlager of Oak Associates,
After a strong 2012, the market continued its ascent in the first quarter, shrugging off macro issues like the Sequester and the Cyprus bail-in. The S&P 500 rose roughly another 10%, reaching a new all-time high. Normally when stocks are moving higher at a fast rate, it is the economically sensitive sectors that lead and the defensive ones that lag. But the first quarter saw the reverse, as the top three performing sectors were the three traditional defensive ones: healthcare, consumer staples and utilities.
Is the Fed Doing the Right Thing?
by Mark Oelschlager of Oak Associates,
After a strong 2012, the stock market is off to a good start in 2013, rising more than 5% so far in January and currently riding an eight-day winning streak (the longest since 2004). Encouraging economic data has a lot to do with this. Unemployment claims are at a 5-year low, home sales and prices are up, and consumer credit and retail sales are growing. Research firm ISI says that the current level of unemployment claims is consistent with 4% real GDP growth for the first quarter, which would be an acceleration from the sluggish growth of recent years.
An Alternate Reality
by Robert Stimpson of Oak Associates,
The largest positive factor affecting the environment for stock prices this year has been the recovery in the housing sector. After years of struggle, the sector appears to have turned the corner. The housing market had been showing signs of improvement for some time, but the debate as to whether the recovery was legitimate weighed on the group and added to concerns over the economy.
The Harsh Realities of Bond Math
by Mark Oelschlager of Oak Associates,
Shortly after I graduated from college my father sat me down and tried to teach me about bonds. He proceeded to explain that prices and yields. He tried to explain the difference between a bonds yield and its coupon as well as the effect that time to maturity has on the sensitivity of a bonds price to changes in interest rates. It all sounded so complex, and there were intertwining effects. This, combined with its counter-intuitive nature, made the concept of bond pricing difficult to grasp in a short lesson.
Time Heals All Wounds
by Robert Stimpson of Oak Associates,
The US stock market enjoyed a strong first quarter of 2012. Fueled by better economic data and a calming of fears over Europe, the stock market surged higher. For the first quarter, the S&P 500 rose 12.6%. Oak Associates accounts did much better, gaining on average more than 17%. The strongest performing sectors of the market were financials, technology, and consumer discretionary. These three groups are the most cyclical and their strong performance bodes well for a broader economic recovery through 2012.
Economic Update
by Mark Oelschlager of Oak Associates,
As one might expect after a near-doubling of the market in three years, investor sentiment, by many measures, is much more positive these days. These psychology indicators had reached worrisome levels (too much optimism often augurs below-average stock returns) a few weeks ago but have since come in a bit, which is healthy. The recent bullishness is hard to square though with the general anxiety individuals still have toward stocks. While some are returning to the market, many are still spooked by the volatility of recent years.
Quarterly Review Fourth Quarter, 2011
by Mark Oelschlager of Oak Associates,
After a dismal third quarter, when concern over the economy and debt ceiling drove stock prices lower, equities came roaring back in Q4 on improving economic data. Signs of a strengthening economy are numerous, and include consumer confidence, retail sales, pending house sales, lending activity, and employment. Corporate profitability, the untold story of recent years, continues to be outstanding. As fourth quarter earnings results filter in over the next few weeks, we expect the trend to remain in place.
Third Quarter 2011 Market Commentary: This is Not 2008
by Robert Stimpson of Oak Associates,
The discussion on how to contain the sovereign debt crisis torments the market, which would prefer a decisive solution administered by a powerful and determined financial authority. While stringing the situation along is painful in the near-term, it may actually allow other struggling countries in Europe time to right their budget problems and enact measured reform before bailout funds are required to force them to act. Regardless, an end to the debate will come and financial markets will recover. We intend to benefit from it.
The Return of Fear
by Mark Oelschlager of Oak Associates,
Politicians may have achieved the necessary short-term cuts, but they have yet to address the core problems that are driving the growth in expenditures: Social Security, Medicare, and Medicaid. On a certain level it is understandable that they have avoided structurally reforming these programs-they believe it is political suicide. This is the crux of the problem. More hopeless is the situation in Europe, where some members are running massive deficits or carrying ballooning debt balances but lack some of the options that a sovereign nation normally would to correct the problem.
The USA Gets Downgraded ? Almost
by Mark Oelschlager of Oak Associates,
This week S&P lowered the outlook for US Treasury debt from stable to negative. This technically is not a ratings downgrade, but the reduced outlook is a warning and can lead to a downgrade. The reason S&P took this action is simple: the agency is concerned about the large federal budget deficit, mounting debt, and the inability of the government to do anything about it. The last point is key. If S&P sensed a resolve to rectify the problem, it likely would not have changed the rating. But, noting the wide gap between Democrats and Republicans on the issue, it expressed concern.
Let Them Eat Crude
by Robert Stimpson of Oak Associates,
World events over the past month have received a lot of media attention, but few accounts have emphasized the long-term effects on equity markets. The revolts in Tunisia, Egypt, Libya, unrest in Bahrain and Yemen, and the earthquake in Japan are significant for equity investors going forward. While most of the media have focused on the human aspect of the events, the influence of food inflation, rising oil prices, and the state of the US dollar have been overshadowed by the regime changes and nuclear disaster in Japan.
QE2
by Mark Oelschlager of Oak Associates,
Interestingly, while one of the goals of QE is to lower long-term interest rates in order to stimulate the economy (particularly the housing market), the policy seems to be having the opposite effect, as rates have risen recently. This also occurred after the implementation of QE1 in 2009. In a perverse way, this may actually indicate that the Fed?s strategy is working, as higher rates generally reflect a healthier economy.
Cash Kindling
by Robert Stimpson of Oak Associates,
The US stock market?s potential resurgence is tied to a renewed and sustained wave of capital spending from corporate America. While consumers delever, most corporate balance sheets are tremendously well capitalized, with high levels of cash, profitability and low debt. High uncertainty levels about the economy seen today are likely to dissipate, thereby creating a more conducive environment for making spending decisions. The stock market?s next chapter will be written by corporations spending the cash they have accumulated. This should unfold over the next 4 to 6 quarters.
Bonds or Stocks?
by Mark Oelschlager of Oak Associates,
Since the market correction of 2008, investors have flocked to bonds and bond funds, and largely eschewed stocks and stock funds. Historically, however, investors have been the perfect reverse barometer, gravitating toward stocks or bonds at their peak and fleeing them at the bottom. This time should be no different, and it is therefore wise to bet that stocks will outperform bonds in the coming years. Of course there is no way to know when the current trend will reverse, but it will.
Wild Ride
by Mark Oelschlager of Oak Associates,
The market went on a wild ride Thursday. The fundamental explanation for the selloff and the correction that began in April is the sovereign debt problem in Europe. At times like this, it is important to remember that stock prices represent the discounted value of a firm's future cash flows. Earnings season is winding down, and first quarter profits have been very strong, even though revenues are just starting to recover to previous levels. Despite the myriad of worrisome big-picture issues, corporate America is healthy and companies are trading at reasonable valuations.
36 results found.
