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Pinnacle’s Q2 Market Review
The beginning of 2016 started in an emotional frenzy, as world markets dropped sharply out of the gates on fears of a sputtering world economy, plummeting commodity prices, a stubbornly hawkish Federal Reserve, and a decelerating earnings backdrop. The violence of the move in January was stunning, and by early February the number of world markets that had fallen more than 20% from their highs clearly argued that a bear market across the globe was taking place.
3 Prime Suspects in the Slow Economic Recovery
In yesterday’s post, I mentioned that lower government spending has been a big factor in the slow U.S. economic recovery. But it’s not the only culprit. Today, we'll take a look at three major headwinds to economic growth and whether they're likely to continue going forward.
Value Comeback?
by Burt White of LPL Financial,
Value stocks have staged a comeback versus growth after a long losing streak. Based on the Russell 1000 style indexes, growth has outpaced value for the better part of the last decade. Other than the period between April 2012 and July 2013, it’s been all growth all the time since 2006.
Should You Hedge Your Foreign Currency Exposure?
by Remy Briand of MSCI,
The volatility of currency has ticked up in recent years as a combination of monetary policy and currency wars fuel swings in the foreign exchange market. That leaves managers of global equity portfolios with a dilemma: disregard the volatility and leave their exposure to foreign currency unhedged, or apply fully hedged strategies that can prove costly over time.
Equity Investment Outlook April 2016
During the first quarter, global markets experienced exceptional volatility. Markets began their nose dive on the first day of trading this year as investors worried about deflationary trends, turmoil in credit markets and the possibility of a global recession. Then, in mid-February, a rebound in oil markets and new data suggesting stronger than expected U.S. growth caused sentiment to reverse and markets to recover. We believe that similar ambivalence and mood swings will persist for some time. Odds seem to favor an extended period of sub-par economic growth both in the U.S. and around the world.
What Capital Cycles Mean for Investment Performance
by Robert Huebscher,
Study an industry and you will observe that it follows a prescribed capital cycle. As prices rise, firms invest to expand production capacity; inevitably, overcapacity results and drives prices down. Investors understand the capital cycle, according to Edward Chancellor, but don’t always heed it. If they did, they would have averted market crashes, such as those following the dot-com and real-estate bubbles.
Bruce Greenwald: The Crisis Bigger than Global Warming
by Robert Huebscher,
Manufacturing is dying on a global basis, according to Bruce Greenwald, and its collapse will mean the demise of economies – like China – that are highly dependent on exported goods. Contrary to what Robert Gordon and others have contended, productivity is growing in the manufacturing sector – roughly twice as fast as the demand for those products. If third-world countries don’t adjust their economies to reflect this reality, Greenwald said it would be a “crisis greater than global warming.”
On My Radar: Glut – The U.S. Economy… in the Age of Oversupply
Today, my plan was to highlight two of my favorite analysts, Dr. Lacy Hunt and Dr. Gary Shilling. But that plan has changed and importantly, I believe, what I share this week can give us a better understanding of the structural issues we face. And how they might be fixed. Listening to Bloomberg’s Tom Keene early this week, I stood quiet as he interviewed Daniel Alpert.
Earnings Remain Key to Equity Forecast
Equities climbed yet again last week, with the S&P 500 Index rising 0.5%.
Corporate earnings were mixed, and the biggest market story was ongoing
strength in commodities, particularly oil and metals. Bank stocks rallied
strongly for a second week, while defensive market segments struggled to
keep pace.
The ECB Remains Focused on Its Targets
by Rob Waldner of Invesco Blog,
The European Central Bank (ECB) surprised markets once again on April 21 with the timing of some important announcements and also the scope of its bond purchasing program. While the ECB kept all three of its policy interest rates on hold — as expected — and the size of its asset purchase program unchanged at EUR80 billion a month, ECB President Mario Draghi provided new details in a news conference on the implementation of the bank’s program and on the scope of what assets it can buy. At a high level, Draghi summarized by saying that the ECB’s monetary policies are working, but they need time to be more effective.
Wait Until You Get a Pitch Right Where You Want It!
by Jeffrey Saut of Raymond James,
One of the most successful investors in history received the only A+ from Professor Benjamin Graham (of Graham and Dodd “Security Analysis” fame) at Columbia: the chairman and chief executive officer at Berkshire Hathaway, Inc., which traded as low as $38 per share in the early 1970s and now trades around $219,000 per share. If you haven’t guessed who by now, it’s Warren Buffett. How does he do it?
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
SPY made a new all-time high this week. The short and long term trend is higher. Despite a gain of 16% over the past 10 weeks, the majority of evidence indicates that investors largely remain skeptical and defensive. That, together with strong breadth, implies that higher highs still lie ahead. Shorter term, SPY is back to where it failed, repeatedly, to go higher in the spring, summer and fall of 2015. In the best scenario, attaining and then holding significant gains will likely take time.
Can Stocks (finally) Set a New Record?
We have been taking profits on stocks that hit targets and replacing with new selections. There are many candidates, and we go shopping on dips. We classify stocks three ways: (1) Aggressive upside, but plenty of risk. You need to buy a basket, not a single stock; (2) Great companies with great prospects, currently undervalued, but with potential catalysts. (3) Stodgy, conservative names without a lot of upside. Great candidates for enhancing dividend yield by selling near-term calls. Thinking about opportunities in this way is a good method for the individual investor.
Thinking Broadly About Emerging Markets
by Raman Aylur Subramanian of MSCI,
The recent uptick in emerging market equities has left investors to wonder whether the gains might continue and to think anew about how to approach the segment. An emerging markets composite index has tended over time to capture diversified returns across multiple countries without adding additional risk, Raman Aylur Subramanian, MSCI's head of equity applied research, explains in his latest post.
The DOL Had Their Say. What next for Advisors?
by Sam Ushio of Russell Investments,
The DOL’s new “fiduciary” rule is just the latest factor shifting the competitive landscape within the advisory industry. Here more from one of our experts, Sam Ushio on other factors that can help keep an advisory business competitive.
April Market Outlook Update
by Jim McDonald of Northern Trust,
The renewed appetite for risk assets continued during the last month, maintaining the strong rally after global equities registered a 20% decline from their highs on February 11. After triggering risk aversion in January, the news out of China is beginning to show some positive effects from their multi-pronged policy approach. The markets have also been supported by more realistic utterances from the Federal Reserve. Not only has the full committee reduced their expectations closer to the market, Fed Chair Janet Yellen has gained some ground in convincing investors that she's in control of policy making at the Fed.
Oil-Price Pessimism May Be Presenting Opportunities
Although investors’ overall sentiment toward commodities and natural resources equities improved in the latter half of the first quarter, they seemed to generally remain skeptical that commodity markets were on the mend. We see this scenario as potentially laying the groundwork for further gains going forward.
The Unprecedented Real Estate Bubble In China
Most economists and financial writers agree that the US has the strongest economy among the developed nations, even though we’re only growing at about 2%. Despite the slow growth, most don’t believe we are facing a recession anytime soon. However, most economists and financial writers also agree that a serious external shock could quickly throw the US economy into a recession and take most of the rest of the world with it.
9 Fairly Valued Mid-Cap Consumer Discretionary Dividend Growth Stocks: Part 2B
by Chuck Carnevale of F.A.S.T. Graphs,
Mid-cap stocks are often overlooked by investors and not widely covered on Wall Street or many financial websites and blogs. However, I consider it a mistake because there are many mid-size companies that are attractive long-term investment opportunities.
How Do You Measure Which Retirement Income Strategy Is Best?
by Michael Kitces,
In framing different retirement income strategies – and the trade-offs they entail – it’s important to scrutinize the measuring stick used to evaluate the outcomes. The best retirement income strategy will depend on whether you measure based on wealth, spending, probabilities of success, magnitudes of failure or utility functions that weigh both the upside and downside risks!
On My Radar: First, Do No Harm
My 18-year-old son, Matthew, came to me asking about how the economy works. This summer he will be an intern and task one prior to his start date is to read “How the Economic Machine Works.” There is much we can learn from history and it makes sense to study the research from some of the brightest amongst us. From there, he and I will begin a dialogue.
Negative Rates May Be Positive for Gold
by John Browne of Euro Pacific Capital,
As 2015 came to a close, most investors believed that 2016 would be a year dominated by a series of Fed rate hikes. That conviction solidified in mid-October when comments from multiple Fed officials convinced many that prior hints that the Fed would stay at zero percent rates had been false alarms. The Fed delivered on its promise in mid-December by actually raising rates by 25 basis points. Based on this, gold declined by 10% from October 14 to the end of the year, nearly matching its six year low. Many on Wall Street thought the declines would continue into 2016. They were decidedly wrong.
What Condition My Condition Is In
by John Mauldin of Mauldin Economics,
In this week’s letter we will take a quick look at the condition of a slowing global economy (the IMF just downgraded its own forecast this last week). Then we’ll grapple with a Plan B scenario, because I have a confession of sorts: I am not entirely optimistic that Congress and the new president can get their act together, so I offer a proposal from former Oklahoma Senator Tom Coburn as to what we, the people, can do to actually change the country’s direction without having to depend on a Congress that may prove dysfunctional. Again.
If You’re Not Following this Energy Trend, You’re Being Left in the Dust
This week our office was visited by my friend, investor and author Gianni Kovacevic, who is at the halfway point of a cross-country book tour to promote the latest edition of “My Electrician Drives a Porsche?” As part of the tour, he’s driving a Tesla Model S from Boston to Palo Alto, California—Tesla’s hometown—to demonstrate the potential of green energy and spread his message that “the future is now.”
The Times Are a--Changin'
Dovish comments and actions by central banks, including the Federal Reserve, helped sustain the market’s rally.
Fundamentals still indicated tepid growth even as global risk appetite built further through the course of the month.
March highlighted that shifts in political trends could feature prominently in the remainder of the year.
The Winter of Discontent
by Peter Schiff of Euro Pacific Capital,
The Winter of 2015-2016, which came to an end a few weeks ago, has been officially designated as the mildest in the U.S. in 121 years according to NOAA. While this fact will certainly add a major talking point in the global warming debate, it should also be front and center in the current economic discussion. The fact that it isn't is testament to the blatantly self-serving manner in which economic cheerleaders blame the weather when it's convenient, but ignore it when it's not.
Alpha or Assets? — Factor Alpha vs. Smart Beta
More and more investors are buying “factor”-based strategies, which invest using measures like valuation and low volatility. However, the most popular strategies are applying factors the wrong way. We believe that strategies should be built for alpha, not scale—but the asset management industry has gone in the opposite direction.
On My Radar: A Powerful and Reliable Determinant of Long-Term Investment Return
In my view, the bet today comes down to this: you believe the Fed can hold the market up (aka “the Fed Put”), you believe politicians can accomplish structural reform and you believe that the same holds true in Europe, China and Japan. Essentially, “whatever it takes” wins. Alternatively, you believe that extremely high equity market valuations matter, excessive debt is problematic and that it is ultimately impossible for central bankers, try as they might, to repeal economic business cycles.
Currency Wars: Fed, Brexit, and Yuan Crisis Potential
by Jeffrey Baker of HiddenLevers,
Thus far, 2016 has shaped up to be an unprecedented year. The old guard of the Republican party has been usurped and a socialist insurgency has taken hold within the Democratic electorate. For the first time since the late 1930s, populist politics are in vogue, taking hold in both major political parties.
Equity Valuations, Recessions and Stock Market Declines
by Doug Short,
Note: In response to an email, I've updated the data in this article through the March month-end numbers and at the launch of the Q1 2016 earnings season.
Last year I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the adjacent chart, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:
Last year I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the adjacent chart, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:
Open Letter to the President, Part Five
by John Mauldin of Mauldin Economics,
Without significant changes in tax and incentive structures, the US will almost assuredly enter a recession within the next few years. Then, if we lose tax revenues only to the extent we did in the last couple of recessions, we’ll be saddled with a deficit of over $1.3 trillion, and the deficit won’t fall below $1 trillion as far out as the eye can see, according to the nonpartisan Congressional Budget Office (CBO).
Mile-High Merger: Alaska Airlines Buys Virgin America, Expanding Market Reach
The $2.6 billion deal, awaiting shareholder approval in June, would create the fifth-largest U.S. airline by traffic and result in a much more competitive player, especially on the West Coast. (Alaska is based in Seattle, Virgin in San Francisco.) According to the Wall Street Journal, Alaska’s annual revenue could grow 27 percent because of the deal.
Results 7,151–7,200
of 10,163 found.
