Small caps have materially outperformed large caps in 2018, with the S&P SmallCap 600 Index outpacing the S&P 500 Index 7.80% to 2.58% between Dec. 29, 2017, and May 25, 2018. Below, I highlight the drivers of small-cap returns this year, and why I believe the trend could continue.
The Federal Reserve has two primary mandates: maximizing employment and stable prices. Congress also included moderating long-term interest rates as part of the Fed’s overall objective, but that should be the offshoot of stable prices. In May the unemployment rate fell to 3.8% which is the lowest since April 2000.
The economic calendar is light. Most of the “financial” news flow relates to non-core stories. Of the various geo-political themes, there is one that is most significant for investors.
Central bankers catch a lot of flak these days. However, there are two dominant trends in the market place – increasing allocations towards passive and private market investment strategies – where this ire might be misplaced. What if these developments were merely part of the natural evolution of investment markets?
Criticism of technical analysis ranges from bemused skepticism to claims of harebrained alchemy. Few investors as well-respected as Jeffrey Gundlach admit to using it. But yesterday, he explained why he relies on technical analysis under certain conditions.
Liz Ann Sonders draws connections between past and present to explain the action of the stock market and how it’s connected to economic fundamentals.
While novice investors typically stumble onto the concept of trend following in the context of stock-market timing, professionals know that trend following is not about using trends to time one or two individual markets. Modern professional trend followers often trade dozens of futures markets across equities, bonds, currencies, commodities and more obscure markets like carbon offsets.
These are two of the most important paragraphs we have encountered in more than 47 years of studying markets. DO NOT read them just once. Go off to a quiet spot that invites contemplation and READ THEM SEVERAL TIMES. Then reflect on all of the mistakes you have made in trading and investing.
Just like the weather, the world economy and financial markets go through cycles. Most years, they don’t change suddenly. We get some transition time between the colder and warmer seasons. I fear we may be in an economic transition right now, and it may not be in the direction of the springtime or summer we would prefer. But let’s look at these charts and see what they tell us.
The economic calendar is very light, and it is a holiday-shortened week. With the quadrennial CNBC switch to Olympic curling coverage after the market close, there is a little less air time to fill. What time and space remains will invite pundit opinion about last week’s stock rebound and the question: Is the coast clear?