MLPs at a Crossroad.
February built on January’s sharp equity market rebound as the Federal Reserve affirmed its commitment to a neutral posture that would not jeopardize the economy’s health simply for the sake of monetary normalization. Further, progress with the US-China trade negotiations has continued on a positive path. A material change in China’s systemic theft of American […]
The China Factor and Activists on AMID
The S&P 500’s 8.01% January rally reversed December’s 8.80% loss driven by dovish Federal Reserve commentary and improved prospects for a trade dispute resolution between the US and China that calmed global recessionary fears. Tangible positive developments on the US-China trade front should be reported by March 2nd and lead to a complete retracement of […]
2018’s Stock Market Volatility
The fourth quarter spike in equity market volatility is primarily the result of the US-China trade negotiations during a multi-year interest rate normalization program designed to reverse the unprecedented central bank accommodation from 2008 to 2016. In addition, secondary factors including slowing foreign economies, Brexit, the US Government shutdown and an overly tight Federal Reserve […]
The Case for Buying October’s Dip
The S&P 500 declined 6.9% in October as expectations for 2019 earnings comparisons downshifted. With 2018 earnings up 22% and the approaching anniversary of The Jobs and Tax Act of 2017, earnings comparisons will soon compare against tax cut enhanced earnings, and likely drop back to the normal 10% yr./yr. growth. Along with a contraction […]
Global Equity Market Performance Will Revert to the Mean in 2019
While the US equity market is at record highs, we have become more positive on the market and the economy in recent letters. Fears that a Smoot Hawley trade war scenario have not played out and the administration’s successful negotiations with Mexico, Canada and South Korea, suggest that the administration’s trade gambit is increasingly likely […]
Are Trump’s Foreign Policy and Tariffs Reckless?
The economy is heating up. The second quarter GDP was revised upward to 4.2% from 4.1%. Walmart, the nation’s largest retailer, reported second-quarter sales of $128 billion and same-store sales growth of 4.5%–the highest growth rate in ten years, demonstrating that the economic pick-up is being felt by most Americans. The stock market is pushing […]
Melt-Up, Mr. Grantham? S&P Earnings and US GDP Growth Strengthen.
Both S&P 500 earnings estimates and the US economy are accelerating. This combination of improving fundamentals revives the prospects for another leg up in the stock market and potentially Jeremy Grantham’s 50-60% melt-up scenario. Since last October, we have cautioned on the hazardous combination of “irrational” stock market speculation, historically high equity valuations and rising interest […]
Strategies for the Bursting Bond Bubble
This year’s increased stock market volatility and sharp declines in the emerging markets are the result of rising interest rates. If interest rates revert to the normal 2007 pre-financial crisis levels, a process not even halfway complete, the potential for significant declines in equity, bond and real estate markets becomes a serious and present risk. […]
Rising Interest Rates are Fundamentally Changing Investing
This month’s letter argues that rising rates are fundamentally changing investing and asset allocation. Our basic premise is that interest rates are artificially low and will continue to rise, which, in turn, will hurt the performance of equities and bonds. Traditional 60% equities and 40% bond asset allocations will need to change to include alternatives […]
Are 3% 10-year US Treasury Yields the Death Knell for Stocks, Bonds and Real Estate?
The remarkable 34-year bull market in bonds which enriched stock, bond and real estate investors for the last three decades, broke another key milestone in April when the 10-year US Treasury yield rose above the 3%. Breaking this psychological milestone strengthens the argument that bonds have entered a bear market. And this may spell trouble […]