Tag Archive: Investing

The VIX And Market Climb: Should We Care?

2024-10-16

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2024-10-16

The financial media frequently opines on what the daily gyrations of the VIX (implied volatility index) signal regarding investor sentiment. Despite how often it is quoted and discussed, many investors do not truly appreciate what implied volatility measures. We take this opportunity to help you better understand implied volatility. Furthermore, we discuss other lesser-followed measures of implied volatility that help better assess whether...

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Greed And How To Lose 100% Of Your Money

2024-10-15

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2024-10-15

In the movies, greed is a trait often exhibited by the rich and powerful as a means to an end. Of particular note is the famous quote from Michael Douglas in the 1987 movie classic “Wall Street:” “The point is, ladies and gentlemen, that greed, for lack of a better word, is good.

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GDP Report Continues To Defy Recession Forecasts

2024-10-11

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2024-10-11

The Bureau of Economic Analysis (BEA) recently released its second-quarter GDP report for 2024, showcasing a 2.96% growth rate. This number has sparked discussions among investors and analysts, particularly those predicting an imminent recession. There are certainly many supportive data points that have historically predicted recessionary downturns. The reversal of the yield curve inversion, the 6-month rate of change in the leading economic index,...

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Are Agency REITs Right For Your Portfolio?

2024-10-09

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2024-10-09

Numerous reader requests following our article, Agency REITs For A Bull Steepener, prompted us to write this follow-up with more detail about how to analyze agency REITs. This article doesn’t recommend specific agency REITs, but it does lay out some of the fundamental basics of the largest publicly traded agency REITs. In doing so, this analysis and the prior article provide a solid foundation for further evaluating agency REITs. Before diving...

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How Howard Marks Thinks About Risk…And You Should Too

2024-10-08

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2024-10-08

When most people hear the word “risk,” they think about wild market swings, scary headlines, and losing money overnight, but Howard Marks, Co-Chairman and Co-Founder of Oaktree Capital Management, takes a different approach. In his new video series How to Think About Risk, Marks digs deep into what risk is and how investors should handle it. Spoiler alert: It’s not just about volatility. The CFA Institute recently summarized the video stream,...

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Election Outcome Presents Opportunity For Investors

2024-10-04

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2024-10-04

As the November 2024 election draws near, the election outcome will profoundly affect the financial markets. Whether Donald Trump or Kamala Harris wins the presidency, each administration will bring distinct policies creating investment opportunities and potential risks for investors.

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A Crystal Ball Isnt Enough: The Importance Of Context

2024-10-02

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2024-10-02

On September 18, 2024, the headlines read the Fed cut the Fed Funds rate by 50 basis points. At first blush, one would think that a trader with a crystal ball a couple of days before the Fed action would buy bonds and lick their chops over the money they would soon make. In this case, the crystal ball was a curse. Bond yields rose following the rate cut despite what many investment professionals perceive to be a bullish event. If you scour the...

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The “Everything Market” Could Last A While Longer

2024-10-01

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2024-10-01

We are currently in the “everything market.” It doesn’t matter what you have probably invested in; it is currently increasing in value. However, it isn’t likely for the reasons you think. A recent Marketwatch interview with the always bullish Jim Paulson got his reasoning for the rally. “It is this cocktail of ‘full support’ at the front end of a bull market which commonly has created an ‘Everything Market’ during the early part of a new bull....

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Tax Cuts – An Examination Of The 2017 TCJA Impact

2024-09-27

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2024-09-27

An analysis of Presidential Candidate Trump’s policy proposals recently suggests that tax cuts will increase the deficit. While the raw analysis is correct, as it subtracts the potential for reduced tax collections from the tariff revenue, it ignores the impact on economic growth. There is much rhetoric about the impact of tax cuts, mostly centering around “only benefitting the rich.” While it may seem that “the rich” are the ones who...

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Agency REITs For A Bull Steepener

2024-09-25

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2024-09-25

In our recent two-part series on the yield curve (Part One  Part Two) we discussed the four predominant yield curve shifts and what they imply about economic activity and monetary policy. Additionally, given the current bullish steepening trend of the yield curve, we provided data on how prior bull steepening environments impacted various stock indexes, sectors, and factors. Missing from our analysis was a discussion of a specific type of REIT...

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50 Basis Point Rate Cut – A Review And Outlook

2024-09-24

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2024-09-24

Last week, the Federal Reserve made a significant move by cutting its overnight lending rate by 50 basis points. This marks the first rate cut since 2020, signaling the Fed is aggressively supporting the economy amid a backdrop of softening economic data. For investors, understanding how similar rate cuts have historically impacted markets and which sectors tend to benefit is key to navigating the months ahead. In this post, we will explore the...

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Weekly Market Pulse: Did The Fed Just Make A Mistake?

2024-09-23

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2024-09-23

Well, they did it. The Fed cut the Fed Funds rate by 50 basis points last week and indicated that there is likely more to come. Stock investors liked it, bidding up small cap stocks (S&P 600) by 2.25%, large caps (S&P 500) by 1.4% and the NASDAQ by 1.5%.

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Market Declines And The Problem Of Time

2024-09-20

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2024-09-20

When stock markets rise, the bullish narrative tends to dominate, overlooking the potential impact of market declines. This oversight stems from two main problems: a basic misunderstanding of math and time’s critical role in investing. Every year, I receive the following chart as a counterargument when discussing the importance of managing risk during a portfolio’s life cycle. The chart shows that while the average bull market advance is 149%, the...

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Trump Or Harris: Corporate Tax Winners And Losers

2024-09-18

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2024-09-18

Not surprisingly, Donald Trump and Kamala Harris are taking opposite approaches to modifying the corporate tax code. If enacted, both proposals would significantly impact corporate profits and, thus, share prices.

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Momentum Investing Gives You An Edge, Until It Doesn’t

2024-09-17

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2024-09-17

Since 2020, momentum investing has generated significantly better returns than other strategies. Such is not surprising, given the massive amounts of stimulus injected into the financial system. However, Brett Arends for Marketwatch noted in 2021 that momentum investing can give you an edge.

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Labor Market Impact On The Stock Market

2024-09-13

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2024-09-13

The August jobs report highlighted a critical reality: the labor market is cooling off. While the headline figures seemed decent, the underlying data reveals clear warning signs that worker demand is slowing. Investors should pay attention because the link between employment and its impact on the economy and the market is undeniable. While often overlooked, as we will discuss, there is an undeniable link between economic activity and corporate...

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Cash Cow Clues: Can Dividend Yields Forecast Interest Rates?

2024-09-11

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2024-09-11

We have written many articles and commentaries forecasting interest rates. The analysis has used prior and current inflation and economic activity. Additionally, we have looked at market data on inflation expectations, Fed Funds futures, and other factors that influence interest rates. Today, we add an unorthodox factor to the list: cash cows. This article introduces a unique way to imply where dividend investors think interest rates will be in...

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S&P 500 – A Bullish And Bearish Analysis

2024-09-10

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2024-09-10

The S&P 500 index is a critical benchmark for the U.S. equity market, and its performance often dictates investor sentiment and decision-making. Between November 1, 2022, and September 6, 2024, the S&P 500 experienced a significant rally but not without volatility. Currently, investors have very mixed views about where markets are heading next as concerns of a recession linger or what changes to monetary policy will cause. However, as...

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Technological Advances Make Things Better – Or Does It?

2024-09-06

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2024-09-06

It certainly seems that technological advances make our lives better. Instead of writing a letter, stamping it, and mailing it (which was vastly more personal), we now send emails. Rather than driving to a local retailer or manufacturer, we order it online. Of course, we mustn’t dismiss the rise of social media, which connects us to everyone and everything more than ever. Economists and experts have long argued that technological advances drive...

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Bull Steepening Is Bearish For Stocks – Part Two

2024-09-04

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2024-09-04

Part One of this article described the burgeoning bull steepening yield curve environment and what it implies about economic growth and Fed policy. It also discussed the three other predominant types of yield curve shifts and what they suggest for the economy and Fed policy. Persistent yield curve shifts tend to correlate with different stock performances. With the odds growing that a long bull steepening may be upon us, it’s incumbent upon us...

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