Tag Archive: stocks

Bi-Weekly Economic Review: The New Normal Continues

There has been a lot of talk about the economic impact of the recent tax reform. All of it, including the analyses that include lots of fancy math, amounts to nothing more than speculation, usually informed by little more than the political bias of the analyst. I am guilty of that too to some degree but I don’t let my personal political views dictate how I view the economy for purposes of investing.

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Global Asset Allocation Update: Tariffs Don’t Warrant A Change…Yet

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. We have had continued volatility since the last update but the market action so far is pretty mundane. The initial selloff halted at the 200 day moving average and the rebound carried to just over the 50 day moving average.

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Bi-Weekly Economic Review: One Down, Three To Go

We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details. Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable.

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Global Asset Allocation Update:

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in correction territory, down 10% from the...

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Bi-Weekly Economic Review: Markets At Extremes

Production ended the year on a strong note but early readings from January are not as positive. The December industrial production report headline was strong at a 0.9% gain but a lot of that strength was in the mining (oil drilling) and utility sectors. Mining has actually led the way the last year as rig count has risen with drilling activity. I’d love to see our economy less dependent on the price of oil but that is what we’ve become over the...

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Bi-Weekly Economic Review: A Weak Dollar Stirs A Toxic Stew

We received several employment related reports in the first two weeks of the year. The rate of growth in employment has been slowing for some time – slowly – and these reports continue that trend. The JOLTS report showed a drop in job openings, hires and quits.

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Bi-Weekly Economic Review: Housing Market Accelerates

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy.

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Bi-Weekly Economic Review: Animal Spirits Haunt The Market

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits?

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Three Years Ago QE, Last Year It Was China, Now It’s Taxes

China’s National Bureau of Statistics reported last week that the official manufacturing PMI for that country rose from 51.6 in October to 51.8 in November. Since “analysts” were expecting 51.4 (Reuters poll of Economists) it was taken as a positive sign. The same was largely true for the official non-manufacturing PMI, rising like its counterpart here from 54.3 the month prior to 54.8 last month.

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Global Asset Allocation Update

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market did not correct since the last update and so I will continue to hold a modest amount of cash.

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Bi-Weekly Economic Review: A Whirlwind of Data

The economic data of the last two weeks was generally better than expected, the Citigroup Economic Surprise index near the highs of the year. Still, as I’ve warned repeatedly over the last few years, better than expected should not be confused with good. We go through mini-cycles all the time, the economy ebbing and flowing through the course of a business cycle.

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Bi-Weekly Economic Review: Gridlock & The Status Quo

The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than the most recent 3.1% and 3% prints of Q2 and Q3 2017.

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Global Asset Allocation Update

The risk budget this month shifts slightly as we add cash to the portfolio. For the moderate risk investor the allocation to bonds is unchanged at 50%, risk assets are reduced to 45% and cash is raised to 5%. The changes this month are modest and may prove temporary but I felt a move to reduce risk was prudent given signs of exuberance – rational, irrational or otherwise.

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The (Economic) Difference Between Stocks and Bonds

Real Personal Consumption Expenditures (PCE) rose 0.6% in September 2017 above August. That was the largest monthly increase (SAAR) in almost three years. Given that Real PCE declined month-over-month in August, it is reasonable to assume hurricane effects for both. Across the two months, Real PCE rose by a far more modest 0.5% total, or an annual rate of just 3.4%, only slightly greater the prevailing average.

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Bi-Weekly Economic Review: Yawn

When I wrote the update two weeks ago I said that we might be nearing the point of maximum optimism. Apparently, there is another gear for optimism in this market as stocks have just continued to slowly but surely reach for the sky.

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Bi-Weekly Economic Review: Maximum Optimism?

The economic reports of the last two weeks were generally of a more positive tone. The majority of reports were better than expected although it must be noted that many of those reports were of the sentiment variety, reflecting optimism about the future that may or may not prove warranted. Markets have certainly responded to the dreams of tax reform dancing in investors’ heads with US stock markets providing a steady stream of all time highs, bond...

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Bi-Weekly Economic Review: As Good As It Gets

The incoming economic data hasn’t changed its tone all that much in the last several years. The US economy is growing but more slowly than it once did and we hope it does again. It is frustrating for economic bulls and bears, never fully satisfying either. Probably more important is the frustration of the average American, a dissatisfaction with the status quo that permeates the national debate. The housing bubble papered over the annoying lack of...

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Global Asset Allocation Update: Step Away From The Portfolio

There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolios this month. The post Fed meeting market reaction was a bit surprising in its intensity. The actions of the Fed were, to my mind anyway, pretty much as expected but apparently the algorithms that move markets today were singing from a different hymnal.

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The Two Parts of Bubbles

What makes a stock bubble is really two parts. Most people might think those two parts are money and mania, but actually money supply plays no direct role. Perceptions about money do, even if mistaken as to what really takes place monetarily from time to time. In fact, for a bubble that would make sense; people are betting in stocks on one monetary view that isn’t real, and therefore prices don’t match what’s really going on.

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Global Asset Allocation Update: No Upside To Credit

There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are other changes to the portfolio though so please read on. As I write this the stock market is in the process of taking a dive (well if 1.4% is a “dive”) and one can’t help but wonder if the long awaited and anticipated correction is finally at hand.

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