Sigmund Freud, devotee of the human psyche, wrote, “One day, in retrospect, the years of struggle will strike you as the most beautiful.”
Human nature dictates that we often reminisce with a fervor quite different from what appeared to be the sentiment of the times. Consider the psyche of today’s investor class. Though the S&P 500 has delivered better-than-14-percent returns for eight years, many investors have yet to dip their toes back into the deep end of the equity pool. So concerned, as they are, that the market will swerve harrowingly back into its 2008 form.
Even as we may end up looking back on this era as one of history’s great investment opportunities. Continue reading
Last week saw stocks cap off their first weekly loss in months. As investors fretted over Congress’s ability to push through tax legislation. And were shocked to see longtime market leader General Electric continue its fall from grace.
GE cut its dividend in half for only the second time since the Great Depression. And guided 2018 earnings below consensus estimates. With the new CEO stating that, “The goal is to make GE simpler and easier to operate… Complexity has hurt us.”
In most horror movies, a naïve and unsuspecting protagonist walks headlong into the closet, basement or cornfield in which her tormentor awaits. The viewer sees it coming. Cringing at the inevitable. But remains powerless to prevent the characters all-too-avoidable demise.
That scene is perfectly analogous to the one in which most investors find themselves today. Nearly nine years into a stock market recovery. With mean reversion laying in wait, somewhere, dead ahead.
Oh, the horror.
Twice over the first decade of the twenty-first century the stock market crashed. Two bear markets. Spanning four of the century’s first nine years. Each eradicating more than 50 percent of the S&P 500 index’s market capitalization.
Last Friday saw the largest outperformance for the tech-heavy Nasdaq vs. the S&P 500 since 2009. The Dow Jones Industrial Average gained just 0.1 percent. The S&P 500 gained just 0.8 percent. But the Nasdaq 100 added a blistering 2.9 percent.
Seeking perspective? The rally on Friday added a combined $185 billion to Apple, Alphabet, Microsoft, Amazon and Facebook. That’s the equivalent of giving birth to a company the size of General Electric in a single day.
In this year’s letter to investors, Warren Buffett wrote, “If you mix your politics with your investment decisions, you’re making a big mistake.”
As is usually the case, Buffett statement was on point.
Always be cognizant of the relationship between risk and reward. Never forget that saying yes to one thing is the equivalent of saying no to another. And never, under any circumstances, should you mix politics with investing.
Investors who remain cognizant of these maxims will invariably outperform their more emotional peers. Continue reading
While last week was solid, Friday saw stocks pull back. A byproduct of an odd jobs report. As payrolls fell 33K due to the hurricanes. The first such drop since September 2010. Yet a gain in full-time labor in the household survey and ongoing tightening in labor conditions pushed the unemployment rate down to 4.2 percent. A low last seen in 2001.
Q3 earnings season kicks off this week. Led by Citigroup, JP Morgan, Wells Fargo and Bank of America. The Financial Select SPDR (XLF) is up 10 percent from its early September low having exited the consolidation range in which it had been trapped since December. Financials are roaring back as Trump considers a dovish, anti-regulation nominee to replace Fed Chair Janet Yellen next February. Continue reading
During last year’s presidential election, Senator Bernie Sanders fueled his candidacy by feeding a rotten bill of goods to young people. Cynically capitalizing on their lack of knowledge and life experience. And hinting at utopian promises that the nation was in no position to deliver.
In so doing, Sanders nailed down, at one point, roughly 84 percent of the thirty-and-under vote in key primaries like Iowa and New Hampshire.
Accordingly, it should not surprise to find that economic socialism seems to resonate with so many American Millennials. Disconcerting when you consider that only recently, being called a socialist in America was an insult. Continue reading
Welcome to October. Known as the jinx month because of the crashes that have historically occurred on its watch. 1929, 1978, 1979, 1987, 1989, 1997 and 2008.
Conversely, October has also served as the “bear killer.” With the month marking the end of the bear markets of 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002, and 2011. Perhaps October’s most probable proffering is higher volatility.
Last week, the S&P 500 ascended to heights heretofore untold. Climbing above the 2,500 level for the first time in its vaunted 60-year history. Ever climbing the wall of worry. As retail and institutional investors alike continue to doubt the ability of equity markets to rise to even more glorious heights. To their own detriment, however, as stocks appear headstrong in their intent to move higher. Continue reading