Below please find a link to our monthly market perspective piece for January. This month, with the transition in Washington upon us, we reflect on what impact prior presidential cycles had on markets, and assess how this one may turn out.
Below please find a link to our monthly market perspective piece for August. Due to the recent rebound in quarterly corporate earnings, this month we explore the importance of this fundamental underpinning to the equity markets.
Corporate earnings have rebounded in recent quarters, growing 6.35% year-over-year in the S&P 500 after several years of decline. Analysts expect further modest earnings growth in 2017 and stronger double-digit growth beyond 2017, though estimates are often overly optimistic. While recent positive economic data and potential pro-business policies under Trump have boosted expectations, current stock valuations are very high by historical standards given the stage of the economic cycle in the absence of confirmed policy changes. Continued earnings growth and flexibility will be important for investors as policy developments unfold.
Below please find a link to our monthly market perspective piece for December. This month we explore a variety of factors potentially driving markets and evaluate the risks and rewards lying beneath the surface.
The document discusses the unusually low market volatility seen in 2017 so far. It notes that historically there has typically been a 5% market pullback in 91% of years, yet 2017 has seen the market continue moving higher without significant corrections. It examines measures of implied market volatility like the VIX index, which is at record lows, indicating that options traders do not expect much price volatility. While low volatility has persisted for an extended period, the document concludes that over time markets typically return to having a normal range of up and down trends, and investors should avoid complacency and prepare for opportunities that market corrections may bring.
The document discusses concerns about the flattening of the yield curve in recent years. It defines the yield curve as plotting interest rates at various maturity points, traditionally sloping upward as investors require higher yields for longer-term lending. Recently, short-term rates have risen due to Fed actions while longer-term rates have remained low, causing the curve to flatten. An inverted yield curve has preceded every recession in the past 50 years, though the timing is inconsistent. While not inverted now, spreads are the narrowest in a decade and investors remain watchful.
Corporate earnings have rebounded over the past year, with S&P 500 companies reporting year-over-year earnings growth of 7.2% and sales growth of 5.5% in Q2 2017. Forecasters expect this earnings growth trend to continue in the mid-single digits. Most S&P 500 companies reported positive earnings and sales surprises this quarter. Additionally, international earnings growth has outpaced domestic earnings growth for the first time in many years, helped by a weaker US dollar. Going forward, policy changes like tax reform could further boost earnings growth.
Below please find a link to our monthly market perspective piece for February. This month, with the prospect for potential policy changes ahead, we take a deeper dive into the concept of inflation and what it means to investors.
The S&P 500 returns in 2017 have been primarily driven by five technology stocks: Facebook, Apple, Amazon, Microsoft, and Google/Alphabet (FAAMG). Together these stocks contributed 30% of the S&P 500 performance. While some see this as a tech bubble, analysts argue valuations are reasonable given growth rates and cash flows. These companies are also changing the economy through cloud computing, e-commerce, advertising, and media consumption. Going forward, technology is likely to continue driving innovation and benefiting from increasing digitalization.
Below please find a link to our monthly market perspective piece for August. Due to the recent rebound in quarterly corporate earnings, this month we explore the importance of this fundamental underpinning to the equity markets.
Corporate earnings have rebounded in recent quarters, growing 6.35% year-over-year in the S&P 500 after several years of decline. Analysts expect further modest earnings growth in 2017 and stronger double-digit growth beyond 2017, though estimates are often overly optimistic. While recent positive economic data and potential pro-business policies under Trump have boosted expectations, current stock valuations are very high by historical standards given the stage of the economic cycle in the absence of confirmed policy changes. Continued earnings growth and flexibility will be important for investors as policy developments unfold.
Below please find a link to our monthly market perspective piece for December. This month we explore a variety of factors potentially driving markets and evaluate the risks and rewards lying beneath the surface.
The document discusses the unusually low market volatility seen in 2017 so far. It notes that historically there has typically been a 5% market pullback in 91% of years, yet 2017 has seen the market continue moving higher without significant corrections. It examines measures of implied market volatility like the VIX index, which is at record lows, indicating that options traders do not expect much price volatility. While low volatility has persisted for an extended period, the document concludes that over time markets typically return to having a normal range of up and down trends, and investors should avoid complacency and prepare for opportunities that market corrections may bring.
The document discusses concerns about the flattening of the yield curve in recent years. It defines the yield curve as plotting interest rates at various maturity points, traditionally sloping upward as investors require higher yields for longer-term lending. Recently, short-term rates have risen due to Fed actions while longer-term rates have remained low, causing the curve to flatten. An inverted yield curve has preceded every recession in the past 50 years, though the timing is inconsistent. While not inverted now, spreads are the narrowest in a decade and investors remain watchful.
Corporate earnings have rebounded over the past year, with S&P 500 companies reporting year-over-year earnings growth of 7.2% and sales growth of 5.5% in Q2 2017. Forecasters expect this earnings growth trend to continue in the mid-single digits. Most S&P 500 companies reported positive earnings and sales surprises this quarter. Additionally, international earnings growth has outpaced domestic earnings growth for the first time in many years, helped by a weaker US dollar. Going forward, policy changes like tax reform could further boost earnings growth.
Below please find a link to our monthly market perspective piece for February. This month, with the prospect for potential policy changes ahead, we take a deeper dive into the concept of inflation and what it means to investors.
The S&P 500 returns in 2017 have been primarily driven by five technology stocks: Facebook, Apple, Amazon, Microsoft, and Google/Alphabet (FAAMG). Together these stocks contributed 30% of the S&P 500 performance. While some see this as a tech bubble, analysts argue valuations are reasonable given growth rates and cash flows. These companies are also changing the economy through cloud computing, e-commerce, advertising, and media consumption. Going forward, technology is likely to continue driving innovation and benefiting from increasing digitalization.
The document provides an overview of the market perspective in September 2017. It notes that while the markets have exhibited little volatility since the 2016 election, corrections of over 5% are actually quite common within a given year. The document also discusses factors like leading economic indicators and the current economic expansion that suggest a recession may not be imminent. It concludes by stating that most economists believe economic conditions remain reasonable, though ongoing monitoring of differences between corrections and bear markets is warranted.
This document discusses the impact of loose global monetary policy on economic growth and equity markets since the 2008 financial crisis. Central banks around the world expanded their balance sheets significantly through measures like quantitative easing to stimulate their economies. This monetary expansion appears highly correlated with rising asset prices and market performance. However, as interest rates are expected to rise, the effects of tightening monetary policy on market volatility and asset price appreciation require careful portfolio positioning.
The document examines several long-held stock market anomalies and legends, such as "sell in May and go away" and the January effect. While the data behind these anomalies seems compelling initially, the document notes that many do not hold up over the long-term or in recent years. For example, a portfolio reflecting "sell in May and go away" did not consistently outperform a simple buy-and-hold strategy. The January effect and January barometer also have not predicted market performance reliably in recent years. The conclusion is that investors should stay invested and consider multiple data sources and perspectives rather than relying on isolated anomalies.
Below please find a link to our monthly market perspective piece for December. This month we examine the impacts of the rapidly changing low interest rate environment.
A review of Q4 2015 corporate earnings reveals a significant slowdown in revenue and earnings growth. While these developments have been affected by the sharp decline in commodity prices,they may reveal early signs of recessionary conditions.
Following an impressive bounce back from February lows, the durability of the current bull market remains suspect. The benefits of the recent rally appear limited to the large cap, defensive sectors of the market. In prior market cycles, this has portended that the latter stages of a bull market are fast approaching and as such, caution is warranted.
The document discusses contrarian investing and provides examples from history. It notes that investors often make the mistake of piling into popular trades, as seen during the tech bubble, while fortunes have been made by remaining calm during crises. Contrarian investing involves taking positions that are opposite the prevailing sentiment. The document examines the tech bubble crash as an example of when contrarian positions were successful. It also identifies some potential contrarian opportunities today in international stocks and high-yielding securities due to possible overvaluations.
Monthly Market Perspective - June 2016David Berger
The drivers of short-term market moves can be vastly different from those which underpin the cycles of longer-term market direction. This month we examine a variety of these factors.
This document summarizes a market perspective report from July 2016. It discusses how central banks have driven interest rates to record lows and even negative levels in some countries in an attempt to stimulate economic growth. However, global GDP growth remains sluggish despite enormous monetary stimulus efforts. As a result, government debt levels have increased substantially. The long-term implications of prolonged low and negative interest rates on economies and financial markets remains uncertain.
This document summarizes the current market environment of historically low interest rates driving high dividend payouts by companies that are likely unsustainable. Specifically, it notes that (1) interest rates being near historic lows have forced investors to seek yield elsewhere, (2) dividend-paying stocks now look very expensive based on metrics like price-to-earnings ratios, and (3) current levels of corporate payouts through dividends and stock buybacks exceeding earnings are unlikely to continue amid late-stage economic cycles with limited earnings growth.
The document provides an overview of recent interest rate movements and expectations for further rate hikes by the Federal Reserve. Short-term rates in the US have risen over 100 basis points in the past year, while longer-term rates remain lower, resulting in a flattening yield curve. The Fed projects stable economic growth and inflation through 2020 as it gradually raises rates, with market expectations that rates will peak at around 2.8% in 2019. Rising interest rates can slow economic growth over time as intended by the Fed to manage inflation, and an inverted yield curve has historically preceded recessions.
Unemployment has steadily fallen since the financial crisis while inflation has remained around 2%, allowing the Federal Reserve to maintain low interest rates. While rates have increased recently, monetary policy remains accommodating. Unemployment and wage growth trends have converged, with wages gradually rising as unemployment falls. However, real wage growth remains low. GDP growth has been consistent and within the range desired for long-term economic health. Looking ahead, the market will weigh the prospects for continued low inflation, steady growth, and a benign interest rate environment.
This document provides an analysis and updated expectations for long-term capital market returns. It estimates that U.S. stocks will provide a total return of 6-8% over the long-term and bonds will return 3-4%. These estimates are based on reasonable assumptions about inflation, dividend income, dividend growth, and valuation shifts. The document examines historical returns and factors to derive its projections, which are meant to provide a guide for long-term financial planning.
The market volatility of late summer seemed to fade as markets hit new highs in November due to optimism around a trade deal and accommodative monetary policy. While overall earnings declined slightly in Q3 due to weaknesses in energy, materials, and tech, most companies still saw sales growth and expressed a positive outlook. Larger companies have seen stronger earnings growth. The Treasury yield curve flattened again in November after widening for months, which bears watching given past recessions have followed yield curve inversions. Most analysts anticipate an earnings recovery in coming quarters but will monitor trends closely given high market valuations.
The document provides an overview of recent market perspectives and concerns for November 2018. It notes that while markets have dipped recently, the overall economic environment remains strong with GDP and earnings growth steady. However, investors are weighing concerns around the pace of interest rate hikes, global trade tensions, and the ability of companies to sustain high earnings growth. The document concludes that the investment environment remains modestly favorable, but market participants are closely monitoring conditions.
The document provides an overview and analysis of the current state of the markets in June 2018. It summarizes that while earnings growth remains strong, expectations are that growth may be peaking. It also notes that interest rates have risen and volatility has normalized this year after an unusually low-volatility 2017. The conclusion is that the market environment is normalizing, which should create continued volatility, so investors need flexibility to capitalize on opportunities.
The document provides an overview of market forces in the first half of 2019 and both positive and negative factors impacting the investment climate going forward. Among the positives are low global bond yields, expectations that the Federal Reserve will cut rates further, strong earnings growth, low unemployment, and subdued inflation. Potential negatives include modestly elevated US equity valuations, ongoing geopolitical uncertainties, softness in some US economic data, and rising debt levels. Going forward, positioning will depend on how these and other factors evolve.
The document summarizes corporate earnings growth in the second quarter of 2019. Earnings growth of 1.74% and sales growth of 3.62% were a surprise to the upside as growth was expected to be slightly negative. Earnings beat expectations by 5% while sales topped expectations by 0.5%. While growth has slowed, companies have generally outperformed expectations with stable underlying profit trends. Future expectations point to a potential return to positive earnings growth after a projected slight decline in the next quarter.
This document discusses the importance of investing to maintain purchasing power in the face of inflation. It argues that many investors' goal should be to grow their capital at a rate that matches or exceeds inflation. Stocks that pay dividends are presented as a solution, as they can provide income that increases over time to outpace inflation. Several large, stable companies are used as examples that have consistently raised their dividends by over 10% annually for the past decade, demonstrating how purchasing power can be achieved through dividend-paying stocks.
Summary
Despite pockets of strength, stocks remain in consolidation mode
Elevated volatility of first half unlikely to ebb in second half
Sentiment at mid-year shows optimism and elevated expectations
Second-half pullback could provide strong foundation for continuation of cyclical rally
The Model Wealth Program by Cornerstone Wealth Management focuses on principal-based investing rather than market predictions. It aims to identify experienced managers who can outperform peers over the long run through quantitative and qualitative due diligence. The program uses sophisticated strategies to manage risk and help investors achieve their goals.
The document discusses inflation and its potential impacts given policy changes under the new US administration. It notes that inflation has eroded purchasing power over the long-term and that equities have historically outperformed bonds and cash in inflationary environments. However, unexpected high inflation in the short-term could negatively impact the economy and markets. The conclusion is that the potential for higher inflation exists, which increases the difficulty of holding cash, so flexibility and risk management are important.
The document provides an overview of the market perspective in September 2017. It notes that while the markets have exhibited little volatility since the 2016 election, corrections of over 5% are actually quite common within a given year. The document also discusses factors like leading economic indicators and the current economic expansion that suggest a recession may not be imminent. It concludes by stating that most economists believe economic conditions remain reasonable, though ongoing monitoring of differences between corrections and bear markets is warranted.
This document discusses the impact of loose global monetary policy on economic growth and equity markets since the 2008 financial crisis. Central banks around the world expanded their balance sheets significantly through measures like quantitative easing to stimulate their economies. This monetary expansion appears highly correlated with rising asset prices and market performance. However, as interest rates are expected to rise, the effects of tightening monetary policy on market volatility and asset price appreciation require careful portfolio positioning.
The document examines several long-held stock market anomalies and legends, such as "sell in May and go away" and the January effect. While the data behind these anomalies seems compelling initially, the document notes that many do not hold up over the long-term or in recent years. For example, a portfolio reflecting "sell in May and go away" did not consistently outperform a simple buy-and-hold strategy. The January effect and January barometer also have not predicted market performance reliably in recent years. The conclusion is that investors should stay invested and consider multiple data sources and perspectives rather than relying on isolated anomalies.
Below please find a link to our monthly market perspective piece for December. This month we examine the impacts of the rapidly changing low interest rate environment.
A review of Q4 2015 corporate earnings reveals a significant slowdown in revenue and earnings growth. While these developments have been affected by the sharp decline in commodity prices,they may reveal early signs of recessionary conditions.
Following an impressive bounce back from February lows, the durability of the current bull market remains suspect. The benefits of the recent rally appear limited to the large cap, defensive sectors of the market. In prior market cycles, this has portended that the latter stages of a bull market are fast approaching and as such, caution is warranted.
The document discusses contrarian investing and provides examples from history. It notes that investors often make the mistake of piling into popular trades, as seen during the tech bubble, while fortunes have been made by remaining calm during crises. Contrarian investing involves taking positions that are opposite the prevailing sentiment. The document examines the tech bubble crash as an example of when contrarian positions were successful. It also identifies some potential contrarian opportunities today in international stocks and high-yielding securities due to possible overvaluations.
Monthly Market Perspective - June 2016David Berger
The drivers of short-term market moves can be vastly different from those which underpin the cycles of longer-term market direction. This month we examine a variety of these factors.
This document summarizes a market perspective report from July 2016. It discusses how central banks have driven interest rates to record lows and even negative levels in some countries in an attempt to stimulate economic growth. However, global GDP growth remains sluggish despite enormous monetary stimulus efforts. As a result, government debt levels have increased substantially. The long-term implications of prolonged low and negative interest rates on economies and financial markets remains uncertain.
This document summarizes the current market environment of historically low interest rates driving high dividend payouts by companies that are likely unsustainable. Specifically, it notes that (1) interest rates being near historic lows have forced investors to seek yield elsewhere, (2) dividend-paying stocks now look very expensive based on metrics like price-to-earnings ratios, and (3) current levels of corporate payouts through dividends and stock buybacks exceeding earnings are unlikely to continue amid late-stage economic cycles with limited earnings growth.
The document provides an overview of recent interest rate movements and expectations for further rate hikes by the Federal Reserve. Short-term rates in the US have risen over 100 basis points in the past year, while longer-term rates remain lower, resulting in a flattening yield curve. The Fed projects stable economic growth and inflation through 2020 as it gradually raises rates, with market expectations that rates will peak at around 2.8% in 2019. Rising interest rates can slow economic growth over time as intended by the Fed to manage inflation, and an inverted yield curve has historically preceded recessions.
Unemployment has steadily fallen since the financial crisis while inflation has remained around 2%, allowing the Federal Reserve to maintain low interest rates. While rates have increased recently, monetary policy remains accommodating. Unemployment and wage growth trends have converged, with wages gradually rising as unemployment falls. However, real wage growth remains low. GDP growth has been consistent and within the range desired for long-term economic health. Looking ahead, the market will weigh the prospects for continued low inflation, steady growth, and a benign interest rate environment.
This document provides an analysis and updated expectations for long-term capital market returns. It estimates that U.S. stocks will provide a total return of 6-8% over the long-term and bonds will return 3-4%. These estimates are based on reasonable assumptions about inflation, dividend income, dividend growth, and valuation shifts. The document examines historical returns and factors to derive its projections, which are meant to provide a guide for long-term financial planning.
The market volatility of late summer seemed to fade as markets hit new highs in November due to optimism around a trade deal and accommodative monetary policy. While overall earnings declined slightly in Q3 due to weaknesses in energy, materials, and tech, most companies still saw sales growth and expressed a positive outlook. Larger companies have seen stronger earnings growth. The Treasury yield curve flattened again in November after widening for months, which bears watching given past recessions have followed yield curve inversions. Most analysts anticipate an earnings recovery in coming quarters but will monitor trends closely given high market valuations.
The document provides an overview of recent market perspectives and concerns for November 2018. It notes that while markets have dipped recently, the overall economic environment remains strong with GDP and earnings growth steady. However, investors are weighing concerns around the pace of interest rate hikes, global trade tensions, and the ability of companies to sustain high earnings growth. The document concludes that the investment environment remains modestly favorable, but market participants are closely monitoring conditions.
The document provides an overview and analysis of the current state of the markets in June 2018. It summarizes that while earnings growth remains strong, expectations are that growth may be peaking. It also notes that interest rates have risen and volatility has normalized this year after an unusually low-volatility 2017. The conclusion is that the market environment is normalizing, which should create continued volatility, so investors need flexibility to capitalize on opportunities.
The document provides an overview of market forces in the first half of 2019 and both positive and negative factors impacting the investment climate going forward. Among the positives are low global bond yields, expectations that the Federal Reserve will cut rates further, strong earnings growth, low unemployment, and subdued inflation. Potential negatives include modestly elevated US equity valuations, ongoing geopolitical uncertainties, softness in some US economic data, and rising debt levels. Going forward, positioning will depend on how these and other factors evolve.
The document summarizes corporate earnings growth in the second quarter of 2019. Earnings growth of 1.74% and sales growth of 3.62% were a surprise to the upside as growth was expected to be slightly negative. Earnings beat expectations by 5% while sales topped expectations by 0.5%. While growth has slowed, companies have generally outperformed expectations with stable underlying profit trends. Future expectations point to a potential return to positive earnings growth after a projected slight decline in the next quarter.
This document discusses the importance of investing to maintain purchasing power in the face of inflation. It argues that many investors' goal should be to grow their capital at a rate that matches or exceeds inflation. Stocks that pay dividends are presented as a solution, as they can provide income that increases over time to outpace inflation. Several large, stable companies are used as examples that have consistently raised their dividends by over 10% annually for the past decade, demonstrating how purchasing power can be achieved through dividend-paying stocks.
Summary
Despite pockets of strength, stocks remain in consolidation mode
Elevated volatility of first half unlikely to ebb in second half
Sentiment at mid-year shows optimism and elevated expectations
Second-half pullback could provide strong foundation for continuation of cyclical rally
The Model Wealth Program by Cornerstone Wealth Management focuses on principal-based investing rather than market predictions. It aims to identify experienced managers who can outperform peers over the long run through quantitative and qualitative due diligence. The program uses sophisticated strategies to manage risk and help investors achieve their goals.
The document discusses inflation and its potential impacts given policy changes under the new US administration. It notes that inflation has eroded purchasing power over the long-term and that equities have historically outperformed bonds and cash in inflationary environments. However, unexpected high inflation in the short-term could negatively impact the economy and markets. The conclusion is that the potential for higher inflation exists, which increases the difficulty of holding cash, so flexibility and risk management are important.
The document provides an overview of market conditions in December 2018, noting high levels of uncertainty from political, economic, and policy factors. It summarizes that markets have seen steep declines with many sectors and companies in correction or bear market territory. However, it notes that asset classes often see mean reversion over the long run and emphasizes the importance of diversification. The document also reviews the Federal Reserve's recent interest rate hike and comments, as well as concerns over global trade tensions dampening company revenues.
The document discusses recent movement in fixed income markets, with interest rates declining dramatically over the past few months. This has significant impacts on both equity markets and the broader economy. The Federal Reserve reduced its expectations for 2019 GDP growth and inflation due to slowing economic indicators and lowered interest rates more rapidly than anticipated. Generally, declining borrowing costs allow economies to advance, so central banks are pushing rates downward globally.
The document analyzes potential unemployment scenarios in the United States over the next decade. It first examines current unemployment data and trends, finding the unemployment rate at 10% with 17.3% underemployment. It then presents three scenarios: 1) unemployment peaking in late 2010 and returning to pre-recession levels by 2013, based on historical patterns; 2) unemployment declining more slowly due to factors like declining consumer credit, part-time work, and low labor participation; 3) unemployment remaining elevated for years due to challenges across many industries in creating sufficient new jobs.
This document provides an overview of the current volatile market environment and outlines 10 rules of thumb for navigating periods of increased volatility. It discusses recent declines in major indexes and rise in market volatility. While the authors' base case sees continued slow economic and earnings growth, they note several signs of uncertainty globally. The 10 rules of thumb focus on identifying companies with organic growth opportunities, flexible finances, strong cash flow, and earnings quality to invest successfully through the market cycle.
The document summarizes an economic commentary discussing recent weak US employment reports and the disconnect between stock market performance and underlying economic conditions. It notes that while unemployment remains high and growth weak, corporate earnings have remained strong, supporting stock prices. It also introduces a special report on China's economic rise and changing demographics that may challenge continued growth.
- The document discusses the recent volatility in global stock markets and the fear that has gripped investors. While there are valid economic concerns, fear has become contagious and may be overstating the risks.
- The US economy has held up better than expected so far in 2016, with steady job growth and consumer spending. However, tightening financial conditions have led to declines in stock valuations.
- Central banks are again trying to ease financial conditions through further monetary stimulus in order to support the economy and stabilize markets, though investor faith in their actions may be waning.
In this issue:
1. TD Wealth Asset Allocation Committee: Market outlook: the year ahead
2. TD Economics: A foundation for uncertain times
3. TD Wealth: New principal residence exemption rules
1. The document discusses recent market volatility due to ongoing trade tensions between the US and its major trading partners. While this represents uncertainty, the trade policy aims to protect US workers and industries.
2. It is a challenging time for international investments as some economic growth has stalled and the rising US dollar puts pressure on foreign assets. However, fundamentals still look attractive for international stocks, with expected strong earnings growth.
3. The final article in the series on Social Security discusses the key factors to consider when deciding when to claim benefits - financial need and health/longevity. Online calculators require estimating life expectancy, but the best strategy generally depends on whether one expects to live past their late 70s or not.
The document discusses the Federal Reserve potentially raising interest rates and the impact on investments. It states that higher rates would signal economic strength and a return to normal rates after the Great Recession. While rates rising may cause initial volatility, historically the stock market has continued to perform well over longer periods as the economy strengthens. The document recommends staying invested in equities, as rates rising from very low levels are unlikely to significantly slow economic growth. Large cap stocks, international equities, and sectors like technology, finance and healthcare tend to perform well when rates rise.
The document summarizes Putnam's fixed-income outlook for Q4 2013. It discusses:
1) The Fed surprised markets by not tapering its bond-buying program, keeping rates low for longer but also increasing rate volatility driven by economic data.
2) Putnam believes the decline in labor participation may be more structural than cyclical, potentially leading to rapid policy tightening in 2014 if unemployment falls quickly.
3) Securitized sectors like agency mortgage-backed securities and commercial mortgage-backed securities benefited from Fed policy and remained overweight positions.
Healthcare is one of India’s largest sectors and continues to grow at an impressive pace. As India strives to become a US $5 trillion economy, the healthcare sector along with its multiplier effect on other industries has a significant role to play in India’s growth story in this decade. Prosperity and economic development of a nation are highly correlated to the well-being of its populace. Hence, provision of accessible healthcare is not a consequence but a pre-requisite of economic growth.
We begin a promising new decade on a hopeful note.
To help navigate the road ahead, we present to you our `Investment Outlook 2020’ report. In it, we seek to examine several long-term socio-economic trends alongside our traditional market analysis to showcase important ideas and provide actionable insights. These are complemented, once again this year, by opinions from decision-makers and thought-leaders across different professional arenas.
Predicting financial markets is a near impossibility as variables and inputs remain innumerable and are consequently hard to crack. But broadly, markets react as much to domestic considerations as they do to external ones. Interest rates, demand and business profitability are the primary domestic factors that determine market sentiment. Global economic and trade considerations together with the monetary policies of the major central banks influence the disposition of investment funds that divert capital from and towards emerging markets.
visit More - https://sanctumwealth.com/investmentoutlook2020/contributor/aditjain/readingtheleaves
Economic releases and how the market reactsJohn Becker
The document provides an analysis of the September employment situation report released by the Bureau of Labor Statistics. Key points include:
- The report showed 173,000 new jobs added, at the low end of estimates. However, August numbers are often revised upward.
- The unemployment rate dropped to 5.1%, below estimates, indicating more people found jobs.
- The participation rate remained steady, suggesting new jobs were filled by those already in the labor force.
- Markets initially dropped on concerns the report could encourage an interest rate hike. However, the report did not strongly indicate the economy was growing rapidly or that inflation was a risk, so the Fed may not raise rates in September.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
CIT: Voice of the Middle Market – Perspectives from the Heart of the U.S. Eco...CIT Group
According to U.S. Census data, middle market executives, whose companies take in more than $6 trillion in revenues and employ more than 30 million people annually, are expressing renewed optimism in their business prospects compared to a year ago. However, despite this positive outlook they are concerned about potential tax increases, government regulations, compliance with the Affordable Care Act and the current strength of the U.S. and global economies.
This document provides an overview and outlook for investments in 2017. It discusses how the Federal Reserve has kept interest rates low due to global economic fragility and negative yields abroad. It also notes that overall global debt continues to rise rapidly, including large increases in US government, corporate, and consumer debt as well as Chinese corporate debt. The outlook expects US economic growth to continue and for the Federal Reserve to gradually raise interest rates, while emphasizing the importance of diversification and managing risk.
Similar to Monthly Market Perspective - January 2017 (20)
Central bank policies have pushed interest rates lower globally, with over $13 trillion of debt outside the US carrying negative yields. The Federal Reserve is expected to cut rates further in 2019. With yields near historic lows, investors continue searching for safety, income, and higher returns, which has led some to take on more risk. Remaining flexible may allow capturing unique returns in areas like private credit.
The document summarizes a market perspectives report from May 2019. It discusses the Q1 2019 corporate earnings season, which saw 76% of S&P 500 companies beat earnings expectations. While earnings growth was positive, companies relying more on international revenue saw declines as trade tensions increased global economic uncertainty. Looking forward, progress in US-China trade talks will be important for continued optimism, as earnings disruptions may occur if disputes persist.
The document provides an overview of the current bond market and interest rate environment. It notes that interest rates have been low since the financial crisis, but recent statements from the Federal Reserve suggest that further rate increases may be halted for now. This could provide an opportunity for bond investors to earn modestly higher yields. Several charts show current U.S. government bond yields across maturities remain low by historical standards, but fixed income can still serve as a portfolio diversifier. There is also over $10 trillion in global debt currently yielding negative returns, keeping U.S. bonds relatively attractive. With low inflation expectations, the Fed has leeway to keep rates from rising in the near future.
The document summarizes a market perspectives report from February 2019. It notes that while corporate earnings continued to rebound in Q4 2018 with sales and earnings growth, concerns about future growth have emerged given global market volatility and more difficult year-over-year comparisons as companies will no longer benefit from tax cuts that boosted 2018 growth. The report analyzes recent earnings trends and expectations for slowing but continued growth in 2019, noting that earnings slowdowns do not always predict recessions and some slowing may already be priced into market expectations given valuation levels.
The document discusses concepts from behavioral finance that influence investor behavior and markets, including herd behavior, anchoring, and various calendar effects. It provides an overview of each concept and recent evidence questioning whether strategies like "Sell in May" have been reliable. The conclusion acknowledges that while machines now influence markets, human behavior still plays a role, and deep research is needed to overcome cognitive biases and take a long-term view of investing.
The 2nd quarter of 2018 saw continued strong earnings growth in the S&P 500, with sales up 10% and earnings up over 25%. All eleven sectors showed positive year-over-year growth and most companies signaled optimism for the remainder of the year. The strong earnings beat even the fairly aggressive expectations heading into the quarter. Additionally, recent economic stimulus has led to surging GDP growth and a strong job market with low unemployment, despite concerns over trade and currencies. Barring unforeseen geopolitical impacts, growth is expected to remain robust through the end of 2018.
Share repurchases are expected to reach record highs in 2018 as companies utilize cash brought back onshore under the new U.S. tax policy. While buybacks are generally seen as positive by reducing shares outstanding and increasing per-share metrics like EPS, they do not always result in higher stock prices. Strong fundamentals and cash flows must still support the company for buybacks to benefit shareholders. Currently, accelerated share repurchase programs are seen across many industries, but remain concentrated among large multi-national firms.
Most investment firms guide investors toward a mix of equities and fixed income, with fixed income intended to earn returns while protecting principal and reducing portfolio risk. However, rising interest rates have created challenges for fixed income. Through April, most fixed income assets were negative, demonstrating the benefits of diversification and avoiding long duration securities. The 10-year Treasury yield has risen from 2.04% to 2.97%, lowering prices in "safe" fixed income buckets. Further rate rises are expected as the Federal Reserve continues tightening its balance sheet. To address this, maintaining a diversified portfolio focused on asset class correlations and including alternatives can help optimize returns over time in the current environment.
Q4 2017 corporate earnings continued to grow, with S&P 500 sales up 7.67% and earnings up 14.28%, the highest revenue growth since 2011. Over 70% of S&P 500 companies reported earnings above estimates. Global earnings growth is expected to continue, supported by tax reform and revisions by companies. Revisions to 2018 earnings guidance have been increasing globally and especially in Europe.
The document provides an overview of the return of market volatility in late January and early February 2018. It summarizes that for the past year, the S&P 500 had experienced no drawdowns of more than 3%, bringing the lack of volatility to historic levels. However, markets finally saw a 10% correction in January, after a very sharp rally, ending the longest period without a 5% drop at 404 days. The document then presents historical data on market corrections and bear markets since World War II to demonstrate that volatility and pullbacks are typical and that recoveries have generally occurred within a reasonable timeframe. It concludes that the current market correction is likely to result in a return to normally functioning markets with price swings above and below an
After many years of underperformance, emerging markets exhibited strong returns in 2017 and may continue their rally. Emerging markets include nations transitioning to more stable political and economic systems with a rising middle class. They are more volatile than developed markets but provide diversification. Many emerging market indicators like GDP, investment, and production are still early in their economic cycles and may see continued growth outperforming developed markets. Earnings growth is also fueling emerging market stock gains, and valuations remain well below long-term averages, suggesting further upside potential. While volatility will remain, conditions support maintaining emerging market allocations.
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Monthly Market Perspective - January 2017
1. Market Perspective – January 2017
Experience Insight Impact
biegelwaller.com
Overview: While presidential election cycles can move markets materially, the impact from
policy moves may take many years to unfold and in many cases are limited in comparison to
what some market participants expect. With Inauguration Day upon us, we use this month to
review how policy moves affected markets historically, in order to determine how markets will
take shape with a new administration in Washington.
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2. Experience Insight Impact
Since the Election…
• Since Election Day, the S&P 500
has advanced 6%.
• So far, very little is clear in
terms of actual policy changes.
• Investors are optimistic that tax
reform will occur.
• Investors also see a better
regulatory landscape.
• The promise of fiscal stimulus is
driving growth optimism.
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Ten Year Treasury Yield
3. Experience Insight Impact
Dollar Strength
• Since the election, the U.S. dollar
index rallied 6.4% to a 14 year high of
103.30.
• While the recent rallies have been
impressive, the dollar index, currently
at 100.62, is considerably lower than
the all-time high of 164.72 (reached in
February of 1985 during Reagan’s
presidency).
• A strong dollar will inevitably hurt U.S.
exporters. In other words, while we
do not dismiss further dollar strength,
moves such as the one since the
election should normalize over time.
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Ten Year Treasury Yield
U.S. Dollar Index
4. Experience Insight Impact
Rising Interest Rates
• Policy moves have stoked the potential
for higher inflation which in turn has
bond yields surging. For instance, the
yield on the 10-Year Note has risen from
1.8% to the recent high of 2.6%.
• However, from a longer historical
perspective, bond yields are still close to
record lows. Jeff Gundlach, of
Doubleline, mentioned that the 10-Year
yield at 3% would put an end to the
bond bull market.
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Ten Year Treasury Yield
10-Year Note Yield
5. Experience Insight Impact
Historical Perspective
Initial Excitement Has Occurred Before:
Oscar Shafer, of Rivulet Capital, recently reminded us in the 1/15/17 Barron’s Roundtable that, “From the time
Ronald Reagan was elected in November 1980 until he was inaugurated in January 1981, the market was up 9%.
It then fell about 30% through August 1982.” He is quick to point out that he is “not predicting that, but we have
had a lot of euphoria.”
Presidential Prowess and Cabinet Do Not Necessarily Correlate with Economic Growth:
Scott Black, of Delphi Management, was quoted in the same Barron’s article: “The Wall Street Journal published
an interesting article recently showing that presidential administrations whose appointees have a lot of
experience, especially in business, don’t always produce the strongest economic growth. The Kennedy
administration’s top officials had the least amount of experience, but the highest growth rate of per-capita GDP,
at 4.2%. Reagan and Bill Clinton had more people with experience, and GDP rose 2.5%. The administrations of
George H.W. Bush and George W. Bush had people with the most experience, but posted the worst growth, at
0.7% to 0.8%. While Trump might do good things like deregulate parts of the economy, there is no guarantee
that America is going to return to an earlier, more robust growth rate.”
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6. Experience Insight Impact
Presidential Power Limits
A recent NY Times article by Neil Irwin has several additional nuggets of wisdom:
• “Presidential economic records are highly dependent on dumb luck where the nation is in the economic
cycle.” He points out that the President has “no control over the demographic and technological forces that
influence the economy.”
• He continues, “Even in areas where the president really does have power to shape the economy —
appointing Federal Reserve governors, steering fiscal and regulatory policy, responding to crises and external
shocks — the relationship between presidential action and economic outcome is often uncertain and hard to
prove.”
• Fiscal Policy requires Congress. “Presidents can set direction, but not steer the ship themselves.”
• Timeframe is important. Irwin argues several examples, “The downsides of regulating banks poorly might
show up as a crisis a decade down the road. The benefits of better infrastructure will tend to show up over
many years. The payoffs of well-designed education policies come to fruition as young people enter the labor
market with better skills years later.”
Irwin concludes: “None of this means that presidents can’t do a lot to make the United States economy more
dynamic and productive. It’s just that doing so could take a great while. It’s hard to prove that this or that policy
was the source of the good times. In the short run, all those other factors have a more direct, measurable effect
in shaping whether a moment in political history produces an economy we remember fondly.”
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7. Experience Insight Impact
Tax Reform is Critical
While the nature and amounts of tax reform are highly uncertain, the wide expectation is that this
could be a crucial step for future earnings growth. According to Barclays, tax reform on its own
could add 15%+ to S&P 500 earnings. A wide range of companies will likely receive at least some
benefit from broad tax reform.
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8. Market Perspective – January 2017
Experience Insight Impact
biegelwaller.com
Conclusion: With a new change in leadership, it is important to maintain a proper perspective.
While there are potentially growth-enhancing measures that market participants have assumed,
the implementation and affects will likely take time to impact our economy. Over the upcoming
months, we will monitor the policy moves that may shape the long-term growth prospects,
which may in turn affect global markets.
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9. Experience Insight Impact
Disclaimer
Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for
any specific person for any particular purpose. We utilize information sources that we believe to
be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee
of future performance; investing involves risk and may result in loss of capital. Consider seeking
advice from a professional before implementing any investing strategy.
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