As goes oil, so goes the stock market. At least that has been a dominant theme so far in 2016. The chart below shows the rolling 16-week correlation between weekly changes in the S&P 500 and WTI crude futures. The correlation between oil and stocks soared in 2016. On days when oil was up big, chances are stocks were up as well. And when oil tanked, you can bet that stocks were down that day. Why this relationship has grown so tight this year is not obvious. Lower oil prices are still a net benefit to the consumer and the consumer economy. But this chart points us toward the profound … [Read more...]
Archives for March 2016
Worthy Reads: Why This Stock Market Rally Looks Exhausted
Why this Stock Market Rally looks Exhausted (Marketwatch) Boom-Era Missteps Prove Haunting for Brazil (WSJ) Investors Replace Futures with ETFs (Financial Times) Inflation Stirs as Federal Reserve stands still (Financial Times) Central Bank Endgame Revealed (Bloomberg) Helicopter Ben (Jim Grant) … [Read more...]
Your 8% Retirement Yield
In the March 2016 issue of Richard C. Young's Intelligence Report, Dick Young wrote that if you want to achieve an 8% long-term yield for your retirement, you must start now. You indeed can achieve 8% as a long-term yield goal for your retirement years, but you need to get started now. There is little time to waste. I am going to show you how to construct an actual "Retirement Ark." You have not read about such a plan before because only a minority in the investment industry thinks long term for clients. For most, it is all about action, trading, breaking news, taking profits and hot stories. … [Read more...]
The Great Enabler of Stock Market Bubbles
GMO's James Montier and Philip Pilkington have a nice piece up on the vast distortion that Fed policy has created in equity prices over recent decades. According to the researchers, it may not be the ultra-low rates that have created such lofty asset prices, but the Fed's willingness to step in at every market hiccup to prevent greater fallout that has led to the distortion. Some of the highlights are below. The full piece can be read here. ...But, from 1985 onwards, removing fewer days began to have a major and increasing impact on the market. In fact, FOMC days account for 25% of the … [Read more...]
Worthy Reads: Will Stocks Soar Under a President Trump?
Yellen has a mini revolt on her hands (Yahoo! Finance) Has Commercial Property Peaked (WSJ) RIP Andy Grove (Financial Times) The Saudi's Flinch (Financial Times) Will Stocks Soar Under a President Trump (Fortune) … [Read more...]
Worthy Reads: The Worst Advice
One of the Most Dovish Fed Decisions of the 21st Century (Bloomberg) The Worst Advice (WSJ) Central Banks now in Central Planning Business (WSJ) China Hoping for Another Stock Bubble (WSJ) Feds Pay Down Homeowner Mortgages (WSJ) Yellen Gives Inflation a Pass (WSJ) Canadian Banks Not Reserving Enough (WSJ) … [Read more...]
Recession and the Stock Market
Dick Young writes in the most recent issue of Richard C. Young's Intelligence Report: If you have been with me for a while, you've read two of my most recent issues—Embrace Russia, Ditch the Saudis and Turks and Crack! You're in Your Tomb (about the real threat of an EMP attack knocking out America's power grid). Well, there is more, much more, to be concerned about. Young Research subscribes to a $50,000/year European database that allows us to gauge the turning points in the economic and monetary cycles that underpin the financial markets. Many months ago, I concluded that the American … [Read more...]
This hasn’t happened since the Bull Market Began
The S&P 500 gained more than 1% for the fifth consecutive time last week as the Fed decided to rip up its statutory mandate and go with its gut on policy. Five consecutive 1%+ gains in the S&P 500 is a rare occurrence in stock market history. Over the last 70 years, this has only happened on 12 other occasions (14 if you count the episodes when it happened in back to back weeks). The last time this happened was in the early weeks of the current bull market. How have stocks performed following a period of five weekly gains of 1% or more? Our chart shows the performance of the … [Read more...]
Worthy Reads: The Death of Cool Stocks
The Death of Cool Stocks (Money) Central Banks Pushing Mom & Pop Investors into Junk Bonds (ZeroHedge) Central Banks Losing Control of Currencies (WSJ) If No One is Trading, Is It Really a Rally? (WSJ) The Fed has a Major Credibility Problem (MoneyBeat) Government Debt Triple Prior Estimates (MoneyBeat) … [Read more...]
How to Invest your Portfolio after the Fed Move
I was driving into work earlier this week listening to Bloomberg Radio, and there was a guest on from one of Wall Street’s big banks. She was an investment strategist and she was being quizzed about what the Fed would announce later that day. Her opinion wasn’t much different than you would hear from any other strategist on the Street, but as I was listening, I was struck by how distorted global financial markets have become over recent years. This strategist proceeded to explain how the Fed was stuck between a rock and a hard place because if it didn’t hike rates, inflation would rise … [Read more...]