Mortgage rates are hitting lows not seen since 2016. But do low rates even matter if housing prices are unaffordable? MarketWatch's Jacob Passy reports: “There is a tug of war in the financial markets between weaker business sentiment and consumer sentiment,” Freddie Mac FMCC, -1.54% said in its report. “Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.” Ultimately, the low supply of homes available for sale will at least partially … [Read more...]
This Has Never Happened to German Bonds Before Now
For the first time ever, Germany's yield curve is completely negative. Bunds from 2 year to 30 year are all yielding negative rates. Bloomberg's John Ainger reports: German 30-year bonds rallied to send yields across the whole of its debt market below 0% for the first time after President Donald Trump ratcheted up the U.S. trade war with China. The euro area’s biggest economy joined Denmark and Switzerland in the region in offering negative returns to investors should the notes be held to maturity, taking the total stock of investment-grade debt yielding less than 0% to $14 trillion … [Read more...]
Time to Get Defensive?
The Wall Street Journal's Corrie Driebusch reports a move toward consumer companies in stock markets. Driebusch calls the move "a sign that investors are hedging their bets by picking up shares of firms they believe will provide returns in a struggling economy." You'll notice on my chart below during this century, consumer staples have beaten tech stocks and the S&P 500 index. Now it seems, investors are buying consumer staples in a bid for defense against a potential economic recession. Driebusch writes: One of the hottest stock-trading strategies lately is buying shares of … [Read more...]
“The U.S. Economy is Remarkably Resilient When Government Doesn’t Get in the Way”
"The U.S. economy is remarkably resilient when government doesn’t get in the way." These are the words of The Wall Street Journal's editorial board in describing the strong economic growth of the first quarter. The 3.2% real GDP growth surprised the financial community which had been preparing itself for far less. The board asks, "what changed?" The answer, they write, is: Well, the economic policy mix. The Trump Administration lifted the threat of new regulation and harassment of business in 2017, which liberated long-stifled animal spirits. Then came the Trump tax reform with its sharp … [Read more...]
The One Thing Investors Forget Late in A Bull Market
More than ten years into a bull market it’s easy to forget that your investment portfolio (assuming it has been crafted properly) was designed for a full investment cycle. How do you invest for a full-cycle investment cycle? When you invest for the full-cycle, you not only focus on how your portfolio will do when risk sentiment is at a peak, but you also consider how your portfolio will hold up when risk sentiment plunges. There may not be a better reminder of the power of full-cycle investing than the performance of Consumer Staples stocks over the last three decades. The Power of Full … [Read more...]
Is This a Generational Opportunity in Foreign Stocks?
The chart below shows the ratio of U.S. stocks to developed market foreign stocks. As anybody who takes a proper approach to crafting stock portfolios by diversifying globally can attest, U.S. stocks have carried the load in global equity portfolios for the last decade. But has Wall Street taken this trend too far? As things stand today, the ratio of U.S. stocks to foreign stocks sits nearly three standard deviations above its long-term mean. Assuming a normal distribution, a measure this extreme happens once every century. If global equity performance remains a cyclical business as … [Read more...]
The Global Bear Market
Outside of the United States, equity investors have had a rough year. Some of the world’s biggest equity markets have fallen into bear market territory including China, Germany, Korea, and Italy. The MSCI index of developed stock markets that excludes the United States is only a whisper away from bear market territory. The emerging markets index is already in a bear market, down more than 23% from its January high. And the United States? The S&P 500 remains up on the year. U.S. investors still seem to have the speculative bug that the rest of the world has avoided. The NYSE FANG+ … [Read more...]
American Factories Booming
America's factories surprised economists with a stronger than expected reading on the Institute for Supply Management's manufacturing index. Economists had expected a reading of 57.9, but were pleasantly surprised with a strong reading of 59.3. Harriet Torry reports for The Wall Street Journal: Readings above 50 indicate activity is expanding across the manufacturing sector, while numbers below 50 signal contraction. November’s reading exceeded the 57.9 economists surveyed by The Wall Street Journal had expected. The report was compiled before this weekend’s announcement of a trade truce … [Read more...]
Is This Just the Beginning of the FAANG Collapse?
Barbara Kollmeyer, reporting at MarketWatch, rounds up a host of negative views on the future of the FAANGS. She writes: Hide behind defensives? That doesn’t seem like such a crazy strategy lately as investors wait to see if worries about the U.S. economy turn into real problems in the coming year. Tuesday’s session offered the most recent evidence of that as health care, consumer staples and utilities drove the gains for the S&P 500. Compare these numbers—the Utilities Select Sector SPDR XLU, -0.30% is up 4% for the quarter, while the Technology Select Sector SPDR XLK, +0.84% has … [Read more...]
My Concentration Is on Full Faith & Credit Pledge U.S. Treasuries
As Wall Street tumbles, my concentration is on full faith and credit pledge U.S. treasuries. Reuters' Caroline Valetkevitch reports on the market: The Nasdaq fell 3 percent on Monday as investors dumped Apple, internet and other technology shares. Shares of Apple Inc fell after the Wall Street Journal reported the company had cut production orders in recent weeks for all three iPhone models launched in September. The iPhone maker’s stock dropped 4.0 percent to $185.86 and is now down 19.9 percent from its Oct. 3 record closing high in the wake of a disappointing holiday quarter sales … [Read more...]
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