I have grave concerns with the S&P 500 (See parts one, two, three, four and five of my series dedicated to those concerns). You can see in my chart below the index would need to fall by 38% based on yesterday’s closing value to trade at a normalized valuation. Doing as well as the S&P 500, or the market, is a double-edged sword. Receiving market performance guarantees you’ll never beat it. Believe me you’ll want to beat it when it crashes, because the grief from losses far outweighs the jubilation from gains. Originally posted on Yoursurvivalguy.com. … [Read more...]
Expect Very Modest Returns from Equities
In an interview with Bloomberg, Vanguard’s former CEO and current chairman F. William McNabb cautioned that investors should expect very modest returns from stocks over the next decade. Vanguard doesn’t have an axe to grind here so it wouldn’t hurt to listen what Mr. McNabb has to say. The meat of his comments are below. You can read the full story here. F. William McNabb, Vanguard Group’s chairman, cautioned investors to consider reducing their stock exposure before the nearly 9-year-old rally ends. “We would expect the next decade to actually be very modest on the equities side in the … [Read more...]
Investors Throw Caution to the Wind
As the bull market rally marches on for what seems like forever, investors who typically are concerned with risk are throwing caution to the wind. Gunjan Banerji reports in The Wall Street Journal that investors who normally hedge their positions have decided buying downside protection is a waste of money. She writes: Investors with significant positions in stocks often look to offset that risk by buying put options on stocks or major stock indexes, like the S&P 500. These contracts are a form of insurance that pay out when stocks fall. But with the Dow Jones Industrial Average … [Read more...]
The ‘Hated’ Stock Market Rally
Do investors even believe this stock market? Despite reaping the benefits of the second longest bull market on record, investors seem to hate the rally. Wall Street Journal reporters Akane Otani and Chris Dieterich report: Rather than celebrating this wealth-generating machine, individual investors have expressed in multiple surveys just how little enthusiasm they have for this stock market. For years, analysts have described an “unloved” or even “hated” stock rally, where prices defiantly rise despite one of the weakest U.S. economic recoveries on record, Washington’s policy sclerosis and … [Read more...]
Investment Views on 2018
John Authers gives his summary of markets in 2017 and his outlook for 2018 in the FT this morning. John argues that long-term interest rates are the key risk to watch in 2018. Sans a rise in long rates, known risks look benign. As for unknown risks, well… there is a reason we have long advised a balanced approach, diversified across asset classes and regions. Below are some of the highlights from John Authers' FT column. You can read the full article here (subscription required): Record Low Volatility in 2017 This can’t carry on, can it? This is the last Long View of 2017, the most … [Read more...]
Three Risks to Watch for in 2018
Outside of the stock market being priced at one of its most expensive levels relative to underlying cash flows on record, there aren't many things to be bearish about going into 2018. But the Wall Street Journal's James Mackintosh has managed to come up with three risks that could derail the ongoing low volatility climb in the equity market. To wit: Monetary tightening. The Federal Reserve raised rates three times this year, yet it became easier to borrow and over long periods actually got cheaper. Instead of rising, long-dated bond yields fell, and global monetary conditions were further … [Read more...]
Do the Best Managed Companies Make the Best Investments?
The Wall Street Journal released the inaugural ranking of the 250 most effectively managed U.S. companies. The rankings are based on the work of the late business management guru, Peter Drucker. The rankings are based on a score of 37 specific metrics that fall under five dimensions of performance: customer satisfaction employee engagement and development innovation social responsibility and financial strength Factors include everything from market-share and patent applications to employee ratings. To qualify for the rankings, a company must be a member of the Fortune … [Read more...]
Nestlé Expands its Nutrition Portfolio
Nestlé has been focused on the idea of food as nutrition for a long time now, and the company's new CEO Mark Schneider is continuing that vision. Nestlé just announced that it will buy Atrium Innovations, owner of the Garden of Life and Pure Encapsulations brands of health supplements. Nestlé is trying to keep up with fast changing Millennial tastes by innovating its own more nutritional foods and buying up smaller competitors who already service the market for healthier fare. Ben Dummett and Saabira Chaudhuri report: Packaged-food makers such as Nestlé and Kraft Heinz Co. are being buffeted … [Read more...]
How Expensive is the Stock Market?
In case the Bitcoin and FAANG stock manias have you envious and pondering a decision to abandon a thoughtfully crafted investment plan, we offer you the following wet blanket. This is now the most expensive stock market on record. The S&P 500 price-to-sales ratio shows that stocks have pushed through the highs, relative to sales, reached at the peak of the biggest stock market bubble in history. High valuations aren’t usually a catalyst for a bear market, but starting valuations are still the single best indicator of long-term returns—with added emphasis on the long-term. … [Read more...]
Goldman: Be Afraid, Pain is Coming
A recent analysis by Goldman Sachs says the last time valuations were so high for so many parts of the market-including stocks, bonds and credit-was 1900. That figure should be startling to anyone invested today looking for return tomorrow. Recently I wrote to you about Jack Bogle and his predictions of 4% returns for some time. Even those may be too optimistic in the future reality painted by Goldman. Bloomberg reports: A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to … [Read more...]
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