For dividend focused investors, the last three years have been a tough row to hoe. From year-end 2012 through year-end 2015, the speculative NASDAQ took a big lead over the more conservative and more Prudent-Man-centric Dividend Achievers Index. This seemingly long run (3yrs does not make an investment cycle) for speculative shares encouraged many to jump ship for what were believed to be greener pastures. Investors who had neither the ability nor willingness to ride out the wicked downturns that accompany such speculative portfolios allowed greed and relative performance comparisons to drive … [Read more...]
What’s Working in the Stock Market this Year?
The table below ranks the 24 Industry Groups in S&P 500 by their YTD performance. What is the best performing industry group YTD? Energy, the same industry group that was last year’s worst performer. I also see utilities, materials, and transportation stocks among this year’s big winners. All three were big losers last year. How are last year’s big winners doing this year? Last year’s best performing industry groups included the retailing, software and services, and consumer services groups. All three are down YTD while the S&P 500 as a whole is in the green. This reversal of … [Read more...]
Transportation Stocks Offer No Hope
The Dow Transport stocks are up big today, partly on news that China’s economy isn’t headed into the tank. The source for that relieving news comes via the Chinese government’s famously accurate statistics bureau which reported a surge in exports in March. Despite the jump in transport stocks today, the medium-term trend of the Transports to the industrials remains down. Transportation stocks tend to be a leading indicator of U.S. growth. If growth was picking up, we would hope to see confirmation in the relative performance of the transports to the industrials. We don’t, leaving one to … [Read more...]
A Capital Gains Focus is a Losing Strategy
If you tune into to the financial news networks regularly, you might get the mistaken impression that capital gains are the most important form of return for stocks. The focus of these programs tends to be oriented toward traders and speculators. Which stock is going to rise the most over the next 1, 3 or 6 month period is the topic of conversation. You hear little about dividends. Focusing solely on capital gains is a big mistake. Dividends and the reinvestment of dividends accounts for a majority of the return on stocks. Stock prices can remain depressed for agonizingly long periods of … [Read more...]
As Goes Oil, so Goes the Stock Market
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...]
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...]
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...]
The Monday Melee: Buybacks Boosting Market
Buybacks Near All-Time Highs Forecasts for Q1 2015 show S&P 500 companies nearing all-time high stock buybacks. Almost Half of Cash Spent on Buybacks American companies have been spending lots of cash on buybacks. IB Times' Owen Davis reported in November: Of the $2.2 trillion in cash corporate America is poised to spend next year, roughly half will go directly to shareholders. Between stock buybacks and dividend increases, Goldman Sachs estimates that just over $1 trillion will end up flowing to shareholders, a 7 percent increase over 2015. “Despite weak activity during the … [Read more...]
Welcome to the Bear Market
The widely accepted definition of a bear market is a decline of 20% or more from the bull-market high. By that definition, the S&P and the Dow aren’t officially in a bear market, (you wouldn’t have missed the flashing red headlines on CNBC or the big bold typeface on the front page of the paper) but for all practical purposes stocks are now in a bear market. Over 75% of the 3,000 largest U.S. companies are now down at least 20% from their highs. That’s a quorum by my count. The small-cap Russell 2000 index has fallen 26% from its bull-market high. And as of last week, the MSCI … [Read more...]
Is Now the Time to Buy Apple Shares?
Last year around this time, Apple was viewed by the market as a company that could do no wrong. Coming off of the successful launch of the iPhone 6 and 6 Plus, Apple reported what was then the largest quarterly profit of a public company in history—a whopping $18 billion. That was up over 37% from the same quarter a year ago. Impressive numbers to be sure. In the first two months of 2015, Apple shares catapulted higher by over 20%. During those two months Apple’s market value increased by over $150 billion dollars—that’s about equal to the total market value of Walt Disney or IBM or Visa or … [Read more...]
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