The Good News (and Bad News) About Politics and the Markets

July 28, 2017

Once more we have news from Washington that suggests the Republicans will not be able to move forward on a core priority—health care reform. You might expect political dysfunction at this level to disrupt the markets, but apparently you would be wrong. The markets are down a bit, but not much, and remain within 1 percent of the all-time high. What’s going on here?

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The Rational Optimist: A Response to the Doomsayers

July 27, 2017

One of the ways I am trying to control my screen-induced ADD is by making myself sit down and read more. It has been surprisingly difficult, as I have apparently largely lost my ability to sit down and concentrate on a book for a period of time. Now that I think of it, this is something that may have been due more to my small son than to screens. In any event, now that he is old enough that we can sit and read together, I am making the effort to relearn concentration.

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More on Investing and Time Frames

July 26, 2017

The other day, I got a question about my recent webcast on the economy and markets (something I do quarterly for clients). The questioner pointed out that I sounded pretty optimistic and wondered how that squared with my concerns about next year and my belief that 2017 looks quite a bit like 1999. A fair question. But what’s the answer?

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Wage Growth: Real Vs. Imaginary

July 25, 2017

Today I’m going to discuss one of the major concerns out there: wage growth. Specifically, is what we’re seeing in terms of wage growth real or imaginary?

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Appearance on CNBC's Power Lunch, July 24, 2017 [Video]

July 25, 2017

This week is an important one for earnings season, with a large number of S&P 500 companies due to announce their results for the second quarter. Given all the political turmoil in DC, should we expect company earnings to follow suit? Or have we already seen all the bad news?

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Monday Update: Housing Bears Watching

July 24, 2017

Last week was all about housing, and the news was mixed. Although industry sentiment showed a surprising drop, actual activity came in stronger than expected. Overall, the data probably shades to the good side, but housing bears watching going forward.

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Small Gratitudes and Mindful Moments

July 21, 2017

It’s a beautiful Friday in the middle of summer. I’ve spent the week examining investments and worrying over the future. Instead of more of the same, I thought we could take some time to think about how truly blessed we are right now.

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Here Comes Another Bus: The Debt Ceiling

July 20, 2017

There’s an important—and potentially very disruptive—issue that has been largely ignored during coverage of the health care debate. The U.S. government hit its borrowing limit on March 16, 2017. Yes, that’s right—the U.S. borrowed as much as it legally can four months ago. Since then, the Treasury has been using the usual “extraordinary measures” to fund the government, including “borrowing” from government pension funds, diverting various funds tasked to other purposes, and looking for spare change in the laundry and the washer to pay the bills.

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Are Current Stock Prices Reasonable?

July 19, 2017

Valuations continue to reach new highs, and the market looks very expensive—by some measures, the third highest of all time after 1929 and 1999. Meanwhile, the economy is showing signs of slowing. I have made my own views about what might come next pretty clear, but it’s worth taking the counterarguments—that current stock prices are reasonable, not a cause for concern—seriously as well. I say this all the more because analysts I respect are increasingly positing that it is different this time. So let’s see if we can make a case for that.

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Washington and the Markets

July 18, 2017

The big news today is the collapse of the Republican plan to replace the Affordable Care Act, aka Obamacare. With two more Republican senators declaring themselves unwilling to even vote to have the full Senate debate the bill, it appears that Obamacare will live on, at least for a while.

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Monday Update: Inflation and Retail Sales Soft, but Industrial Production Solid

July 17, 2017

After a week of good news, last week’s economic data returned to the soft side. Inflation continues to run below Federal Reserve targets, and retail sales disappointed. Despite that, however, industrial production did well, suggesting that the economy as a whole may not be weakening, even if parts of it are. The Fed, in particular, appears to remain optimistic about growth.

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Q2 Earnings Outlook: Can Companies Continue to Beat Expectations?

July 14, 2017

When looking at the stock market, one of the key things we should focus on are earnings, as they represent the bedrock of a stock’s value. The best way to value stocks—the dividend growth model—analyzes earnings, growth rates, and required returns to determine what a stock is worth fundamentally. Growth rates and required returns are subjective estimates, but earnings are facts. Everything starts from there.

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New Market Highs: Intelligence Vs. Wisdom

July 13, 2017

Yesterday saw another new high for the Dow, as well as big bumps in the other indices. The only real news, and what I consider the driving factor for those highs, was that Federal Reserve Chair Janet Yellen appeared a bit more dovish in her Congressional testimony than was expected. Given the low inflation we have seen, she said, the Fed is reserving the right to raise rates more slowly than it has previously indicated. Also, no time frame was given on starting to wind down the balance sheet. The result? Stocks proceeded to rally significantly. Think about that: with no real news about the fundamentals of corporate earnings or economic growth, a hint that the Fed might raise rates a bit more slowly drove stocks up.

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Monthly Market Risk Update: July 2017

July 12, 2017

Market risks come in three flavors—recession risk, economic shock risk, and risks within the market itself. Using a red light/yellow light/green light system, this monthly post explores the risk level in the markets, based on a number of factors.

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Economic Risk Factor Update: July 2017

July 11, 2017

The data for June was generally positive, with a rebound in job growth and a surprise increase in business confidence supported by continued high levels of consumer confidence. After a run of weak data in the past couple of months, the June rebound is a good sign. Although there is still a gap between confidence and actual hard data, the persistence of confidence suggests that most economic factors remain positive—and that the current expansion is likely to continue.

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Monday Update: Positive Surprises Suggest Growth Continues

July 10, 2017

Despite a recent run of weak data indicating a summer slowdown, positive surprises across the board last week suggest that growth is likely to continue for the rest of the year. Business sentiment rose further into positive territory, while job growth was much stronger than expected. Overall, the big picture looks positive, as businesses continue to feel good and to act on it by hiring.

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The Business Cycle Is Not Over Yet

July 7, 2017

The news this morning on the jobs report was much better than expected, with a strong June offsetting a weak May. This supports the idea that some of the weak data we’ve seen recently is just a summer slowdown, rather than something worse. And with consumer and business confidence still at high levels, prospects for the immediate future continue to look good.

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Does a Low VIX Mean High Risk?

July 6, 2017

To start, for those of you wondering exactly what the “VIX” is, formally, it is an index of expected volatility in the returns of the S&P 500 Index. It’s calculated based on the prices of eight different put and call options. If that doesn’t mean much, it might help to think of the VIX as a fear index. When the market tanks, the VIX rises; when the market is smooth—and expected to remain so—the VIX is low. In other words, low VIX equals low fear.

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Market Thoughts for July 2017 [Video]

July 5, 2017

June was a good month, with consumer confidence and business confidence remaining strong. The Federal Reserve raised rates and seems likely to keep doing so. Plus, growth is accelerating around the world, from Europe to China. But here’s the problem: Both consumer spending and business investment are not growing as much as expected.

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Monday Update: Consumers Confident but Not Spending

July 3, 2017

Although consumers remain confident, last week’s data showed that neither consumers nor businesses are spending. This weakness raises concerns about whether the expansion will continue to accelerate.

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