The Independent Market Observer

Wage Growth Ahoy!

October 31, 2014

Thus far in the recovery, wage growth has been a mirage—presumed to be out there, occasionally sighted, but never actually brought to bay. There have been signs for some time that wage growth was coming, but it's never arrived. Like someone crawling across the desert, every time we’ve seen water, it’s turned out to be just more sand.

That changed today.

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After Fed Statement, a Not-So-Scary Halloween

October 30, 2014

The big news in my house right now is Halloween, with a major costume decision between Toothless (a dragon) and Hiccup (his friend) hanging in the balance. Neither choice is particularly scary (it’s a small dragon), and that’s okay—it won’t be a very scary Halloween for the economy either.  

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Appearance on Opening Bell with Maria Bartiromo, October 15, 2014

October 29, 2014

In case you missed it, I was in studio for Fox Business's Opening Bell with Maria Bartiromo on October 15. The conversation centered on the recent market selloff, as well as the ongoing economic recovery. 

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Back to the Future for the Fed? Not Quite

October 29, 2014

I’m going to take a chance—probably only a small one—and predict that the Federal Reserve will announce the end of its bond-buying program today.

If I’m wrong, I won’t be the only one. Expectations for the Fed to step back are almost universal at this point.

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Will Government Spending Pick Up Again?

October 28, 2014

Over the past couple of years, we’ve seen government spending drop considerably as a percentage of the economy as a whole. But is it set for a comeback?

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European Banks Healthier than Expected: Why We Should Care

October 27, 2014

Today's big financial and economic news is that the European banking system is in better condition than many had thought.

An extensive review by the European Central Bank and the European Banking Authority was completed on Sunday. It concluded that, of the 130 large banks reviewed, only 25 were below the standards at the end of 2013; of those, 12 have since raised enough capital to get out of the danger zone.

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Will Globalization Continue?

October 24, 2014

One way to get ahead of trends, in my opinion, is to take basic assumptions that everyone just knows are true and think about what the world would be like if, in fact, those assumptions turned out to be wrong. 

Since returning from the Goldman Sachs conference yesterday, I’ve been thinking about what was said there—as well as what wasn't so much said as assumed.

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As Economy Strengthens, No Cause for Doom and Gloom

October 23, 2014

Looking at the data over the past few days, it’s apparent that the economy continues to improve. Consumer comfort is rising, initial jobless claims are up a bit but remain at extremely low levels, job openings are at multiyear highs . . . the list goes on and on.

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The U.S. Is Still the Center of the World

October 22, 2014

I am currently attending a Goldman Sachs conference, and I was struck by one key point made by the agenda: The U.S. is still the center of the world. 

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IBM’s Woes Highlight a Major Risk to the Market

October 21, 2014

And he woke up, and it was all a dream.

With a six-year-old son, I admit I’ve been forced to end stories in that way on more than one occasion, when I get stuck and run out of ideas (or energy). Looking at the market today, though, the events of last week have certainly taken on a dreamlike quality. What just happened?

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Where Is the Market Going Next?

October 20, 2014

We’ve seen a market downdraft, a bounce back up, and now . . . what next? This is the big question everyone’s asking.

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U.S. Is Prepared to Weather Market Storms

October 17, 2014

Over the past couple of days, I’ve said again and again that the U.S. is in good shape economically, and that the problems rattling the markets are coming from elsewhere in the world. Today, let’s take a closer look at where we stand, and why I think we're well positioned to ride out any market turmoil.

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Is a Market Blizzard Coming?

October 16, 2014

Once again, the winds of market turbulence are starting to blow. Once again, barometers (and stock prices) are dropping. Once again, we wonder why we ever thought it was a good idea to invest in stocks.

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What Falling Oil Prices Mean for the U.S. Economy

October 15, 2014

Apart from the stock market—and we got a break on that front yesterday—the big story lately has been falling oil prices.

Not to minimize the market’s losses, but from a long-term perspective, the oil price decline over the past month is the more important story by far, both for the U.S. economy and for the world.

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Are We Seeing a Market Correction? Not Yet

October 14, 2014

Yesterday was another bad one. The market is now below its 200-day moving average, and the selling toward the end of the day wasn't a good sign.

It’s time to think through what this "correction" might mean.

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An Early Warning: Market Breaks 200-Day Moving Average

October 13, 2014

After I wrote Friday’s post, the market proceeded to drop even further, and it opened today with another dip. Time to reevaluate where we stand.

First, as always, it’s important to keep things in perspective. As I write this, the S&P 500 is down just over 6 percent from the peak. We’re still up about 2.5 percent for the year, and more than 11 percent for the past 12 months. Even with the drop, we’re in a pretty good place.

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A Bumpy Ride for Investors

October 10, 2014

Over the past few days, the market has taken investors on a roller-coaster ride, and I suspect many of us are feeling a bit queasy. No one likes to be jerked down and up and back down again.

What’s going on?

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Why Is the Fed So Worried?

October 10, 2014

This week’s market melt-up has been widely attributed to the release of the Federal Reserve’s meeting minutes. More or less, the Fed said it was worried about global growth and would probably be slower in raising rates than many had expected.

The effect on the market was substantial, which prompts a number of questions. But the one I want to talk about this morning is why the Fed is so worried.

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Some Perspective on the Stock Market

October 8, 2014

Yesterday was a bad day for the stock market, which dropped sharply on fears about European growth. So they say, anyway.

Pinpointing a single reason for market moves has always seemed misguided to me, when you think about all the factors behind any investment decision. Even so, taking it at face value, what should we make of European growth and yesterday’s market decline?

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The People Side of Investing

October 7, 2014

One of the joys of my job is that I’m constantly learning new things. A great way to do this is to go to a conference, listen to smart people speak, and then sit down and chat with them. That’s what I’m doing right now at Commonwealth’s National Conference.

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Appearance on CNBC Worldwide Exchange, October 6, 2014

October 7, 2014

How big of a concern is Europe to the ongoing U.S. economic recovery? Hear what I discussed with CNBC Worldwide Exchange in an interview yesterday, October 6.

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Market Thoughts for October 2014

October 6, 2014

In my latest Market Thoughts video, I provide an update on the difficult quarter-end for the markets, international volatility, and the status of the U.S. economy. 

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Economic Risk Factor Update: October 2014

October 6, 2014

It’s time for our monthly update on risk factors that have proven to be reliable indicators of economic trouble ahead. As expected, the data hasn’t changed that much from last month—it remains encouraging in almost all areas, and has continued to improve in many cases—but it’s still important to keep an eye on things.

As we enter the month of October, though, the economic forecast remains good.

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A Closer Look at Future Stock Returns

October 3, 2014

As I noted a couple of days ago, if you look at average future stock returns from our current valuation level of 26.3 on a Shiller P/E basis, they don’t seem all that bad. Historically, 10-year returns should be in the range of 7.5 percent and 5-year returns around 5 percent, on average. Not too shabby.

Averages conceal a multitude of sins, though, so let’s look a little closer. One question I have is whether the return spreads are consistent over time. If not, we have to ask whether the overall results are applicable to today.

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What's Behind Yesterday’s Market Drop?

October 2, 2014

After the decline in the stock market yesterday, the question on many people’s minds is whether this is the correction we’ve been waiting for. It could be. But even if it’s not, we may well be in for a turbulent month.

Let's look at what could be behind the market drop and where the market might be going from here.

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What Should We Expect from Our Stock Investments?

October 1, 2014

Following up on yesterday’s post about what kind of returns we can expect from bond investments, today let’s look at stocks. With the market recently bouncing off all-time highs, it seems like a good time to consider what the future holds.

Are we poised for more of a run-up over the next several years, or is the market likely to disappoint in its returns?

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