The Independent Market Observer

The Economy and Markets Mid-Year 2017

June 30, 2017

It’s hard to believe tomorrow is July 1—the halfway point of 2017. The first half of the year, eventful as it was, has simply blown by. And now that we are moving into the second half, it’s time to take a look at the stories that are likely to play out in the economy and markets over the next six months.

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Here Comes the Bus: The Problem with Passive Investing

June 29, 2017

Yesterday, we talked about the worries surrounding exchange-traded funds (ETFs)—chiefly, that they could trigger a flash crash. Ultimately, we concluded that ETFs are just an enabling technology, not the real problem. The real problem, at least potentially, is passive investing. Let’s take a closer look at what the passive investing trend could mean for the markets.

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Looking for the Next Bus: ETFs and Passive Investing

June 28, 2017

It’s never the bus you’re watching for that hits you, they say. Even if you are watching for different buses, sometimes it pays to look at just how close they are getting to you. In that spirit, and in response to some questions I have gotten recently, let’s look at two different buses that could run over the markets: exchange-traded funds (ETFs) and passive investing.

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Oil Prices: Will Things Be Different This Time?

June 27, 2017

Recently, there has been a great deal of discussion over oil prices—up, down, in a bear market, what is OPEC doing? So, let’s see what we can discern by applying our usual methods to the situation: evaluating changes over time, rather than in the short term; applying some historical perspective; and then looking at the fundamental economic realities to figure out what they mean now and in the future. I think you will find the results interesting.

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Monday Update: Housing Still Strong

June 26, 2017

Last week was a slow one, primarily focused on housing, with reports on sales of existing homes on Wednesday and new homes on Friday. Unlike much of the news recently, the data showed that housing continues to do well, with strong demand and activity.

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Volatility—It’s a Real Drag

June 23, 2017

In yesterday’s post, I explained that the noise in returns—in other words, how much they bounce around—is what imposes much of the risk when investing over shorter periods. When you might lose 20 percent or more in a year, any plans that start soon thereafter can be derailed. Volatility (i.e., the noise) is a real drag in that sense.

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Time Horizons and Why They Matter

June 22, 2017

One of the key points I made in yesterday’s post was about your time horizon, and how shorter time frames call for more caution than do longer ones. But this is actually a bigger point, which applies to multiple areas of investing and life. So, I thought I would make the discussion more general.

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2017 Vs. 1999: Now What Should We Do?

June 21, 2017

From our recent analysis, we can conclude that stock market risk is high. We can conclude that, even if things are different this time, they probably aren’t different enough to make a meaningful change in the outcome. And we can conclude that 2017 might well be 1999 all over again.

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2017 Vs. 1999: Could It Be Different This Time?

June 20, 2017

In several recent posts, I have made the case that today’s economy looks quite a bit like 1999—and that the markets may be setting up to look like 2000. Although this argument certainly seems reasonable, we have to ask ourselves how it could be wrong. Despite all the similarities, could it be different this time? If so, how? And what would that mean?

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Monday Update: Weak Economic Data Across the Board

June 19, 2017

Last week, we saw a wide range of economic data. Overall, the news was disappointing, with all indicators coming in below expectations. In many cases, however, the details were better, as annual numbers often remained in healthy territory. Still, future growth acceleration is becoming less likely as signs accumulate that the economy has peaked. That being said, growth is expected to continue, just at a lower level than anticipated earlier this year.

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2017 Vs. 1999: When Will the Storm Hit?

June 16, 2017

I concluded in yesterday’s post that there might well be a storm coming. So, the next question we need to answer is this: How will we know when the storm is about to hit?

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Appearance on CNBC's Trading Nation, June 15, 2017 [Video]

June 16, 2017

Is there a glaring resemblance between the years 2017 and 1999? Yesterday, I appeared on CNBC’s Trading Nation, with host Brian Sullivan, to discuss the similarities I see between 1999 and 2017 in terms of five key economic indicators.

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If 2017 = 1999, Does 2018 = 2000?

June 15, 2017

In yesterday’s post, we investigated whether 2017 is similar to 1999—and decided that it is. This leads us to the next obvious question: will 2018 look like 2000? And what would that actually mean?

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1999 v2.0: How Similar Are 1999 and 2017?

June 14, 2017

When I look at the current economic and market environment, I think it shares a lot in common with 1999. The tech industry is booming, unemployment is low, consumer and business confidence are high, and investors are very complacent. But just how similar are 1999 and 2017? To get a better sense, I decided to do a detailed economic review. So, without further ado, let’s set the wayback machine to 1999.

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Appearance on CNBC's Power Lunch, June 13, 2017 [Video]

June 14, 2017

What are market expectations for the rest of the year? Yesterday, I appeared on CNBC's Power Lunch alongside senior contributor Larry Kudlow, discussing the impact of the Trump administration on the economy with hosts Becky Quick, Brian Sullivan, and Steve Liesman.

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Appearance on TheStreet, June 13, 2017 [Video]

June 13, 2017

Will the Federal Reserve continue its rate hike policy? Earlier today, I visited Scott Gamm on the set of TheStreet TV to discuss the Fed's next move, plus why I think the markets can go higher despite a significant technology selloff.

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Some Thoughts on the Fed and Recent Tech Stock Performance

June 13, 2017

The Federal Open Market Committee (FOMC) kicks off its regular meeting today. Markets expect a rate hike to be announced on Wednesday. What I’m really interested in, though, is what the Fed plans to do about rates for the rest of the year, as well as how it intends to reduce its balance sheet.

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Monday Update: Service Sector Down, Remains Healthy

June 12, 2017

Last week was quite slow from an economic news standpoint, but things will pick up in the week ahead.

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From Super Thursday to Freaky Friday: Why Are Markets Rising?

June 9, 2017

Well that was unusual. After all the concern around yesterday’s events, two of the three turned out to be even more disruptive than expected. The British election resulted in a hung parliament, substantially increasing political uncertainty, and former FBI Director Comey’s testimony was every bit as potentially concerning for the White House as had been anticipated. Yet the markets are up today pretty much across the board. What’s going on?

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Super Thursday: What It Means (and What It Doesn’t)

June 8, 2017

Today is a big day on the current events front, so much so that I’ve seen it referred to as “Super Thursday.” We have the British election; the meeting of the European Central Bank (ECB), which will determine the course of monetary policy; and, closer to home, the testimony of former FBI Director James Comey. I've spent a lot of time recently discussing these events, both individually and collectively, and what they could mean for the U.S. economy and markets. On reflection, they provide a good example of how investors spend quite a bit of time focusing on things that do not really matter—and ignore things that do. But more on that later.

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Monthly Market Risk Update: June 2017

June 7, 2017

I have revamped the monthly market risk update this month to incorporate a wider range of factors and, I hope, a more useful presentation style. My economic risk factor update seems to have wide appeal, so I am going to use the same traffic light system here, as well as incorporate some economic metrics outside the market.

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Economic Risk Factor Update: June 2017

June 6, 2017

The data for May was mixed. The weak areas—in employment and interest rates—suggest that we might be approaching the end of the recovery cycle. On the other hand, both consumer and business confidence remained high in May, suggesting that the end is likely to be a ways away. Although the data bears monitoring, all of our measures remain in green-light territory, supported by the strength in April’s reports.

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Monday Update: Economy Starting to Hit Its Limits

June 5, 2017

Last week’s data was mixed, with some strong areas offset by areas of weakness. Looking at the big picture, growth is likely to continue and even accelerate over the next couple of quarters. Still, the economy is starting to hit its limits, particularly in employment.

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Market Thoughts for June 2017 [Video]

June 2, 2017

May was a good month, with financial markets around the world rising and strong gains in the U.S. Still, we’ve had political and economic concerns, with the first quarter of the year being quite slow. But the data in May suggests this slowdown was temporary: Jobs came back, consumer spending was up, and consumer confidence remained high. We also saw growth in business investment.

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Is This 1999 v2.0?

June 1, 2017

Now that conference season is done, over the next week or so, I plan to share some of the thoughts I have been passing along to Commonwealth’s advisors. I will start today with the title of the presentation I gave at a number of conferences this spring—“1999 v2.0?”—and explain why I chose it.

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