The Independent Market Observer

Monday Update: Data Beats Expectations (Almost) Across the Board

April 30, 2018

Last week’s economic news started off with housing and ended with the gross domestic product (GDP) report. The week ahead will be a busy one, giving us a look at all major sectors and wrapping up with the most important report of the month: employment.

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Future Stock Returns: Could Things Be Different This Time?

April 27, 2018

We closed yesterday’s post on the stock market and your portfolio with the proposition that future returns, historically, have been lower when the market started out expensive than when the market started out cheap. This would seem to be common sense, but there is considerable resistance to the idea. Let’s think it through by starting with a look at the actual numbers.

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The Stock Market and Your Portfolio: What’s the Big Picture?

April 26, 2018

We closed yesterday’s post on market turbulence with the big picture: risks are rising, but they are still not necessarily immediate. Of course, this is important to remember. But it also implicitly assumes that, as investors, we are primarily concerned with that short-term risk. In fact, what we should be looking at is how our portfolios are likely to play out over years and decades, not the next couple of quarters. With that in mind, what can we discern from current conditions about the longer-term impact?

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More Market Turbulence: Risks Are Rising

April 25, 2018

Yesterday, we had another breakdown in the stock market. Major indices dropped for the third day out of four, and they were down this morning. Once again, we are getting close to the long-term trend line, the 200-day moving average, which is where I personally start to pay attention.

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Interest Rates Are Up Again—So What?

April 24, 2018

Normally, I don’t spend my time watching the markets move. But this morning, I did have one chart open: the interest rate on the U.S. Treasury 10-year. In the past couple of days, the rate has risen. The question is, will it actually get to 3 percent? If so, what will that mean?

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Monday Update: Retail Sales Rebound

April 23, 2018

Last week’s reports gave us a look at pretty much the entire economy, including consumer spending, the housing market, and industrial production and manufacturing. In the week ahead, we’ll see data on consumer confidence, durable goods, and gross domestic product growth.

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A Look at Confidence—the Final Indicator of Economic Risk

April 20, 2018

Today’s post will conclude this week’s discussion on the major economic risk indicators I follow. After looking at interest rates and jobs, we will close with a discussion of confidence, both consumer and business.

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A Look at Employment—the Next Best Indicator of Economic Risk

April 19, 2018

As a follow-up to yesterday’s look at the yield curve, today we will review employment, another indicator that does a good job of signaling economic risk. The reason employment works as an indicator is simple: More than 70 percent of the economy is made up of consumer spending, and the vast majority of that spending comes from wage income—which is to say, from jobs. No jobs? No spending. No spending? No economy. It really is that simple.

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A Look at the Yield Curve—the Best Indicator of Economic Risk

April 18, 2018

One of the key indicators I look at when evaluating economic and market risks is the yield curve, which is a fancy name for how interest rates for different time periods vary. You would expect the rate an investor needs for a 10-year loan, for example, to be different from what she needs for a 3-month—or 30-year—loan. And, by and large, that is the case. Exactly how different the rates are, however, can change quite a bit, and those changes can tell us a lot about the economy.

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What Higher Market Volatility Means for Your Portfolio

April 17, 2018

One of the big themes so far this year has been the return of volatility to the stock market. After a very calm 2017, markets have gotten much more turbulent in 2018. One way to quantify this is to look at daily movements. In 2018 (through April 9), the S&P 500 had an intraday swing of 2 percent or more on 13 days. The day-to-day price movements, measured at the close, have been more than ±2 percent on eight days. Neither of those happened in 2017, at all. There clearly has been an increase in volatility, and in a big way.

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Monday Update: Inflation on the Rise

April 16, 2018

Last week, the news was largely about inflation, with producer and consumer prices leading the way. The week ahead will be a busy one for economic news. Reports will give us a look at consumer spending, the housing market, and industrial production and manufacturing. In other words, we’ll get an update on the entire economy.

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What to Watch for This Earnings Season

April 13, 2018

Earnings season is here again, and expectations are high. In fact, expected growth is at the highest level since 2011, with growth expected to continue through 2019. You would anticipate markets to respond positively. So, the fact that the stock market has instead just been bouncing around is a bit concerning. What is going on—and what does it mean for the future?

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The Consumer Price Index and the Powell Put: What's the Connection?

April 12, 2018

It seems to me that a couple of recent news items need to be put together in a way that, so far, I have not seen. Although the idea that inflation is rising and the discussion of the Fed’s rate increases are often connected, the link to the stock market has been neglected. Let’s see if we can make that connection.

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Monthly Market Risk Update: April 2018

April 11, 2018

Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for April? Let’s take a closer look at the numbers.

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Economic Risk Factor Update: April 2018

April 10, 2018

March’s data continued to be good overall, although there was some pullback from February’s very strong reports. Job growth slowed substantially, which was the most notable concern. This is most likely not an immediate problem, however, as long-term trends remain favorable. More worrying is that while confidence remains high, the trend appears to be peaking for both consumers and business. Again, this is more of a change in trend rather than an immediate concern. Fed policy continues to be stimulative, which is helpful, despite the recent rate increase. Overall, this month’s economic data indicates that growth continues, although it may have peaked.

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Appearance on CNBC's Nightly Business Report, April 6, 2018 [Video] 

April 9, 2018

On Friday, I appeared on CNBC's Nightly Business Report (my segment starts at 10:19) to discuss the latest jobs report, more rate increases from the Fed, and what effect the tariffs may have on the market. Listen in to learn more.

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Monday Update: Business Confidence Pulls Back, But Remains High

April 9, 2018

Last week was a busy one for economic news, starting with the major business surveys. Inflation will be the focus this week, with producer and consumer prices due in the first half.

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The Jobs Report: As Bad As It Looks?

April 6, 2018

This morning, the jobs report came in with a surprising miss: the total number of jobs created dropped from 339,000 in February (including a 26,000 upward revision to the initial figure) to 103,000. This is quite a drop. At face value, it raises concerns about whether the economy has slowed dramatically. But while the headline number is weak, the report is not nearly as bad as it looks.

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A Look Back at Q1 2018 and Ahead to Q2

April 5, 2018

The first quarter of 2018 saw the end of the bull market. Not in stocks necessarily, as the upward trend remains intact, but certainly of the bull market in confidence. January was a strong month, but then the world changed. Markets dropped in early February, only to bounce and then drop again in March. Let’s review why things changed in Q1, plus what we might expect in Q2.

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Stock Market Update: Time to Pay Attention, Not to Panic

April 4, 2018

It has been a difficult couple of months in the stock market—and things have only gotten worse over the past couple of weeks. After the drop in early February, which took the S&P 500 down by almost 9 percent from the all-time high, the market bounced back. But it started dropping again in mid-March, which takes us to where we are right now: down 9.6 percent from early February.

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Market Thoughts for April 2018 [Video]

April 3, 2018

March was a tough month, with both U.S. and international markets seeing losses. It was the second down month in a row, something we haven't seen in a while. This was due, in part, to markets becoming uncertain on the news of tariffs on China—which rattled companies around the world. Plus, Fed Chair Powell was seen as more hawkish than expected, introducing uncertainty around interest rates.

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Monday Update: Consumers Still Confident and Spending

April 2, 2018

There were only two major economic reports last week, but they gave us a look at the all-important consumer. The week ahead will be a busy one for economic news, including the major business surveys.

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