The Independent Market Observer

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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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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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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Welcome to the New New Normal

March 29, 2018

In the first couple of years after the financial crisis, there was a lot of discussion about the “new normal.” This referred to the new environment characterized by lower interest rates, lower growth, lower inflation, and lower volatility. The sense was that things really were different this time, and we had to understand that.

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How to Worry Effectively About the Market

March 28, 2018

I suspect that many of us are worried about the stock market. I certainly am, but what else is new? That’s why they call me Eeyore. But worrying by itself doesn’t do any good. What is important is to figure out how to worry effectively. That is, by identifying the real signs of trouble, you can focus on those and not worry until there really is something to worry about. I think we could all use a refresher on how to do this.

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The Markets Bounce Back: What’s Going On?

March 27, 2018

Wow. After a significant decline last Thursday and Friday, markets bounced back yesterday in a big way. What’s going on?

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Beyond Tariffs: More Changing Fundamental Trends

March 23, 2018

The big news yesterday was the market decline after the announcement of U.S. tariffs on Chinese goods. As we saw with the previous round of tariffs, markets are pulling back and forth between the very real potential damage a trade war could cause and the likelihood that one won’t happen.

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The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

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