Dear Mr. Market:
The first quarter is in the rear view mirror and what a wild ride it was! The stock market started the year with the worst first 10 days in history and we finally experienced a ‘textbook correction’ of over 10%. Perhaps the most shocking part is when it was all said and done, Mr. Market rallied in March to finish out Q1 just above break-even. Volatility like this is typically played out over a 12-month or longer cycle, not in one quarter.
The question that investors are currently asking is … how does the rest of 2016 play out? Turn on your television or open any printed material and you will quickly be overwhelmed with the various talking points. Just look at a few of the headlines that have popped up last week:
- Housing starts declined -8.8% in March.
- Auto sales fell at a -14.6% annual rate in Q1.
- Business investments in equipment fell -8% the first three months of this year.
- Large declines in military spending by the government in Q1 will add 0.1% percentage points to the real GDP.
- Industrial production dropped -0.6% in March coming in below consensus of 0.1%.
- Production of high-tech equipment increased +0.5% in March, up +2.1% versus a year ago.
These are real economic data points that have driven financial headlines over the last few weeks. In our opinion here’s what they mean (or don’t) and how we think the rest of 2016 will play out in plain English: Continue reading
Dear Mr. Market:
You’ve certainly kicked 2016 off with a bang! Even investors that rarely, if ever, look at their portfolio are aware of the rough start to the New Year. Over $8 trillion in market valuations has seemingly disappeared in the blink of an eye. Many are pounding the table with a bear market narrative capturing your attention and emotions but is there anything truly different this time?
There are many different factors at play in this volatile market environment but in our opinion none of them are really all that new nor are they indicative of a bear market, a recession, or impending crash. We’ll briefly touch on each of them but at the end of this article you may be surprised to learn why we believe this market could bounce strongly when least expected.
Currently there are three factors that are dramatically impacting the markets: China, Oil and the Fed. It appears that when these are combined it creates a combustible combination that not even the most seasoned analysts know how to handle! The reality is that the stock market and all the ‘experts’, who analyze and report on it, seem to have short-term memories. For lack of a better description people have also been put to sleep and forget what it’s like to see a normal market correction. Let’s quickly break them down and attempt to put them in perspective: Continue reading
Dear Mr. Market:
Have you ever watched an old rerun of your favorite TV show or perhaps enjoyed the same movie twice? Of course you have…
Can the same be said for watching similar patterns in the stock market? While nobody wants to see the market go through a nasty quarter like we just witnessed, like it or not, it will happen again. Stock market corrections are not predictable and they air on their own time!
Our opinion, however, is that the stock market in 2015 is very much like the one we saw in 2011. History may not always unfold just as it has before, but several patterns and background indicators tell us that there is a lot to learn from the 2011 stock market year. Take a quick peak at the end of this article for a visual representation of how the markets did from May to late October in 2011 and 2015.
Most of us can’t remember what we had for dinner last night so as a quick refresher let’s summarize what was going on in 2011:
During the summer of 2011 all of the news headlines and the overall narrative was absolutely negative. The sovereign debt crisis in Greece rattled nerves daily. Comparisons of Greece vanishing were eerily similar to the disaster of Lehman Brothers going bankrupt just three years prior. Almost all the financial pundits also talked about the Fed raising interest rates and what a devastating impact that would have on the market. Sound familiar??? Continue reading