Displaying items by tag: S&P 500

(New York)

The markets look troubling right now. They are just about to cross to a new high at the same time as they have just breached the record for the longest ever bull market. P/e ratios are way above historical averages and stocks have risen 400%+ (including dividends) since their lows in 2009. At the same time, there are ample geopolitical headwinds, tightening rates, and trouble in tech. Is it time to take risk off the table? Maybe, but don’t act rashly. The key is to take small, gradual, and reversible steps. If you end up being right, you will have minimized your losses, but if you end up being wrong, you won’t kick yourself from missing gains.

FINSUM: Advisors say that these kinds of strategies are well-received by most investors, so simple risk mitigation efforts can go a long way to minimizing the psychological discomfort one feels at the potential peak of the market.

(New York)

Dividend stocks are in an odd place right now. The yield curve looks likely to invert as short-term rates have risen and long-term yields continue to fall. This has made the average S&P 500 yield look quite weak relative to bonds. However, there are some really good picks out there. All the stocks listed here have dividends of 2.8% or more, and most have dividend growth rates of 20% or more. These stocks include AbbVie, LyondellBasell Industries, Broadcom, Regions Financial, and Starbucks.

FINSUM: What an interesting mix of companies and industries. These definitely seem worth a look. Starbucks is an interesting case for us.

(New York)

Stocks have done very well over the last month and a half. The correction—one of the longest on record—ended and stocks are back near an all-time high. But where do we go from here? One Wall Street analyst says the S&P 500 is in for major gains, with the index set to rise 12% before the end of the year. The analyst, from Cannacord Genuity, sees surging corporate earnings and rising consumer confidence as key to the market expansion. He sums up his view this way, saying “There is no doubt the unpredictable news backdrop of a potential trade war with China and a rise back to 3 percent in the 10-year U.S. Treasury yield can cause increased volatility, but the fundamental backdrop commands using it as an opportunity to add risk”.

FINSUM: The principal components of the argument seem sound, but we will admit we are a bit concerned about an earnings peak even though history tells us not to be.

(New York)

One of the big worries in the market right now regards the idea of peak earnings. The market has been doing quite well, all underpinned by seemingly super-powered earnings. However, many see this quarter or next as the peak of the earnings boom, with the benefits of the new tax package starting to wane from here. “How will markets respond?”, many wonder. According to Barron’s, “just fine” is the answer. Historically speaking, the peak of earnings had little do with market peaks, so the two seem to have no clear correlation. In other words, there is no historical precedent that should make one worry.

FINSUM: Part of the reason this is so worrying is that the bull market is so old that people are constantly looking for something new to power it. In that regard, peak earnings do seem concerning.

(New York)

The market finally had a down day yesterday (with the exception of the Nasdaq) after a good recovery. That said, many are worried about the market’s breadth, as most of the gains this year have come from just the six FAANG stocks. However, Barron’s notes that “just three sectors out of 11 are up more than the S&P 500 this year—that would be tech, discretionary, and health care—seven sectors have stronger breadth readings than the S&P 500, and all except energy have more than half their stocks trading above their 50-day moving average”.

FINSUM: Market breadth seems to have improved considerably over the last month, and generally speaking, the fundamentals underlying the market look healthier.