Displaying items by tag: stocks

(New York)

If one thing is clear about markets right now, it is that they have no direction. Volatility has been very high, but not in any one direction, as prices have been bouncing around as if they were inside a pinball machine. In this vein, Barron’s makes the argument that markets may keep simply moving sideways, possibly through 2027. The article summarizes the view this way, saying “With the Fed continuing to raise rates, populism still threatening Wall Street, and baby boomers ditching stocks as they retire, the market could be stuck in a rut until the end of 2027”.

FINSUM: Nine years is a long time to move sideways! In the nearer term stocks may struggle as we are in a mid-term election year. In such times, they tend to do well in the fourth quarter.

(New York)

Markets have been very turbulent lately with no clear path forward. With that in mind, and given the stage of life (retirement) of many clients, a lot of advisors may be looking for some good yields to add to portfolios. Well, it might be good to take a look at utilities stocks. While the focus on investors has been on growth, utilities look good at the moment. Despite the fact that utilities generally lose ground when rates rise, and have lost 2.4% this year, well-run regulated utilities still look like a good buy. In particular, look for utilities that do not have massive amounts of capital tied up in a single asset, like a power plant. This means one should focus on utilities in the electricity transmission and distribution areas.

FINSUM: Beyond the yields, utilities would also seem to be quite good at defending against a downturn, as spending on them would be quite resilient in a recession.

(New York)

Investors beware, the market might be losing its nerve. Back and forth markets for most of this year appear to be making investors very wary, as the market is fleeing to cash. Investor holdings in “cash sanctuaries”, which include money market funds, are approaching 2%, the highest level seen in a decade. According to one prominent asset manager “Cash is an asset class once again”. According to Crane’s, “Money funds were on a starvation diet with yields at zero percent … Rate increases have given them a stay of execution”.

FINSUM: Aside from volatility, the other big driver is that yields on money market funds have risen considerable alongside the Fed hikes, making them much more attractive.

(New York)

Is value dead? That question has been asked for years now as value stock have chronically underperformed their growth oriented peers. Even now investors look first and foremost to technology (especially FAANG) stocks, prioritizing the richly valued, but quickly growing companies. However, value may be ready to turn around, says Barron’s. One of the big reasons why is that loose monetary conditions, which have held value stocks back, are finally tightening. Some even think value might really soar, as it is exceedingly rare for strong value stocks to be trading at such low P/E ratios this late in a bull market.

FINSUM: We think the biggest problem facing value stocks has been that everyone senses technology is coming to dominate all aspects of life, the economy included. This has meant that investing in tech companies is seen as the way of the future, and that one is foolish not to. It is going to take time, and maybe some cataclysm (e.g. a big regulatory crack down on tech) to disabuse them of that notion.

(New York)

JP Morgan has just put out a guide which may be very interesting to investors—a manual for how to navigate the end of easy money. The bank thinks the equity market’s response to earnings has been very worrisome lately, and they are very bearish. The bank recommends that in 2019, investors go underweight equities and long gold and long duration as the economic cycle ends and real rates “collapse”.

FINSUM: This is an extraordinarily bearish outlook from JP Morgan, and it seems mostly dictated by weakness in equity prices lately. Investors should take this warning seriously.