Traders Take the Market for a Spin It was a busy week, especially for traders who can’t resist betting on news of the moment. That news included the FOMC announcement, on Wednesday, of a hike of the Fed Funds rate by 50bp. At the press conference that followed, Chairman Powell clarified the Board’s perspective and laid out its strategy for the coming months. In doing so, he cautioned that the Fed, with its tools, couldn’t craft a remedy for what…
Inflation Fight Weighs on the Economy and the Markets In Q1 of this year, we witnessed the movement of capital among sectors within the market as traders traded and investors rebalanced portfolios. The predicted result was a contraction of P/E multiples among some high-profile NASDAQ stocks and superior price performance from a number of value/income issues within the DOW and S&P 500. Last week, the P/E compression of the NASDAQ widened to include most, and on some days all, sectors…
In our December Investment Outlook we addressed the need for investors to adapt their finances to challenges we saw arising for the economy and its markets in 2022. We measured the known risks. In our opinion, none were judged to be more than just “Moderate”, likely to do nothing more than slow the current global expansion. All were considered to be cyclical, solvable, and likely to be resolved over time. Today, we find the markets mired in the extreme uncertainty…
Event Risk Overtakes Cyclical Risk Investor sentiment took a hit this week as the Russian incursion into the eastern regions of the Ukraine became a full-scale invasion. The capital, Kyiv, came under siege along with several other major cities in the country’s interior as a miles-long Russian convoy snaked its way westward. What was thought to be a brief, localized outbreak of hostilities as a prelude to a negotiated settlement regarding the separatist controlled states was in actuality a planned…
Geopolitical Tensions Grab the Headlines Inflation and the Fed retreated from the headlines as all eyes focused on Russia’s militaryincursion into the Ukraine Thursday morning. At first glance, that aggression presents thepotential to upset political and economic stability on a global scale. After taking acloser look, that appears unlikely. The stock market embraced the worst-case scenarioearly in Thursday’s trading session as we saw the DOW join the NASDAQ and S&P 500 incorrection territory as they posted their year-to-date lows in…
Inflation Headlines Weigh on Stock Prices As you might expect, the Fed’s recent announcement generated an abundance of speculative headlines andopinions from market watchers that served as a catalyst for the recent drawdown in stock prices. Bydrawdown we mean a not-so-surprising correction for the NASDAQ and the S&P 500, down 17% and 12%at their respective lows. At the same time, we saw the small-cap Russell 2000 slide into bear marketterritory, down 21% at its recent low. The DOW was resilient,…
This Week: A Preview of Things to Come Since our most recent Update, that slight bump in volatility we saw earlier this month developed into a spike as measured by the VIX index. No doubt, you noticed. This week was all about the Fed and their scheduled meeting. It had some talking heads in the media giddy with excitement as they raised prior estimates of 2 to 4 rate hikes this year up to the 5 to 7 range. Apparently,…
The Market Responds to the Shift in Monetary Policy These first two weeks of the year in the stock market have, so far, gone according to script as the Fed begins to remove the punch bowl. We’re seeing a slight bump in volatility as market participants shift their focus, and capital, from high-priced, large-cap Growth (mostly Tech) issues to the opportunistically-priced Cyclicals that typically perform well in a late-cycle expansion. Diversified investors with a long-term view need only make minor…
Bidding Adieu to 2021 After a bit of choppy action and a bump in volatility early in the Christmas week, Santa Claus righted the sleigh and delivered the goods for those cooler-headed investors who held fast following the mid-December Fed meeting. That was the meeting where Chairman Powell announced a doubling of the pace of the taper, now ending in March, and would be adapting future policy to changing economic conditions. Nothing dramatic there. In fact, we viewed that as…
As we approach the end of Year Two of the Pandemic Era, we’ll take a look at what has been wrought upon the economy and its markets by the policy response to COVID and what we might expect to see next year. 2020 was a year of extremes while 2021 has been a year of advancement for a US economy that has returned to pre-pandemic levels of growth. The byproduct of this has been a disruption of supply chains and…
