The Trade War Has An Upside
Recession fears fueled by an inverting yield curve has investors scrambling for cover The US-China trade war has convulsed the market with unexpected bouts of severe volatility The trade war is providing a critical assist in pushing the Federal Reserve into an easing cycle instead of a one-off mid-cycle adjustment A bullish scenario can be…
Sell Or Hold As Volatility Strikes
Unexpected tariffs catch the market by surprise Sharp selloff accompanies escalating trade conflict with China While the negative consequences of rising trade friction are significant, there are a couple of positives which can help the market Most likely we will now enter a period of detente till the next trade meeting in September Panic selling…
Yield Inversion Is Not Stomping Out A Bull Market Yet
The Zero Spread is providing a signal of the building risk of an economic recession. A substantial lag exists between yield curve inversion and a recession, and a key spread has to still turn negative. Federal Reserve timely dovish stance and perhaps even aggressive steps can prolong the expansion, along with a globally stimulative environment.…
Does The Bull Survive?
Stock Market Outlook 2019
Intense volatility in the final quarter eroded double-digit gains last year Fears of a recession or a sharp economic slowdown in 2019 are inconsistent with data and most likely overblown With Federal Reserve in alignment with a wait-and-see approach, it preserves key market support for now Economy and earnings will step-down, as the tax cut…
So We Got Ourselves A Bear. Now Lets Go Find A Recession.
Stock market indexes and sectors have slipped 20% to 40% from their highs. But the economy is heading for moderation, not a recession. The bear market has been created by a recession of confidence and not an impending economic recession. This may be a relatively positive thing. Slip-ups, poor tactics, and unpleasant surprises have pushed…
This Stock Market Reset Requires Patience
Halloween is coming, but the goblins seem to have already arrived and lost their way into the stock market. And they’re creating havoc! The relentless volatility and a drip of near-daily 1-2% decline are darkening investor confidence and making it a month of terror. What started as a question of whether the Federal Reserve is…
A Federal Reserve Jolt
Federal Reserve Chairman Powell’s recent comments about future rate hikes are being perceived to be more hawkish. With interest rate risk rising, short-term volatility has increased further in a nervous market that was already working through some near-term issues. Bond yields have snapped higher and stocks have declined sharply. The parsing of the comments may be…
An Upheaval – Systematic Disciplined Thinkers Toll The Bell!
On the 10th anniversary of the 2008 financial crisis, deep thinkers predict a potential crisis that can lead to social and political upheavals. Monetary policy will be a key factor in determining the timing of a potential crisis. Passive ETF investing and model-driven quantitative investing can amplify sharpness of pullbacks. Insights into the timing of…
Small Cap Stocks Are Rising. Biotechs Can’t Be Far Behind!
While much attention is being riveted on the S&P 500 new all-time high eclipsing the January one, small cap stocks accomplished that in May. Small cap stocks are in their next leg up as they record new all-time highs, once again leading the broader indexes. Biotech stocks, dominated by small and midcaps, have been closely…
Second Half Stock Market Outlook: What Now After Double-Digit Gains?
Earnings fountain created many opportunities in the first-half, even though index returns were relatively restrained. During the first-half, the market overcame a tide of negative sentiment, including a breaking down of trade alliances, the prospect of a trade war, an aggressive interest rate policy, and unending political turmoil. Second-half won’t be much different in terms…
A Short Case For A Longer Term
The stock market is volatile but still rewarding Most investors should favor a longer-term time frame as the stock market again records new highs after recovering from the first quarter pullback The principal reason for the end of a bull market is a forthcoming recession. Presently, such risk remains restrained Once investors recognize and accept most…
Small Caps Charge Bodes Well For The Stock Market
Small cap stocks record fresh all-time highs leading the broader market indexes higher for the first time in a couple of years Small cap performance suggests an underlying risk appetite in the market even with the volatility and yield-related concerns. Markets trends are reinforced not weakened when small caps are leading markets Small cap stocks have…
Small Cap Stocks: The Bright Spot In A Challenging Market
Stock market volatility is disruptive but has not damaged the markets Key supports remain favorable for the primary uptrend Growing political risk is a bigger threat to the market than interest rates Risk appetite remains positive as small cap stocks demonstrate resilience throughout the consolidation phase A portfolio strategy incorporating small and midcap stocks will…
Stock Market: It’s Not Over Yet
Stock market gored by a sharp spike in yields. Rising inflationary expectations feed into the fear of an aggressive monetary policy beyond current expectation. A cyclical adjustment as we enter the normal ebb-and-flow of stock market rises instead of just uninterrupted rallies. Stocks have wilted, but will not wither as economic expansion and earnings provide…
When The Bulls Growl & The Bears Moo! Stock Market Outlook 2018
Stocks remain in a major uptrend. Staying the course worked great in 2017 and remains an effective strategy even now. Witnessing a renewal of business cycle expansion, which can push annual growth above 3%. Earnings, Economy and Monetary Policy remain favorable and supportive of valuations. Risk of a more aggressive monetary policy exists for the…
Investor Biases. Be Aware!
November 14, 2017 We can be irrational investors and have to be aware of our biases. Investing biases can cost us significant returns over time. Group Thinking, Loss Aversion, and Overconfidence are few of the prominent biases we possess. Systematic Investing diminishes the bias related underperformance evident in Active Management. Biases can be hard to…
Systematic Investing Works!
November 07, 2017 Systematic Investing, using quantitative models, continues to grow as it addresses key drawback of active investing – behavioral biases Behavioral economics continues to provide growing evidence of the benefits of model-driven investing Top hedge fund managers shifting assets towards quantitative management Individual investors should consider Quantitative Investing as a compelling portfolio management…
The Small Cap Rush!
October 10, 2017 After a sleepy start, small cap stocks have turned up the heat. Corporate tax cut proposal triggered the rally. The enduring power of small cap relative outperformance presents a compelling investment case for long-term investors. Small cap stocks still lag the broader market indexes and there is room for small caps to…
Move Over Yellen! It’s Tax Cut Time!
September 29, 2017 Yellen remains steadfast on the interest rate path Stock market takes the higher probability of December rate rise in its stride The health care repeals effort fizzle out clearing the desk for Congress to focus on tax cuts Small caps lead the charge, after underperforming the larger indexes till now Tax cuts…
Will The Federal Reserve Send The Market Higher?
September 19, 2017 Federal Reserve begins an important meeting on Tuesday with implications for the stock market Start date for the Balance Sheet Rollback program to be announced Federal Reserve’s posture on the final rate increase can provide near-term direction to the market It will be prudent to push out the next rate increase to…
A Partial Stock Market Eclipse Maybe, But Not A Total One!
August 30, 2017 Entering a period of elevated risk from unrealized policy expectations, budget ceiling debate, and Federal Reserve’s quantitative easing reversal September and October are the months to be watchful as key events coincide The Bull Market support from Economy, Earnings and Monetary Policy remains broadly intact Conditions exist for a possible correction but…
Monetary Policy Reset At The Federal Reserve
Monetary policy became more aggressive last month with the announcement of the balance sheet normalization program Emerging evidence now points to a willingness to reconsider further rate increases based on data, rather than a pre-determined course A scenario that we outlined earlier is now becoming a real possibility An expected reset back to moderate monetary policy…
Will The Federal Reserve Avoid A Slowdown?
June 29, 2017 Market fundamentals remain stable with earnings momentum and a steady economy Monetary policy experiencing a material change as the Federal Reserve outlined a program to reverse quantitative easing A combination of rising interest rates and a shrinking money supply, from the reversal, elevates monetary policy risk We believe Federal Reserve will reduce…
Lessons from a Trump Presidency
May 16, 2017 Controversies are now typical of the new Trump administration. In spite of jolting political news, the market remains in a steady uptrend. Earnings and growth trump political turmoil as long as economic implications are limited. The market is patient, but the patience is not finite. Staying the course instead of predicting corrections…
Is The Stock Market’s Hour Up?
April 26, 2017 Market professionals are suggesting an imminent correction for some time. Key measures are indicating overvaluation. But the market still marches on. Market Timing is a costly exercise, particularly for individual investors Staying the course has worked thus far In our previous article, The Relentless Market And Missed Calls, we had highlighted how…
The Relentless Stock Market And Missed Calls!
March 24, 2017 Brilliant professional money managers fail in their market timing. For individuals it is even harder to engage in market timing. An eye on the three key supports for the stock market can be helpful. The market may be closer to a pullback, but the Bull is not ready to rollover yet. …
Buffett Makes It Clear!
Buffett’s Recent Investments Suggest Confidence In Economic Growth. The Economy Has Legs and So Does the Market. Uninterrupted Market Rise Raises Probability of A Normal Pullback. Even Though March Has the Potential to Be Volatile, the Overall Secular Uptrend Remains Intact. Warren Buffett is a peerless value investor. With his recent sweeping investment in the…
The Stock Market Is Heading Higher
February 08, 2017 A change of administration typically means new policies that impact economic growth The first two weeks of the new administration have been fairly controversial The stock market has consolidated and absorbed the early news flow as it edges higher Is it time for a change in the stock market trend or can it still…
Small Cap Stocks Breathe Fire!
January 22, 2017 Small Cap stocks had a strong 2016 after a slow start The enduring power of Small Cap performance over years should factor into portfolio decisions Investors must consider some exposure to Small Caps as part of a broader portfolio strategy A favorable environment exists for Small Cap stocks to continue performing strongly…
Legendary Investor Had An Unlikely Tough 2016 – 1% Return!
January 18, 2017 Steve Cohen is one of the most successful hedge fund managers of the last 25 years. His firm, Point72 Asset Management, had a difficult last year as the portfolio returned about 1 percent in 2016. This was the second-worst performance for the gifted investor, with the earlier worst year being a decline…
Still Waiting For A Correction? Stock Market Outlook For 2017
December 20, 2016 Investors have been fairly cautious in the second-half, with money managers and analysts predicting an imminent correction. All key constructs of stock market valuation have continued to be supportive of higher valuations Markets in 2017 have a lot going for them but eventually, it will come down to policies and legislation that…
Living In A Drawdown State – 60% Of The Time
Drawdowns are inevitable and more common than investors realize. Nearly two-thirds of the time a portfolio will be in a Drawdown, referred to as a State of Regret. Nearly 40% of the time, the Drawdown will be greater than 20%. Drawdowns can take a psychological toll and awareness of the likelihood of such Drawdowns can…
Return Of The Fundamentals – 3 Reasons For Stocks To Head Higher
November 11, 2017 Economy and earnings can’t be ignored. Monetary policy remains accommodative. Investor sentiment has improved markedly towards assuming risk in stocks. Higher stock prices and new stock market highs expected It may be instructive to keep in mind the words of noted British investor Sir John Templeton, as we approach a new investing period for stocks following the US elections. The…
Madam Or Mister President – Pricing A Presidency
November 5, 2016 The stock market begins to factor in a non-Clinton Presidency. Late momentum allows Trump to close gap with Clinton, forcing the stock market to recalibrate. A spurt in risk averseness has led to indiscriminate selling. Healthcare and Biotech stocks do have a future, not being reflected in current valuations. Prudent to hold…
The State Of The Market 7 Days Before Elections
November 1, 2016 Earnings are coming in better than expected by the stock market, with the S&P 500 companies reversing an over year-long decline during Q3 itself. The final hustle begins on the Election front and projections thus far appear to be in sync with stock market expectations. But watch out for Halloween surprises, aka…
Trading Strategy Exacerbates Market Turmoil
October 17, 2016 Recently, Robin Wigglesworth of Financial Times wrote an interesting article about some automated systematic investing strategies being pursued by institutions that add to the volatility in the stock market. These strategies maintain a certain level of volatility in the portfolio. When the stock market declines and the volatility pierces the threshold or…
It’s October, And The Stock Market Has Not Given Up Yet!
OCTOBER 13, 2016 Attention shifts from US elections towards earnings Third quarter earnings to be supportive of stock valuations Monetary policy to assume greater importance later in November Uptrend remains in place, with earnings expectations of key importance in determining stock market direction The stock market has continued to edge higher, supported by an ongoing…
Hedge Fund Legend Notes Industry’s Hard Struggle To Generate Returns
SEPTEMBER 29, 2016 Julian Robertson, a legendary hedge fund manager who founded one of the most successful hedge funds, Tiger Management, noted in a recent Bloomberg interview that the industry faces one of the toughest times encountered in his 40-year career, to generate returns and maintain the fee structure. The 84-year hedge fund manager who founded Tiger…
Federal Reserve Policy Bolsters Case To Stay With Stocks
SEPTEMBER 23, 2016 The case for staying the course with stocks was bolstered following the FED’s ongoing pause. As earnings season arrives, technology to power Nasdaq Higher. October can see stock market gains interspersed with sharp volatility from swings in election forecast. November is favorable, but generally driven by the election outcome. “Investors should…
Understanding Our Investing Biases – Part 2
SEPTEMBER 21, 2016 Investors are not rational and have to deal with biases. Investing biases can cost us significant return over time. Disposition, Confirmation, and Anchoring are few other biases with adverse consequences. Biases can be managed to improve investment performance. As part of our writings on Systematic Investing, we continue with a look at…
Understanding Our Investing Biases – Part 1
SEPTEMBER 17, 2017 Investors are not rational and have to deal with biases. Investing biases can cost us significant return over time. Loss Aversion, Confidence, and Bandwagon are few of the biases we possess. Biases can be managed to improve investment performance. As part of our writing on systematic investing, which started with an…
Staying The Course!
Stocks Remain Attractive
SEPTEMBER 13, 2016 Federal Reserve to shift out any monetary policy change to December or beyond. A pre-emptive increase can turn the intended medicine to poison. Volatility to remain elevated and some consolidation to occur. At this time US stock allocation should be maintained. “Over August, we believe stocks will continue to perform strongly…
Why UBS Is Hiring So Many Quants?
SEPTEMBER 12, 2016 This recent headline on Bloomberg caught my attention. “There’s a Simple Reason Why UBS Is Hiring So Many Quants” The Swiss financial giant UBS Group, which oversees nearly $2 trillion, has in the past couple of years doubled the number of quantitative analysts (quants) working in the office of its Chief Investment Officer,…
Active Management Loses Ground
SEPTEMBER 09, 2016 Most Active Managers Are Unable to Outperform benchmark S&P500 Small-cap managers face an even more uphill battle with 90% underperforming S&P600 There is room to consider model-based Systematic Investment Strategy The S&P Dow Jones Indices, LLC publishes a tabulation of Active versus Passive Investment Management performance twice a year. According to this…
With Market At All-Time Highs,
September Can Be A Month Of Consolidation
AUGUST 9, 2016 Markets have overcome systemic shocks to record all-time highs. Rally has begin to shift towards being earnings-driven as well, rather than being interest-rate driven. September could be a month of pause and consolidation as interest rate decision looms. Exposure to stocks has been a prudent strategy and remains so going forward. The…
Smallcap Stocks are Charging Ahead
JULY 14, 2016 Small-cap stocks have risen strongly from their February lows Risk appetite remains strong, and portfolio exposure to this dynamic segment is prudent Favorable Fed policy and signs of a steadier economy will continue to push small-caps higher over the course of the Summer After the surprise result in Brexit polls, when the…
Brexit Doesn’t Mean An Exit On Stocks
JUNE 30, 2016 Interest Rates to Remain Lower for Longer Economic Growth was Stronger in Q1 than Expected Even though Brexit Puts Pressure on Global Growth, How Much and When Remain Unknown Brexit Doesn’t Mean an Exit on Stocks One thing that became certain after the British referendum favoring an Exit from the Eurozone, popularly…
It’s The Fed’s Move Once Again
Federal Reserve will update its “dot plot” to reflect the median rate hikes for 2016, and that number is widely expected to come down to 3 from 4 A more settled interest rate picture, and continuing economic growth should create an environment for a durable rally into the year We believe the next rate hike…
The Fed’s Done For Now – Market And Smallcap Viewpoint For 2016
We anticipate the market decline to provide fresh legs for a new rally later in the first quarter and early second quarter For the year, we anticipate a positive year, with single-digit returns for S&P 500 and Nasdaq The market expectation we laid out in our January 2015 commentary, and reiterated in April and September,…
The Song Of The Fed: Market Outlook And Smallcap Commentary
SEPTEMBER 16, 2015 The market expectation we laid out in our January 2015 commentary and reiterated in April 2015 second quarter commentary was borne out from late-June through August. As risk-appetite continues to shrink and swivel to risk-averseness, small cap stocks will bear the brunt and underperform the larger caps in the third quarter and…
Viewpoint: Stock Market Outlook And Smallcap Performance In 2015
Small cap stocks underperformed significantly during 2014, compared to larger caps. As the US economy strengthens while key international economies struggle, small caps are well-positioned. We anticipate small caps to outperform larger caps in 2015, but returns will be restrained compared to years past. The small cap stocks put in a forceful effort in December,…