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Wkly Market Round-Up thru Oct 26th 2018; Trick or Treat!!

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Oct 272018
 

Halloween is marked by times when cute little kids come to your door and you give them treats, mostly in the form of candies and send them on their way; –everybody is happy! But now when you hear a knock on your door, it is market price action, and in this case there are no treats! Only Tricks, financial tricks, mostly to the downside. Have we put in a low? Can it go lower? Check out my take on the current market turmoil below in this week’s Weekly Round-Up

Market Sound-bites

• Some say the biggest risk is the Feds….since Powell’s statement on Oct 3rd when he said that they had a way to go before reaching a neutral fed-funds rate from the extremely accommodative current range of 2% to 2.25%…markets interpreted this as a more Hawkish tone from the Feds and the markets sold off accordingly…current the Feds seem still committed to 4 more rate hikes thru 2019 with a 69% chance of a rate hike this coming Dec and 3 more for 2019…most market participants believe this is too aggressive and have forecasted only a sigle hike in 2019…with the Q3 GDP numbers coming in at 3.5% but slowing inflation seems to indicate the Feds can slow down their rate hike mentality….however Consumer spending is still very high at 4% which is the fastest rate in about 4 years…
• In US Dollar terms the markets suffered a loss of over $1.2 Trillion dollars and over $3.3 Trillion in Equity Values evaporating in October…a bigger part of this sell-off can also be attributed to a larger overall allocation of money in Technology and Momentum stocks…
• Q3 US Corp Earnings on track for a 22.5% rise in Earnings YoY yet companies are being punished when they miss or lower forward guidance…current earnings have thus far not acted as a circuit breaker to stop downside equity onslaught…almost half of S&P 500 companies down more than 20%…the fear of Corp Earnings peaking is forcing price action lower…trade tariffs also starting to show up in Corp Earnings calls like from Caterpillar, Lennox and Honeywell…

Get my take for current market price action;

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Oct 19th 2018; Interest Rates vs Valuations

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Oct 202018
 

Hey Folks in one corner we have Interest Rates, which are rising; and in the other corner we have Forward PE Ratios (Corporate Valuations) falling. When an equilibrium is reached we can expect to see consolidation in the US Equity markets and money start to flow back into Equities. The key question is where is this level located as it is reflected in prices of US Indexes? Always remember, when Corporate Earnings are strong (and they are) and forecast guidance, while lower is still strong (and they are) then money will see that price point where owning US Equities is a fair value vs the inherent risks of even lower prices…get my take on the current market price action and what we could possibly expect from here;

Here are some more short takes on the current markets:

• Fed Reserve still committed to 4 more rate hikes thru 2019 with a 70%+ chance of a rate hike this coming Dec and 3 more for 2019…even through in real terms the current rates or below zero in real terms when taking into account the current CPI reading of 2.3%…the valuation gap between the US and the rest of the major economies is the widest it’s been in 20 years
• Many cracks showing in the current US Economy; Rising Interest rates (Fed Monetary Policy) reduces forward PE Ratios in S&P to 15.9 from 16.9 just about 3 weeks ago and down from 18.6 from January this year (15 is long term average)….as Forward PE Ratios move lower it allows money to better justify Equity investments vs. equally compelling Fixed Income Investments…; Falling Home Sector and its associated Supply chains (ITB [Home Construction], XHB [Homebuilders], HD [Home Depot], and Lowe’s [LOW]; Saudi Investment Risk [technology, infrastructure, Defense and oil],
• 72% of Companies that have reported Earnings topped forecasts near highest rate in 20 years but only 58% have topped revenue forecasts and have fallen about 5.7% on average if top line missed…
• Hard BREXIT would be a mess; Contracts (banking); Clearinghouses (derivatives); Data (data protection); Immigration (Cross Border rules)

Here is my take on the current market with this week’s Weekly Round-Up;

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Oct 12th 2018; Goldilocks and the 3 Bears!

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Oct 132018
 

Hey everyone, this market reminds me of Goldilocks and the 3 Bears. How many of you remember that story? Well check out my Weekly Round-Up this week to get a glimpse into what is going on in the current markets.

• Q3 Earnings expected to come in at 21% YoY growth which follows 24% / 26% for Q1/Q2 this year…Underlying growth is expected to slow its ascent but to a still strong 12%…rising rates could further dampen and compress margins/EPS… So far JPM fell 1.1%, C was up 2.1% and WFC up 1.3%…
• It is now all about Interest Rates – Goldilocks and not 1 but 3 Bears! (Rising Rates – Trade Tariffs – Regime change – Deflation to Inflationary markets…since the dot com bust thru the financial crisis in 2008 stocks and bonds have been inversely correlated…this happens in a deflationary environment – now as the markets shift more towards an inflationary one, this correlation could change – this would change investment models of most all pension and endowment/retirement funds…we saw some of this in Q1 of 2018 when both Bonds and Equities had a down 1st Qtr…
• Both the Dow and the S&P have fallen for three straight weeks, while the Nasdaq has dropped for two… For Q3 Earnings analysts are looking for earnings growth of about 19% and sales growth of 7%. There are also concerns that expectations have gotten too optimistic, or that the quarter could represent peak earnings, as much of the earnings growth can be credited to the tax bill passed late in 2017…
• This past Thursday’s downdraft was marked by the 4th volume, with 11.3 billion shares changing hands, since Feb. 9, amid a sizable sell order around 2:30 p.m. that added to the downswing and had traders buzzing…the Dow lost 300 points between 2:30 and 2:45 on that larger order distribution…
• When the large-cap index drops 5% or more during the first 10 trading days of a quarter, it falls 79% of the time for an average quarterly decline of 11.3%, according to the Dow Jones Data Group…Since 1928, the S&P 500 has logged a 5% decline about every two months and a 10% drop every six months…On average the S&P 500 has experienced intra-year declines of almost 14% since 1980 despite going on to post annual gains in over 75% of those 38 years
• Oct is a strange month for the US Financial markets…it is also generally the last month of the year that Mutual Funds can sell their losing stock positions to off set gains in their portfolio for tax reasons…

Get my take on this week’s Weekly Round-Up:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Oct 5th 2018: Don’t Look Down!

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Oct 072018
 

Hey Everyone, this week’s kick off of the fourth Quarter was like a carnival ride! As I always tell our members in our User Group, we must watch the Bond Markets and interest rates. We have a number of events coming up over the next 12 months that will change the “go-forward” dynamics of the US Equity Markets. At the same time we see the FEDs reducing our Balance Sheets to the tune of 50 Billion per month, we’re also seeing the Corporate Bond markets growing to very large levels. In fact, over the next 3 years we will see over 6 Trillion of the “BBB” lower end investment grade bonds come up for refinancing. And in a raising interest rate market it will be most interesting. Of course there are other issues the Equity Market must face in the coming few years so get my take in this week’s Weekly Round-up:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb