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The Incredible Shrinking Earnings Forecast
- Not very long ago at the start of the New Year, corporate earnings were forecasted to increase on a year-over-year basis by more than 20% in 2015.
- But only a few weeks later, this robust earnings outlook has not only completely evaporated, but projections are now for earnings growth to turn negative starting in the second quarter.
- If history is any guide, this developing and deteriorating outlook for corporate earnings bodes ill for the stock market in the months ahead.
Volatility: Up She Rises
- Volatility in the U.S. stock market is building.
- While it may not be readily apparent in the headline readings, it is building under the surface in different ways.
- The more this volatility builds, the more the sustainability of the long running post crisis bull market may be at risk.
U.S. Stocks: Oh Behave!
- The U.S. stock market continues to behave remarkably well.
- As long as the uptrend remains intact, investors are best served to respect it until warning signals emerge to confirm that definitive change in trend may actually be taking place.
- Headwinds continue to accumulate with each passing week, so investors are equally well served to avoid becoming complacent as we continue through 2015.
The Fed Trade That's Money In The Bank
- Two key trading days in March have been informative in revealing how markets might react once the Fed finally raises interest rates.
- Most capital market segments seem to detest the idea of Fed rate hikes.
- But one select segment seems to be eagerly anticipating higher interest rates from a Fed.
Oil: Dallas Sellers Club
- A notable disconnect has recently unfolded in the oil market.
- Oil prices have rolled back over since early March to reach fresh new cycle lows.
- But selected regional banks that had followed the oil price decline have continued to rise.
- These banks may face renewed downside pressure in the near term, but some among the group may offer great long-term opportunity in the process.
Lessons From Another Tough Week And The Big Day Ahead
- It was another challenging week for the market.
- The U.S. Federal Reserve’s Open Market Committee is expected this upcoming week to set the table for raising interest rates in the coming months, adding to market anxiety.
- Higher volatility is likely to continue into the spring and summer.
- A number of investment opportunities remain attractive in the current and expected environment.
Beware Chasing QE
- Investors are rushing to the European side of the global stock market ship.
- Beware of pouring into European stocks simply because QE is now underway.
- ECB QE is not necessarily the same as Fed QE.
- Recent history has shown that a QE program is not necessarily a sure-fire guarantee to send regional stock prices higher.
- More attractive returns opportunities may eventually reside elsewhere as the program continues into the future.
Friday's Sell-Off: Assessing The Damage And Opportunities
- Capital markets sold off broadly and deeply across asset classes following Friday's stronger than expected reading on U.S. employment.
- Given the magnitude of the sell-off, it is worthwhile to assess both the damage and opportunities.
- Most category uptrends remain intact, but risk levels are rising.
- Selected opportunities are also now starting to be revealed.
Elevate My Market
- It has been an extraordinary month of February for the U.S. stock market despite a steady stream of bad news.
- The Fed also remains on track to raise rates, yet stocks want to go higher.
- Intraday trading activity has been particularly notable during the recent rally.
Hawks Take Flight
- It appears that the market's dovish interpretation of the Fed's minutes may prove incorrect.
- The Fed appears to remain intent on raising interest rates in June.
- This underestimation of the Fed's intent by financial markets has the potential to result in increased near-term volatility and potential stock downside.
What, Me Worry?
- U.S. stocks have registered new all-time highs this week.
- This latest advance has occurred in the face of markedly deteriorating fundamentals.
- Investors should become increasingly cautious about simply looking past all worries as we continue through 2015.
Stocks At The Crossroads: Breakout Or Breakdown?
- The U.S. stock market has once again arrived at a critical juncture.
- Over the course of just two short weeks, the market has found its way from the bottom to the high end of its trading range.
- It is reasonable to consider whether stocks will fail at current resistance or breakout to the upside.
A Cautionary Tale For Dividend Growth Investors
- A key tenet of dividend growth investing is staying the course even following a major decline, as the growing dividend will compensate you for your wait.
- But even high quality companies have endured periods lasting a decade or more before investors recover their value even when including dividends received along the way.
- Many investors today may recognize this in theory, but may not be truly prepared for such an outcome in practice.
- Coca-Cola provides a cautionary tale of investors from the past that are still struggling with this challenge even today.
The King Of Pain
- King dollar is back on the throne.
- How long its reign lasts this time around remains to be seen, but a number of indications suggest that it could last at least into the summer if not longer.
- Whether the resurgence of the U.S. dollar is a positive sign for the U.S. economy and the stock market is subject to debate.
- But its rise has certainly come with a vengeance across many asset classes.
Dangerous Liaisons: Banks & Oil
- This is how problems in an industrial sector spread across an economy.
- It has been no secret that the energy sector has been under heavy pressure due to the precipitous decline in oil prices since last summer.
- But the banking sector has more recently presented itself with its own set of related problems.
- For what was once a fruitful and prosperous relationship between the energy sector and the banks has become increasingly precarious.
- Investors that wish to manage their exposures to the oil sector either more aggressively or more conservatively can do so through evaluating the individual banks they own.
Did A Market Alarm Go Off On Friday?
- The trading day seemed like most any other on Friday.
- But when digging under the surface, the performance coming out of selected sectors may be tripping the alarm bells that more downside pressure may be soon to come.
- Investors may be well served to monitor selected market segments in the coming week to determine whether a more pronounced pullback is starting to get underway.
Oil: Beware The Bounce
- It looks like oil may have finally found its footing with a solid bounce in recent days.
- This has resulted in a number of calls suggesting that the drop in oil prices is now over and a sustained rally higher is imminent.
- If history is any guide, however, investors should proceed with caution before rushing back into the oil patch.
Gold Is In A Bull Market And Stocks Are In A Bear Market
- It may sound like a completely ridiculous statement, but it is true: gold is currently in a bull market, while stocks are in a bear market.
- It is all a matter of perspective.
- At this stage of the cyclical market cycle, investors would be well served to protect against recency bias and the reliance on extrapolation in their portfolio management process.
Gold: Will War Soon Be Over?
- The war rages on for gold.
- It has been nearly three and a half years now since gold reached its cyclical bull market peak in September 2011.
- Since that time, the price drop in the yellow metal has been almost unyielding.
- But after a disastrous year for gold in 2013, it has been making slow and steady progress in working toward a bottom in the more than a year since.
- Many challenges remain, but we may soon be approaching a final bottom in gold after several years of turmoil.
Time To Consider Regional Banks
- Regional banks have stumbled out of the gate in 2015.
- While the broader market is down roughly -3% to start the year, regional banks have fared far worse with a nearly -10% decline.
- But while this market segment as a whole may remain under short-term pressure, it may be a good time to begin exploring through regional banks for potential investment opportunities.
The Bull In Winter
- All good things must come to an end. This includes the current bull market in U.S. stocks.
- A new bear market will eventually get underway. The only question is exactly when this change will take place.
- But a number of forces are increasingly converging that suggest that the demise of the graying bull market may now be drawing close.
The Black Cloud Still Looms Large
- The oil market continues to search for any signs of life.
- The trend for oil remains definitively down.
- This bodes ill for capital markets in general and the high yield bond market in particular.
What U.S. Investors Can Expect From ECB QE
- The ECB is finally doing whatever it takes.
- Investment markets immediately rejoiced on the news, but is this sustainable once the program actually gets underway starting in March?
- Not all asset programs are created equal, and the ECB's QE program is not necessarily like the Fed's QE programs.
- It is reasonable to consider exactly what U.S. investors can expect from the ECB’s QE program moving forward.
Will The ECB Kill The Gold Rally?
- The European Central Bank is expected to take the latest “extraordinary” step in global monetary policy by announcing its own quantitative easing program on Thursday.
- Such aggressive monetary policy actions would presumably be positive for the gold price.
- Recent history has shown that gold has performed very poorly in the wake of these extraordinarily accommodative monetary policy announcements.
Is The Market To Be Hanged In A Fortnight?
- It is a fortnight filled with events that have the potential to meaningfully shape the future direction of the market.
- Four separate episodes are set to play out that each have major implications on how capital markets are likely to perform in 2015 and beyond.
- And unfortunately for investors, the risks associated with these events are currently tilted to the downside.
- Investors should be prepared for increased volatility and proceed with caution as a result.
Expect The Unexpected
- Global capital markets have become increasingly burdened by the capriciousness of human decision making by global policy makers and central bank leaders.
- Despite its perceived benefit in recent years, such heavy management may ultimately serve as a great detriment to markets in the end.
- Investors that not only expect the unexpected but anticipate it stand to benefit most as global capital market volatility continues to increase.
2015 Outlook: Pain
- Market prediction for 2015: Pain.
- U.S. stock market volatility is likely to increase notably with its relative outperformance over global stocks and other asset classes put to the test.
- A variety of asset classes and strategies provide the opportunity for strong returns in the coming year.
Monitoring Global Market Hot Zones
- The world is not without risk as we enter 2015.
- A growing number of countries are increasingly grappling with debt problems that have the potential to eventually lead to default.
- It is worthwhile to monitor developments within these at risk countries to protect against both direct and indirect negative impacts from any future deterioration.
2014's Trash Could Be 2015's Treasure
- It has been another strong year for U.S. stocks in 2014.
- But a number of more specialized asset classes and categories posted performance that notably outperformed the S&P 500 Index by a fairly wide margin this year.
- In many cases, those categories that landed at the top of the leader board in 2014 were many of the same categories that languished at or near the bottom last
- Thus, it is reasonable to consider those asset classes and categories that are limping to the finish line in 2014, for some might end up as winners in 2015.
Fires Still Burning In The Oil Patch
- The massive decline in oil prices over the last several months has clogged the headlines with bullish and bearish views on how to proceed.
- This can leave many investors feeling confused about what actions if any they should take in response going forward.
- At times like these, it is often helpful to begin by taking the simplest approach, which is to look at what prices alone are telling us.
- So far, they suggest that fires are still raging across the oil sector and that more challenges may lie ahead.
Can U.S. Stocks Four-Peat In 2015?
- The U.S. stock market finds itself in rarefied territory as it enters 2015.
- For only the sixth time in the past 150 years, the U.S. stock market has registered a double-digit annualized gain for three consecutive calendar years from 2012 to 2014.
- Can the U.S. stock market score a four-peat in 2015 and register yet another year of double-digit annualized gains?
- While the sample size is certainly limited, history suggests such a feat could be a tough one to pull off.
What Gift Will Santa Bring Stock Investors This Year?
- The time for the Santa Claus Rally is upon us.
- Stocks have historically performed famously well during the period between Christmas and New Year’s Day.
- But exactly how well have stocks performed?
- And what can we reasonably expect Santa to bring to stocks investors in terms of performance in 2014?