Oil Price: Beginning Of A Downtrend
- The IEA's Mid-Term Oil Market Balance may be the only chart you need, to assess longer-term oil suply-demand.
- Based on abundand supply and slow demand growth, the recent drop in oil price is likely the beginning of a downtrend.
- Investment implicaitons: exposures to crude oil and oil producer stocks are not recommended.
Is The S&P 500 Valuation High Or Average?
- When looking closely at the calculation of popular valuation metric Shiller's P/E, we found significant shortfalls.
- Using "good old" trailing P/E avoids those shortfalls, and works better as predictor of near-term equity market returns.
- The S&P 500 is trading at 17.7 TTM earnings, which is close to 10-year average and to the average since 1980.
Don't Fret The Fed
- The end of QE and zero-rate policies have been well communicated by the Fed, and are largely priced-in by markets.
- U.S. inflation had better stay close to 2% (1.72% now) for reasonable economic growth. If unsure, look at Europe.
- The Fed's execution in the past five years has been flawless, and there is no reason to doubt it now.
Why U.S. Equities Are Hitting All-Time Highs
- Fundamentals drive markets, not geopolitics.
- Despite high volume of negativity in the media, U.S. economic fundamentals are very strong.
- The equity rally is justified based on fundamentals, and is expected to continue.
Equity Rally Is Just Getting Started
- Investor sentiment moved to very bearish in May, driven by geopolitics. Investors reduced risk, and now have to get back in.
- Economic data were very strong in May, including employment (jobless claims and payrolls), housing, consumption, etc.
- U.S. equities broke out on the upside in 2nd half of May, with all major indices reaching all-time highs.
- The tectonic sentiment shift from negative back to positive is starting, and will support the strong equity rally.
Bond Yields Make Some Sense
- Long-term interest rate falling from 3% at year-end (for 10y Treasury) to 2.46% "don't make any sense" to some observers.
- They do make sense when we consider the abundant global liquidity, and relative yields around the globe. We expect interest rates to rise gradually from here.
- I offer tactical fixed-income strategies that reduce exposure to rising rates, while increasing the total portfolio yield, and expected total return.
Mortgage REITs Are Buys
- Dividend rates have stabilized for AGNC, other REITs. Our (conservative) expected dividend yield for REM is 12%.
- At 12% (with no appreciation), expected return exceeds our forecast for equities, and far exceeds other FI assets.
- Interest rate risk is significant (expected duration of 14), but investors are paid well for the risk.
- Emerging Market Contagion Creates Buying Opportunity In U.S. Equities
- Bonds: Low Return, High Risk Asset For 2014 And Beyond
- S&P 500 Q3 Earnings Up 3.5%, Q4 May Accelerate
- Crude Oil Fundamentals Bad For Price
- Mortgage REITs Are A Great Buying Opportunity
- Oil Supply Shock Will Drive Prices Down
- The Gold Emperor Has No Clothes
- Tactical Strategies - Pulling In The Horns
- A Rare Buying Opportunity: S&P 500 Return Forecast Is Up To 19.2%
- Tactical Asset Allocation Can Be Successful With The Right Model
- Fear Of Earnings Slowdown Is Overblown
- Expected Return For U.S. Equities Remains Positive
- PAR Model: Expected S&P 500 6-Month Return Up To 5.1% On Data
- Turning Positive On U.S. Equities
- The Performance Analytics Return Model Report: 6-Month Expected Return Improves Slightly, Still Negative