Despite the general contention that the economy and the stock market are inexorably connected, the facts get in the way of confirming common wisdom. This chart presents the average stock market return and average GDP growth by decade and by secular bull/bear market cycle. Economic growth is not the primary driver of stock market returns; … Continue reading Stock Returns, P/Es, and GDP
As inflation moves beyond (or below) 1-2%, P/Es drop.
Bull markets are born on pessimism, grow on skepticism, and die on euphoria. -Sir John Templeton
The Federal Reserve's inflation target is 2% and an important indicator the board uses for measuring inflation is the Personal Expenditures Consumption (PCE) index. Last Friday the government reported that both core PCE (excluding food and energy) and regular PCE was running at 1.5% on a year over year basis.
Dragged down by technology stocks, global stocks turn bearish. US Stocks International Stocks
As the central bank creates or distributes more money, people don't suddenly go out and consume goods and services. Falling or rising interest rates play out where they are the primary cost of doing business: financial transactions. The chart below shows the relationship between monetary velocity (nominal GDP per dollar of monetary base) and Treasury … Continue reading Should we be concerned about hyperinflation?
For the third time in the last 12 months, the wave price pattern of US tech stocks turns negative. Prices are represented by VGT and are not to be taken as a recommendation to buy or sell.
"My idea of the modern stoic sage is someone who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking. " - Nassim Taleb, The Black Swan - A paper to read - To read the paper . . .https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3693034
The problem with what is commonly thought of as inflation is that consumer prices move up and down for many different reasons and, at any one time, there will be prices rising somewhere and falling elsewhere. So, what prices should be checked by the compilers of the statistics? The answer, inevitably, contains much subjectivity because … Continue reading What comes next?
Powell's approach to inflation has been described as "fuzzy" compared to his predecessors. Maybe it's because of his background in law. Asked at the FOMC press conference what the Fed means by "moderate," Powell said, with perhaps a hint of frustration, "It means not large. It means not very high above 2%. It means moderate. … Continue reading Powell and inflation
Stocks wave pattern since June top appears to be in a final phase as oscillation continues to decline lower ... Volume crashes ...
The following reminders could not be more important in times like these with respect to the stock market. The outstanding characteristics of financial markets are shortness of memory and ignorance of history. - John Kenneth Galbraith It ain't what you don't know that gets you into trouble. It's what you know for sure that just … Continue reading It’s times like these
The reality is that the business cycle is different than the economic cycle. GDP growth is much more consistent than EPS growth. EPS declines can occur during periods of economic growth. Across the 68 years since 1950, earnings declined during 23 of them despite positive economic growth in all of those years…34%! Real GDP growth … Continue reading Earnings are not immune to declines
The traditional advice of Wall Street has been that "since you can't time the market" investors should remain invested in stocks at all times to avoid the risk of missing the opportunity for returns. One statistic often cited is that most of the market's return occurs on a few days and, if an investor is … Continue reading In it to win it