Desloges CFA is a professional investment consultant/ blogger/ trader
with over 25 years of experience working on the buy and sell-side.
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Insight December 5
SP500: At Major Crossroads? What we must realize is that the market is full Risk On as the High Beta stocks (SPHB ETF) on a relative basis with SP500 Index (SPY ETF) reached the Major Daily Resistance Trendline that started back in July 2014!
Canadian Technical Charts Potpourri The XIU ETF is surprinsingly underperforming the SPY ETF (+2.3% vs +2.6%) since November 8 2016 with overweight in Financials (40.41% of XIU), Energy (21.57%) and Base Metals (10.20%). Sell-side share analysis is wrong Profits forecasts made more than a few months ahead have a dismal record of inaccuracy...
Monthly Technical Charts Potpourri The Trumpification of Financial Markets in November as pro-growth and reflation theme within a protectionism bias repriced violently stocks vs bonds, US Dollar Index vs Gold...
S&P 500 Index: Rare Bollinger Band Width Worth Monitoring If 2016 and 2017 fall into the bullish camp, the major U.S. stock market indexes will remain above their recent long-term consolidation boxes, asset class behavior will continue to align with risk-on outcomes, and the current bullish trends will remain in place. If the bears start to work on the previous list, the odds of “bad things happening” will improve. Time will tell.
Should we celebrate rising rates? While rate changes can cause short term profits and losses, they also change the coupon yield that constant maturity portfolios reinvest at, which can largely offset short-term losses over multi-year periods. So for investors with a medium-to-long-term outlook, the initial rate that they invest at likely has more impact on their long-term returns than the rate changes they experience while they are invested.
What Happened To The Earnings Recession In summary, the EPS growth for the S&P was 11.5% yoy in 3Q16, the highest quarterly growth in two years. Overall profit margins are back at their former highs from 2014. Nearly all of the interim weakness in profitability was related to weakness in energy. That the other sectors showed continued strength was a very strong indication that corporate results were not indicative of an imminent recession (from Yardeni).
20 Canadian stocks set to win from Trump’s ‘good policies’, according to RBC “Canadian companies stand to benefit from President-elect Trump’s policies in two ways: 1) The direct impacts from lower corporate taxes and fewer regulations and 2) The impact of stronger U.S. growth and the flow through to Canada both through better domestic growth and some of the knock-on impacts,” said RBC analyst Matthew Barasch in a research note.
Financial Markets Already Trumped A lot of good news (Trumpification of Financial Markets) already priced in as Divergence on Price vs Volume intensifies. Canadian Technical Charts Potpourri The XIU ETF is surprinsingly underperforming the SPY ETF (+2.8% vs +3.6%) since November 8 2016 with overweight in Financials (40.41% of XIU), Energy (21.57%) and Base Metals (10.20%).
Typically strong December slightly weaker in election years Rarely does the market fall precipitously in December. When it does it is usually a turning point in the market—near a top or bottom. If the market has experienced fantastic gains leading up to December, stocks can pullback. Conversely if the market has been through the ringer of late and December is down as well, then expect a rally to ensue shortly.
Swedroe: The Perils Of Bargain Hunting Summarizing the findings from these three recent papers, investor preferences and beliefs lead to the pricing anomaly in which low-priced stocks—especially those with higher betas, high idiosyncratic volatility and high skewness—show poor raw returns and very poor risk-adjusted returns.
SP500: Full Risk On Behavior? That tells me how convinced (or complacent?) market participants are about the market potential in terms of risk reward on a short term basis.
Does likely 2nd fed rate hike mean return to normal Whatever the case, political shake ups are happening around the world and Chair Yellen’s days are numbered with the new Trump administration unlikely to re-appoint her for another term in 2018. Despite what the Fed says about low inflation, we think real inflation that hits us all in the pocketbook and bank account is much higher, economic growth is gaining traction, and the stock market remains rather buoyant.
Do Larger Budget Deficits Stimulate Spending? Depends on Where the Funding Comes From In sum, there may be rational reasons why the U.S. equity markets rallied in the wake of Donald Trump’s presidential election victory. But an expectation of faster U.S. economic growth due to a more “stimulative” fiscal policy is not one of them unless the larger budget deficits are financed with thin-air credit. Fed Chairwoman Yellen, whether you know it or not, you are in the driver’s (hot?) seat.