It’s not a stretch to say that 2016 has been full of surprises! One of the big surprises from our perspective up until the election was the decline in interest rates and corresponding strong return that bonds delivered. I wrote about the surprising decline in yields as early as February and was going a little bananas as yields throughout the world went negative (here, here and here). We never went… Read More
At this point, my view is that most of the market activity since the election can really be broken down into two distinct categories. The first category are stock sectors that clearly stand to win or lose from expected changes in government policy. The most obvious winner is bank stocks, which will benefit from lighter regulation. The big loser is hospital stocks that will lose Obamacare related revenue. The second… Read More
One of the interesting elements of yesterday’s trading was that small cap stocks continued to pop, jumping 1.59 percent. I don’t have a particular explanation for this movement, but it’s significant enough that I think it’s worth mentioning and it’s an example of positive volatility. Too often we think of volatility to the downside, but the movement in small cap stocks in the past few days is a good reminder… Read More
Most people probably caught the wild swings in the Dow and S&P 500, from a five percent drop in futures trading overnight to a 1.1 percent higher close, with most of the action in the 30 minutes before the market opened. Small cap stocks, which gained 3.1 percent during the trading session are particularly interesting because their relative performance to large cap stocks can be viewed as a signal of… Read More
Just as markets were surprised when British voters elected to leave the European Union, markets wrongly expected Clinton to win last night. When it first became apparent that Trump had a credible path to victory around 10:30 pm CST last night, markets turned negative with futures on the Dow Jones showing a decline of -750 points. In addition to falling stock prices, bond prices rose sharply, with the yield on… Read More
Warren Buffett is rightly considered the most successful investor of all-time. Not only has his holding company, Berkshire Hathaway, grown at a much higher rate than the overall market, he’s managed to earn exceptional returns for much longer than others who have also earned high returns. I was only able to pull data from 1987, but the last 29 years have been extraordinary for Buffett and his fellow shareholders. Over this… Read More
Last year at this time, deep fears about China’s economy caused US markets to drop sharply. The Shanghai market -8.5 percent one day drop spread to our shores and the Dow Jones Industrial Average (DJIA) fell -1,000 points in a single day. The week before, markets that had dropped by the massive one day plunge sent all of the stock market indexes into a correction, generally defined as a decline… Read More
Personally, I was a little surprised that stocks held up as well as they did yesterday after the failed coup in Turkey. Even though the political regime ultimately didn’t change, I thought that tanks rolling through the capitol would be enough to remind everyone that emerging markets (EM) are risky. Instead, the MSCI Emerging Markets index gained 0.26 percent and the two main ETFs that track EM stocks both gained 0.88 percent… Read More
After Andrea Leadsom withdrew herself from consideration and cleared the way for Theresa May to replace David Cameron as Great Britain’s Prime Minister, I was interested to see how British stocks were faring there after the Brexit. When I looked at the chart, I realized that I hadn’t been paying close enough attention because I was surprised that British stocks are actually up sharply this year – the chart shows a 7.9… Read More
One of the phrases that I hear over and over, but simply don’t like, is that ‘markets hate uncertainty.’ Forget the fact that markets are just made up of people and don’t have independent emotions, I’m talking about hating uncertainty. From a theoretical standpoint, let’s think about how uncertainty affects markets. Let’s start with the idea that the value of an investment is the present value of its future cash… Read More
