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November 2016 Update image

 Market Scorecard      Monthly Commentary The month of November brought many surprises.  Very few were predicting a Trump victory and even fewer were predicting the market's positive reaction.  We saw bond prices fall precipitously while US stocks climbed to new all-time highs.  The stock market is said to be a 6 month leading indicator but it seems to have gotten ahead of itself in recent weeks.  Furthermore, we believe the selloff in bonds is overdone.  We've seen a jump in 5 year inflation expectations and growth expectations well ahead of anything actually happened.  This makes sense if we had line of sight to these things, but at this time, we believe it's wishful thinking. There's been a lot of research and thoughts over ...

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October 2016 Update image

 Market Scorecard    Monthly Commentary The month of October turned out to be a busy month and not particularly good for stocks, bonds and commodities.  I think we'll all be glad when the election is over on November 8th.  I have been asked a lot about how the results could impact the markets.  Anytime there's a strong consensus, the risk is that it's incorrect.  Since Clinton is projected to win, the risk to the markets is that she doesn't which creates more uncertainty since a lot of people view Trump as a wildcard.  Although, since Wikileaks has been leaking emails and a new FBI investigation into Clinton's email related to Anthony Weiner, the likelihood of a Trump win has grown.  At the ...

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September 2016 Update image

 Market Scorecard Although stock and bond returns were fairly boring, a lot happened during the month of September.  Data continued to deteriorate, the Federal Reserve left rates unchanged (and lowered growth forecasts), OPEC agreed to a freeze in production (or did they), Japan is targeting a 0% 10 year bond yield and Deutsche Bank brought the Europe to a Lehman moment. Beginning with the Fed, they left rates unchanged while speaking hawkishly after their decision.  They are projecting to the market that they're going to raise rates in December since the economy "feels" like it's getting better.  Only the unemployment appears to be doing what they want, although Japan's unemployment is at 3% and they aren't close to growth or inflation. ...

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August 2016 Update image

Market Scorecard   The month of August was relatively boring compared moments in the past few months.  The Fed's meeting at Jackson Hole culminated with Janet Yellen and Richard Fischer suggesting there could be one or two rate hikes coming before year end or shortly thereafter.  Just one week later, employment for the month of August rose by only 155,000, which missed estimates by a decent margin.  The hawkish tone from the Fed will most likely be switched yet again as we saw weak manufacturing and services data.  What you may not have heard about Jackson Hole is they held a session on negative nominal interest rates and brought in Marvin Goodfriend as the lead presenter.  He is a believer of ...

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The Best Days Propaganda (Part Deux) image

A few months ago, we highlighted the 10 best days myth in a blog post.  This myth as I call it is perpetuated by large money-center institutions as a way to show investors a) why they need them and b) why they should stay invested throughout market cycles in zombie-like portfolios for fear of missing a few large up days.  I came across a similar chart (but different enough) by Gary Shilling which looks at this myth slightly differently.  I won't bore you again with all of  the  details of the myth since you can read about it on our blog here.         Lines 1 & 2 They say timing the market is difficult and trying to can destroy returns.   From 1926 ...

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Guide To The Markets (Dissected) image

Each quarter, JP Morgan Asset Management updates it's Guide to the Markets report which is filled with charts and statistics.  In this post, we isolate 11 out of the 71 pages of information in the guide and provide some context.  I tend to do this every year as new information is added and as things change materially.   Slide #4 The current forward P/E of the market is 17.1, which is higher than in 2007, although not close to the bubble high in 2000 of 27.2.  The thing with forward earnings estimates is that analysts and companies are notoriously optimistic.  I don't think any analysts forecasted in 2011 that today's earnings would be the same level, but they are.  And yet the market has continued ...

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July 2016 Update image

Market Scorecard   The markets continued to trek higher following the Brexit bounce in late June. All of the major indices posted solid gains during the month, with the S&P posting a 3.52% positive gain.  US Q2 GDP was released at month-end and posted a meager +1.20%.  We were very surprised since we actually expected a strong GDP report powered by consumer spending which makes up roughly 70% of the economy.  While consumption was strong, investment fell -1.20% and government expenditures fell for the first time since Q4 2014.  The biggest surprise was the GDP deflator which went from +.50% to +2.20% (a delta of +1.70%) which caused GDP to fall to 1.20% instead of being 2.90%.  The GDP deflator is ...

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