Dear Clients and Friends,
October saw stock markets bounce back from their first meaningful loss in a year to post a strong gain of over 5% while intermediate and long term bond yields generally moved sideways. Short term bond yields started to move higher as fears over inflation and the Fed raising rates potentially next year forced traders and investors to reprice that part of the curve.
October brought a lot of the same in terms of data and concerns; markets are very highly valued and inflation might be here longer than some thought. A few notable items for the month:
Bezos, Ikea and The Rockefeller foundations pledged announced plans to create a Global Energy Alliance for People and Planet that will ...
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Dear Clients and Friends,
September was the first month in a long time that markets experienced a reasonable pullback as the S&P retreated over 4.5%. It's been so long that most people seemed to forget that this is not an unusual occurrence. The reasons for this could have been the debt ceiling concerns, China Evergrande contagion, rising interest rates which could negatively impact valuations or a combination of all of the above.
The update below will likely read like others over the past year and I fear I'm starting to sound like a broken record with respect to inflation and market valuations. But alas, I shall continue until something changes!
Markets
Bank of America's clients as a % of ...
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Clients & Friends,
August was a quiet month in terms of market returns and economic data (more below). We also saw heart-wrenching videos of folks trying to flee Afghanistan as the US's departure allowed the Taliban to retake the country. No exit would have been perfect but this certainly did not look like a healthy way to handle things. I can only imagine the level of frustration and anger the people of Afghanistan feel towards Americans.
Otherwise, not a lot happened in August so this update is short and sweet.
Housing
Turning to the world of housing, prices keep going up. The percent of builder share (the share of houses built by a publicly-traded homebuilder) hit a ...
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Clients & Friends,
It's been a busy month with the delta variant running rampant in parts of the U.S. and world, and renewed concerns over reimplemented lockdowns taking the center stage. The hospitalizations appear overwhelmingly concentrated by those who are unvaccinated. While the amount of people still not vaccinated is concerning, the vaccines are now battle-tested against delta with strong results. Hopefully those who are not vaccinated will take notice.
In economic data, Q2 GDP was released and came in at 6.5% which was materially lower than the 8.4% estimate. A large reason for the miss was related to inventories and supply chain issues. Meaning, inventories were drawn down but not replenished as supply chain issues prevented ...
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Clients & Friends,
June was a relatively muted month so we'll keep this month's update short and sweet. Some trends have persisted such as housing prices which continue to climb while inventory levels are at historical lows. The hottest debate now is whether inflation will be persistent or transitory. Battle lines are being drawn and portfolios are being adjusted. But even the Google searches for transitory may prove transitory ?.?
According to this survey by BofA, the transitory gang has more members.
A key moment was when Jerome Powell made hawkish comments on the 16th on discussing scaling back mortgage bond purchases and rate hikes in 2023, which is sooner than expected. Long term bond yields spiked ...
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May was an eventful month and while the S&P fell ~4% at one point, crypto stole the volatility show. $ETH, for instance, rose ~50% during the first 12 days and then proceeded to fall >50% over the next 12 days before recovering some. While $BTC lost almost 50% of it's value, it didn't experience the gains $ETH had early in the month and thus is down substantially more over the same time period. If you look at some of the altcoins, some of them experienced drops of 80%+ raising many questions over whether crypto is an asset class or not. I have noticed that anytime there is a significant pullback in crypto in a short ...
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Dear Clients & Friends,
The S&P 500 (and other equities markets) had a very strong month posting 5%+ gains after a subdued March which saw markets mostly move sideways. $DOGE has defied gravity as more people are exchanging their dollars for dog money. If you haven't heard that line, check out this fantastic rap video. As funny as it is, there are some real truth bombs being dropped. The level of inflation we're experiencing is much more than what we're able to earn buying bonds and especially in savings accounts. In fact, when you factor in inflation (and expected inflation) the entire US treasury bond market curve is negatively yielding.
In fact, prior to the pandemic, ...
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Clients & Friends
Another quarter is behind us and with it has brought us Spring and more vaccine supply. As of the time of my writing this update, I am still not yet vaccinated and have had difficulty getting an appointment. I am thankfully booked in the coming days but we have to drive 3 hours away to get it. There's light at the end of the tunnel as it looks like 90% of the US will be vaccinated by the end of the summer which will lead to a lot of people coming out of hibernation en masse. I do wonder how many folks will feel comfortable if venues, restaurants and other gatherings go back ...
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Dear Clients & Friends,
I think we're all thinking it; so long 2020 you won't be missed! However, if the first week of 2021 is an omen of what's the come this year, I'd prefer to unsubscribe. Q4 was generally speaking a very positive quarter, especially in light of the year most have had and the impacts from COVID on all of us. To the pulse of the collective, the vaccines feel like a light at the end of a dark tunnel. The US presidential election went smoother than most predicted although some were surprised at how split we appear to be as a country. Most folks I have spoken with believed Biden was going to ...
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TLDR:
Economic data is deteriorating fast with Q2 GDP likely down 35% and unemployment reaching 20%+.Opening up the economy is going to be tough if not combined with testing, tracking and capacity at hospitals.Corporate debt defaults are expected to surge to 10-15%.2020 S&P earnings are set to decline but analysts opinions are differing drastically. I favor a cautious approach for portfolios for the near term as markets have almost fully recovered their lows reached in March.
There are a lot of questions about what direction the market will be headed next. As it stands now, the S&P is down around 10% YTD, and the NASDAQ is flat driven by companies such as Amazon, Google, Netflix, Apple, Microsoft and several others. My conversations ...
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