Monthly Commentary

January 2018
This is an odd stock market.  Plain and simple.  In the last 14 months, the market has moved in a way that virtually every market analyst is trying to figure out as it keeps on moving to the upside.  We had a bit of a scare the last few days of January when the S&P 500 tumbles 5% over the course of 2 days, yet the index still managed to print a 5% gain for January.  This kept the streak of monthly positive returns going back to October 2016 intact.  Read Details

December 2017
One definite take away from the stock market performance for 2017 is that we will likely look back on this year as the year of happy returns.  The returns were happy because they were unexpected.  Leading up to the national elections in 2016, very few predicted the Trump victory and even fewer anticipated the gains the stock market delivered for 2017.  Most people thought once the Trump “honeymoon” was over that reality would settle in and investors would wake up and realize who held the keys to the White House.  In reality, it appears the market didn’t really care about Trump. Read Details

November 2017
The good economic news continues to roll in amidst the expectation of a market pullback.  Like most of you, I am hearing more and more that the market is ready to drop.  Opinions vary on the level of drop from catastrophic (a small minority) to a health and much needed correction(the largest following.  My standard response is that yes, we will have a correction.  We just don’t know when and how severe it will be.  At the end of this article, I will share with you the three themes we are working with during these times of record returns and investor anxieties. Read Details

October 2017
The folks in “the market is too high and a correction is imminent” camp continue to increase in number as the market moves up steadily with new highs being set on a regular basis.  With the economic recovery now into its ninth year without a major correction, you can’t really blame them for being a bit nervous.  For 2017, the S&P 500 came out of the gate strong and hasn’t shown any sign of reversing course.  For those worried about the market being overpriced, they can certainly point to extended PE ratios for the S&P 500 and that is a compelling argument, but the markets historically don’t always act as we expect them to.  Read Details

September 2017
Why does this market keep going up?  Recently, the S&P500 hit another record high after what appears to be a modest breakout to the upside.  This came on the heels of a 2 month long sideways trading pattern.  Even this consolidation pattern was done in record territory.  Now we have had 5 straight days of new highs and there doesn’t appear to be anything on the horizon that will stop these advances. Read Details

August 2017
All eyes have been focused on the weather tragedy in the Texas gulf area as Hurricane Harvey slammed into the coast dumping historical amounts of rain on the region.  The nightly news feeds have been filled with neighborhoods underwater, people scrambling for high ground and predictable, political bickering as the finger pointing about government response surfaces.  These unfortunate events have diverted the attention of the investing public away from what has been a rather ho-hum summer for investments.  To say there were dominant market themes August would certainly be an overstatement.  There just wasn’t much going on. Read Details

July 2017
Now that we are fully involved into the second half of 2017, it is always interesting and fun to see if we can spot the trends that could be responsible for moving the markets.  The trend of monetary stimulus by the Federal Reserve is clearly over.  After a very long run of accommodation by the Feds, the lending window of easy and cheap money is clearly over.  Since the first interest rate hike late last year the Fed has been clear with their intentions of shifting back to “normal” monetary policy.  They have kept an eye on the economy via the employment numbers and inflation and with both of those well in check, they will be raising interest rate targets and managing the money supply very carefully and closely.  Read Details

June 2017
Could it be that the tech sector has finally run out of gas?  For a sector, as measured by the QQQ ETF, to be up 16.6% YTD, nearly 30% over the last 12 months and averaging just over 14% for the last 3 years, it stands to reason that it eventually would have to cool off.  In the last month, that is exactly what has happened as it delivered its worst monthly return since June 2015.  That loss had hardly anything to do with the sector itself as we recall that was the month of the Brexit vote, when a lot of common sense left the minds of investors for a few days. Read Details

May 2017
Go big or go home seemed to be the theme for the stock market in the month of May.  The S&P500 gained just over 1% during the month while the average stock in the index gained 0.27%.  This means the larger stocks in the cap-weighted S&P500 did better than the smaller stock in that index.  A recent analysis by Bespoke Investment Group clearly showed the disparity between large stocks and small stocks.  Notable was the performance of the 50 smallest stocks in the S&P500.  They were down in May with an average decline of 4.5%.  The value trade also didn’t work well in May.  Value stocks are characterized as those with lower prince/earnings ratios which suggest they are trading at a low “value”.Read Details

April 2017
We are off to a good start for the current earnings season!  Stocks rallied during the last week of April on a combination of lower geopolitical worries (French election), a long-anticipated attention to tax cuts and most importantly, a strong earnings season that has not only shown underlying strength in the US economy but also earnings guidance going forward that has generally been better than anticipated.  The forward guidance has been strong so far, particularly in industrials with names such as Caterpillar, 3M, Honeywell, Boeing and General Electric to name a few.  Read Details

March 2017
Is the Trump Rally over?  After breaking out right after the national elections in November, the stock market had been moving up strongly and had not seen a daily decline of 1% in 109 days.  On Tuesday, March 21, the S%P 500 had its first 1%+ down-day of the year, and its first truly significant downward move in five months, falling -1.3% for the day.  Since then, the mid and small cap stocks have been meandering down, trying to reach up to previous highs only to fail and then settle down to new lows.  Read Details

February 2017
What is the latest buzz in the stock market?  It is the speculation that “animal spirits” are returning to the stock market and the phrase is quickly gaining notoriety and exposure in the investment media.  Is this a new concept brought on by new market dynamics or a new phenomenon in investor psychology?  Quite the contrary.  The term, “animal spirits,” was used by economist John Maynard Keynes in “The General Theory of Employment, Interest and Money,” the 1936 masterpiece that reshaped the field of economics. In it, Keynes describes animal spirits as “a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.”Read Details

January 2017
Uncertainty and elevated emotions are two conditions which stock markets dislike.  Uncertainty causes stagnate markets and emotionally charged times, both good and bad cause huge swings in the market.  We will likely see one of these conditions begin to take over as we emerge from the first month of 2017.  Markets tend to move in spurts caused by emotions and then once the emotions settle down, the expectation of “what’s next?” comes into play and the markets go into consolidation patterns. Read Details

December 2016
Now that 2016 is over we can all breathe a sigh of relief…or can we?  As we well remember 2016 started out really bad.  After the worst start possible, which turned out to be the worst start on record, the equity markets staged a furious rally which quickly erased the losses and moved the markets firmly into positive territory.  Shortly after that and still in the first half of the year, UK votes threw everyone a curve ball and voted to leave the European Union despite warnings that such a move would be an economic disaster.  The market responded accordingly and then just 48 hours later decided things weren’t so bad after all.  Read Details

November 2016
The elections are over and the markets have cast their short-term votes.  What many observers are labeling the “Trump Rally” has been going on for three weeks and appears to be running out of steam.  You could make the argument that this rally is nothing more than a relief rally as the typical US investor was able to breath a huge sigh of relief on Wednesday November 9th.  The relief isn’t necessarily due to the fact that Donald Trump became the 45th President as much as the feeling that the months of nasty campaigning were finally over and a winner emerged. The uncertainty leading up to the elections was not well received by the stock markets and when the electoral votes were tallied up and the winner proclaimed, the markets decided that was a good thing and have been moving up steadily since Election Day. Read Details

October 2016
For the month of November, let’s focus on the important issues in our economy and they do not include the national elections that will be taking place soon. Instead, let’s talk about the earnings season that is underway.  According to Thompson Reuters, third quarter earnings are expected to increase 3.1% over the same quarter for 2015.  If you remove the energy sector that pushes the increase up to 6.8%.  The pattern of six straight quarterly earnings declines appears to have finally come to an end.  In addition, this season includes more in the way of positive surprises and fewer negative revisions and the positive earnings growth rate is expected to continue into the next quarter.   Read Details

September 2016
October 3, 2016.  Where do we go from here? Despite warnings to sell in May, the worst month of August, and the dangers of September, stocks have posted another positive quarter with a gain of over 3.2% for the quarter.  Stocks with heavy institutional ownership outperformed those with little institutional following.  The weak dollar helped companies with heavy international revenues to outperform their domestic counterparts.  Stocks that did well in the first half of the year were down in the 3rd quarter, while stocks that lagged in the first half were up in the 3rd quarter.  Small caps outperformed large caps and value stocks did better than growth.  Read Details

August 2016
The summer is over and we can now expect more news about the Federal Reserve interest rate decisions, improving corporate earnings, the quagmire in Europe, China’s economy getting back up to speed and one more thing…..oh yes…the elections in November.  The good news is that while all of those economic and global conditions will continue to develop, stall and move forward, the elections will actually be over in a few months.  Regardless of your political leanings, I think all of us can agree once again that we will be happy to see this election season come to an end.  Read Details

July 2016
We are in the second half of 2016, which is turning out to be quite the year in terms of market activity.  The year started off with a crazy decline in February, followed by a recovery through the months of March, April and May and then, about the time we were feeling somewhat relaxed, the markets were blindsided by the Brexit vote in late June.  In a few short days, however that pullback quickly reversed and then through the month of July, the S&P 500 goes on to hit a new all-time high.  Historically, it may have taken a year or even two to see that kind of activity, but we did all of that in just a little over 6 months!  2016 is turning out to be anything but routine, and we haven’t even seen yet what the national elections will do to investors come November. Read Details

June 2016
In the words of long time Yankee Yogi Berra, “It ain’t over till it’s over.”  He made this comment as the manager of the New York Mets during the 1973 season when the Mets were in last place during the pennant race. Against all odds, Berra helped manage the team back to the top, and the Mets won that year’s division title. That remark is especially appropriate regarding the recent decision by the citizens of the United Kingdom (U.K.) to leave the European Union (EU).  We have a lot of uncertainty on the horizon regarding this decision and the implications are already being felt.  Read Details