Outlook for March 2019

The stock market sure has roared back to life since the dip in December 2018. Quarterly & annual earnings season is in full swing, and while some companies have beat the low bar previously set, a lot of companies are guiding down for the coming quarters.

On the central bank front, the Fed seems to be caving to the market pressure and signaling that the rate hike is done for this cycle. There are some market indications that we may have one more raise, but thats it. It will be interesting to see where things go from here. Meanwhile in Canada (where I am based), the BoC is following suit and also signaling the end of rate hike cycle. Again, I remain vigilant on this front in the coming weeks/months.

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Outlook for February 2019

What a start to the new year! A rollercoaster ride in market sentiment with everyone reeling from the portfolio destruction in Q4 2018 to finally the relief that the Fed is putting QT on hold.

Over the first few weeks of Jan, most companies confirmed what was already expected. A slowdown in expected revenues and earnings for the coming year. Of course, that doesn’t stop investors from cheering on and piling back in when the low bar is stepped over in the “adjusted” numbers reported for past quarter (I’m referring to you, Apple stock permabulls). Various companies from almost all sectors of the economy have lowered revenue and earnings guidance for 2019 — many of them blaming the trade war, but the reality is probably more to do with the business cycle than anything.

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Outlook for 2019

Happy New Year! 2018 is in the books and the recent turn in markets made it a year to forget for most investors. Q4 saw the much-expected & needed correction in US equities. While the investors seem to be breathing a sigh of relief and jumping back into the market, I am not convinced that this is the end of the correction and expect the downtrend to continue.

Here are the reasons why I continue to be bearish:

The US economy just went through 9 consecutive quarters of growth and the rate of growth is now tapering off. More importantly, most companies had record operating margins when they were hitting their respective all-time high stock prices. So, when you simply look at a short-hand financial number like P/E ratio, keep in mind that the margins are baked into the numbers — which is why you cannot base your full investment decision simply based on one number. Add to that revenue growth has plateaued for companies in this cycle and wage growth has consistently increasing month after month. Even though the Fed doesn’t see a recession coming (they never do), that recipe smells like a upcoming recession to anyone looking at the data objectively.

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Outlook for December 2018

As the year 2018 winds down, the markets keep turning more volatile (and interesting). After a decline in October, things seemed to stabilize a bit in November, but still remained sluggish. The big surprise was the change in tone from Fed chair Powell a few days ago, which hinted that they may be at the end of the cycle for raising interest rates. While it was not explicitly stated or clear in any certain way, the US market rallied ferociously as investors started panic buying. This change in direction & the amount of movement from the largest stock market in the world, based on interpretation of 2-3 words from one person (albeit the Fed chair), shows how broken the system is.

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Outlook for November 2018

October turned out to be one scary month for a lot of investors. Most portfolios took a haircut with the broad market taking a plunge. Almost half of the S&P 500 stocks are in bear market territory now, having fallen more than 20%. I am now waiting for the other shoe to drop. When you have a handful of stocks (the big 5 tech stocks) making more than 15% of world’s largest financial market, nothing good can come from it. I’ve been highlighting this for the last year or so and finally the tide is turning with the major tech stocks plunging in October.

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