Outlook for April 2017

Q1 wrapped up with more disconnect between the fundamentals and the performance of equity markets. There are plenty of very questionable areas of the economy which are being widely discounted as investors are herded towards the edge of the cliff. The mantra has been to remind everyone that There Is No Alternative (TINA), and US stock market is the only place to invest if you want to make any money. That playbook has been going on for a while, as the focus shifts from monetary policy to fiscal policy. The Trump administration has failed to deliver on any of the promises so far, and it will be interesting to note when the investors’ patience will run out.  
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Outlook for March 2017

The insanity continues! The DJIA continued posting all-time highs for 12 consecutive days in February. One would think that investors would care about valuation and safeguard their hard earned dollars, but since There Is No Alternative (TINA), US stock market investors continue getting herded to the edge of the cliff. What I do find amusing in the financial media is that there is acknowledgement that things are getting worse (earnings forecast and guidance is terrible, stock buybacks are slowing etc), but just haven’t reached fever pitch hubris as in past bubbles. Waiting for the market to get that state just seems like a recipe for disaster as every Joe Investor likes to call non-participant morons for not participating and reminding “Time in the market is more important than timing the market”. If I had a penny everytime I heard that mindless phrase thrown around, I’d be a lot closer to retirement 🙂 
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Outlook for February 2017

Wow…we are already one month done in 2017. Time sure flies by. Things are getting pretty interesting in the market these days. The stock market is continuing to set new all-time highs with the DJIA hitting 20K finally (not that the number really means anything). But there are some traders which are starting to question whether this “Trump rally” really is warranted and if the market is getting ahead of itself. The earnings expectations are still down and not rising anytime soon based on the forward guidance from most companies, so a broad market rise like this is raising some eyebrows. 
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Outlook for 2017

Happy New Year! 2016 is in the books and what a year it has been. The year saw some major geo-political events that most analysts were completely blindsided by, such as the Brexit vote and the US presidential election. Overall, the market sentiment has shifted to a more bullish side after a flat market the year before (in 2015).

How’d the markets do in 2016? Here’s some chart porn courtesy of Novel Investor.

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Outlook for December 2016

Well, here we are. Plenty to look forward to as we ring in the end of a rollercoaster year. Things still seem to be chugging along nicely as investors are happy about the state of the world economy (even though they shouldnt be). The Fed is almost guaranteed at this point to raise the interest rates by another 25 basis points. In anticipation, we have seen major holders such as sovereigns (such as China, Saudis etc) dumping treasury bills in the market driving up the yield and changing the yield curve. With the increase in yield, we noted a milestone achieved during the month of November — the 10 yr US treasury yield crossed above the S&P 500 yield. Over the past decade, the narrative has been to pay a higher premium and go into riskier assets (i.e., stocks) to generate income…now that the same kind of income can be generated in a less risky asset (i.e., bonds), investors have to question whether they want to own stocks to generate same level of income. It will be interesting to note how the market proceeds, and we are already seeing a slow slide in share prices in some of the stock sectors such as consumer staples, healthcare, REITs, telecommunications etc. As of this writing, $3T (yes, trillion) have already been wiped out from the bond markets due to rising yields — the other markets (stock mkts, currency mkts) will feel the effects of this storm.

Other central bankers seem to be heading the other way as they are more in tune with the problems in their respective economies. The Bank of Canada has in the past given clear indication that the monetary policy could see further easing – potentially a rate cut from the current 0.5% in their October Policy Report.

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