Presidential elections and market corrections have a long history of companionship. Given the rampant rhetoric between the right and left, such is not surprising. Such is particularly the case over the last two Presidential elections, where polarizing candidates trumped policies. From a portfolio management perspective, we must understand what happens during election years concerning the […]
In 2019, the Fed cut interest rates and restarted QE despite a healthy economy. Today, inflation is higher than the Fed’s target, economic growth is above historical trends, and financial markets display complacency and exuberance. Yet, the Fed is talking about cutting rates and reducing QT. The only rationale for them in such an environment […]
Valuation metrics have little to do with what the market will do over the next few days or months. However, they are essential to future outcomes and shouldn’t be dismissed during the surge in bullish sentiment. Just recently, Bank of America noted that the market is expensive based on 20 of the 25 valuation metrics […]
After over two years, retail investors, also known as the “dumb money,” are almost back to breakeven. A recent chart by Vanda Research shows that the average retail “dumb money” investor portfolio still sports a drawdown despite the markets making new all-time highs. Such is unsurprising, given that retail investors often fall victim to the […]
Apple’s valuations are near their most expensive levels of the last ten years. Now consider that today’s valuation premiums are amidst a much higher risk-free bond yield than during most of the previous ten years. Apple has a market cap of $2.8 trillion. Assuming its price-to-earnings ratio and margins remain stable, Apple must sell nearly […]
“When you sit down with your portfolio management team, and the first comment made is ‘this is nuts,’ it’s probably time to think about your overall portfolio risk. On Friday, that was how the investment committee both started and ended – ‘this is nuts.’” – January 11th, 2020. I revisited that original post a couple of weeks ago as the […]
Recently, retail investors have started chasing small-cap stocks in hopes of both a rate-cutting cycle by the Federal Reserve and avoiding a recession. Such would seem logical given that, historically, small capitalization companies tend to perform best during the early stages of an economic recovery. The recent exuberance for small-cap equities is also unsurprising, given […]
Sometimes, a narrative dominates the financial/social media and promotes a mania among investors. Today, the Magnificent Seven is a great example. Seven stocks, including Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta, are media darlings that many investors favor. Fifty-plus years ago, the Nifty Fifty were the stocks to own. They held a similar place […]
Don’t fear all-time highs in the market. Such is a natural response for investors who are concerned about market risk. However, rather than fearing market exuberance, we must understand what drives it. There is an essential concept investors should understand about markets when they are hitting “new records.” “Record levels” of anything are “records for a […]