European Junk Bonds Now Yield More Than U.S. Treasuries

Junk Bonds’ Recent Trading On Friday, the small caps outperformed the mega caps as the Russell 2000 - RUT was up 0.40%, while the Dow was down 0.43%. In the midst of this middling action, the JNK high yield bond index was down 0.05% and the HYG high yield bond index was down 0.03%. The…

Wal-Mart & Cisco Drive Stocks Higher

Economy Growing At Potential The chart below is a unique perspective on the economy which isn’t discussed much. It shows the real GDP in relation to the potential GDP. It looks at productivity growth to give you an idea of where the economy is relative to where it can be. Even though GDP growth per…

Investors ‘Fearful’ From A 1.15% Pullback

Actually Returns Are Good When Fund Managers Are Taking Risk In a previous article, I showed the chart below without the 3 year forward S&P 500 returns. Some bears were claiming the fact that fund managers are taking more risk than ever meant impending doom. As I mentioned, there have been times when the fund…

Fund Managers Overweight Emerging Markets & Underweight U.S. Stocks

Fund Manager’s Survey We’ve looked at some of the results from the BAML fund manager’s survey in a previous article. Let’s look at some more results to help us forecast where asset prices are going. The chart below shows the z scores of a few assets. When the z score is high, it is overbought…

Wall Street Is Very Optimistic

Extreme Positivity The stock market was down marginally on Tuesday. GE is getting blamed for a lot of the selloff, but, since the Dow is price weighted and GE stock is in the teens, it has very little effect on the index. With such a big fall, some are wondering if GE will be kicked out…

Junk Bond Weakness Limited To Healthcare & Telecommunications

Relative Valuations We’ve seen a coordinated stock market rally in about every index globally. The chart below compares the recent Shiller PEs of the American, Japanese, European, and Emerging stock markets. The dotted lines are the average since the start of this bull market in 2009. As you can see, America, Japan, and Europe are…

Q3 Earnings Were Just Like The First Half

More On Q3 Earnings Not only are the percentage of companies reporting beats and the beat rate better than average, but also the percentage of companies issuing negative guidance is lower than average. 58 companies have issued negative guidance and 28 have issued positive guidance. Just like how companies usually beat estimates, most of the…

QE Tightening To End In 2-4 Years

Fed’s QET To End Between 2020 & 2022 The chart below brings light to the timetable I’ve been discussing with regards to the Fed’s balance sheet unwind. I stated that it would be unlikely for the ECB to start an unwind before the next recession because its QE program will end in late 2018 or…

This Week Is An Important One For Tax Reform

Tax Plan To Be Worked Out This Week Last Thursday the Senate released its plan to cut taxes which sent the market falling because the tax cuts start in 2019. The Senate’s amendment process starts on Monday. That’s when the details will be hashed out. We will probably see the market move on headlines regarding the debate.…

The Fed's Policy Situation

Summary Of Fed Policy The chart below is a great summary of the monetary policy situation. It shows the S&P 500, the current Fed balance sheet, the future balance sheet, the Fed funds rate, the Fed funds futures, the long term expectations, and the dot plot.  Now that stocks have done well for a couple…

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