Quarter Ends With A Whimper For Long Bonds & Nasdaq

With the end of the first half of the year in the books, we’re seeing an interesting divergence between the recent trading and the total results for the past 6 months. The Nasdaq had its best first half since 2009 as it was up 14.1%. At the same time, it also had a rough June…

Q1 GDP Wasn’t So Bad: 1.4% Annualized Growth

On Thursday, instead of rallying, the S&P 500 fell 0.86% and the Nasdaq fell 1.44%. The S&P financials sector was up 0.65% and the technology sector was down 1.83%. The selloff was blamed on investors rebalancing their portfolios since it is the penultimate day of the quarter. In a normal market, this wouldn’t even be…

Stocks Are About As Expensive As In 2000

Banks To Rally As The Fed Accepts Capital Return Plans The big news on Wednesday afternoon was that the Federal Reserve didn’t have a problem with any of the 34 banks’ capital return plans. You can look at this as a positive or a negative. It’s clearly a positive for the near term because it…

Draghi Is Now Dovish? He Changes Quickly!

It's turning out to be tough to analyze what ECB President Mario Draghi means in his statements. It was widely reported by media outlets and interpreted by the markets that the ECB would taper bond buying after Draghi made upbeat statements about the economy. However, Draghi clarified his statements on Wednesday, saying the ECB isn’t…

ECB Shadow Rate Near -6%

The chart below adds more depth to the traditional understanding of interest rates. This chart looks more confusing than it is because the grey line represents the Bundesbank policy before the ECB was created. The dotted line is the Fed’s shadow rate including QE and the green line is the shadow rate of the ECB…

Draghi Now Sings A Hawkish Tune

Draghi Expected to Taper 2018 Bond Buying While it definitely was dovish of Mario Draghi to say the ECB hadn’t discussed unwinding the balance sheet, it didn’t imply the ECB wouldn’t taper the 60 billion euro bond buying program in December. We got further clarification of the ECB’s tapering potential in December in the latest…

Q2 Earnings Shaping Up Well

Q2 Earnings Will Likely Be Good With central banks putting out guidance to shrink their balance sheets or taper buying and with U.S. fiscal stimulus delayed by at least a few months, earnings are more important than ever to keep the market up. As long as earnings growth is solid, the market should be steady.…

Valuations Are In The Top Quintile Implying 0.2% Annualized Returns

The chart below gives you an alternate way to look at the valuations in the stock market opposed to looking at the historical value of the Shiller PE. With the Shiller PE currently at 29.87, the market is in the 5th quintile meaning it’s in the category of market periods in the top 20% of…

Wage Growth Acceleration Not Likely Unless Skills Gap Narrows

The increase in demand for workers isn’t leading to accelerated wage growth because there is a skills gap between what the labor force has and what employers want. The chart below reinforces the chart I showed in a previous article which had survey data. As you can see, hiring has fallen while the job openings…

The AHCA: Will It Stall The Bull Market?

Healthcare Plan Update The market is pricing in the economy maintaining the current pace which could mean stocks will rally when something gets done and selloff if nothing gets done. I’m expecting it to be a binary event meaning I don’t see a scenario where stocks selloff after a deal gets done even if the…