Inflation, interest rates, employment, Fed taper, pandemic backdrop, Washington wrangling, supply chain disruptions, slowing growth, and the seasonally weak period for stocks are all aggregating and resulting in the current market swoon. The month of September saw a 4.8% market drawdown, breaking a seven-month winning streak. The initial portion of October was met with heavy losses as well. Many individual stocks have reached correction territory, technically a 10% drop, while the Nasdaq is also closing in on that 10% correction level. Many high-quality names are selling at deep discounts of 10%-30% off their 52-week highs. The outlook for equities remains positive after the weak September as the economy continues to move past the pandemic. During these correction/near correction periods in the market, putting cash to work in high-quality long equity is a great way to capitalize on the market weakness for long-term investors. Absent of any systemic risk, there’s a lot of appealing entry points for many large-cap names. Don’t’ be too bearish or remiss and ignore this potential buying opportunity.
For any portfolio structure, having cash on hand is essential. This cash position provides investors with flexibility and agility when faced with market corrections. Cash enables investors to be opportunistic and capitalize on stocks that have sold off and become de-risked. Initiating new positions or dollar-cost averaging in these weak periods are great long-term drivers of portfolio appreciation. Many household names such as Starbucks (SBUX), UnitedHealth (UNH), Apple (AAPL), Amazon (AMZN), Micron (MU), Adobe (ADBE), Qualcomm (QCOM), 3M (MMM), Facebook (FB), Johnson and Johnson (JNJ), Mastercard (MA), Nike (NKE), PayPal (PYPL) and FedEx (FDX) are off 10%-30% from their 52-week highs. Even the broad market indices such as Dow Jones (DIA), S&P 500 (SPY), Nasdaq (QQQ), and the Russell 2000 (IWM) are significantly off their 52-week highs. All of these are examples of potentially buying opportunities via deploying some of the cash on hand. Continue reading "Market Swoon - Deploying Capital"→
Hiring is soft, pay is barely up, consumers are cautious and economic growth has yet to pick up. And yet today, the Federal Reserve is expected to take its first step towards reducing the extraordinary stimulus it has supplied to help the U.S. economy rebound from its deepest crisis since the Great Depression. That begs the question....
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The media love to get a hold of buzz words and then give them a spin and a life all their own. Recent examples were the mainstream media's presentation of 'Operation Twist' – which was simply an official yield curve manipulation designed to sanitize and dampen inflationary signals – as an inflationary operation, and the 'Fiscal Cliff' drama that sent herds of conventional investors to the sidelines* when they should have been contrarian (and bullish) back in Q4, 2012.
Now we have the media on the job tending the 'Taper' herd. Among the many hyped up implications of 'Taper' according to the media are that it is bearish for gold. But I would put forth not only a rejection of that assertion but just maybe a call for the opposite; a bullish stance on gold in the face of a Fed being coerced by natural movements in the Treasury bond market to talk 'taper'.
As part of its QE operation, the Fed buys long-term Treasury bonds with newly printed money. It does so to try to keep interest rates down so that the economic recovery they have promoted does not fold in on itself, wheeze, roll over and die. They also buy distressed MBS, but this is a story about Treasury bonds. Continue reading "Gold: "Taper This""→
Interestingly enough, 24 hours before Ben Bernanke made his announcement and spruced the markets up dramatically, MarketClub's Trade Triangle technology picked up buy signals on the DOW at 15,340.09 and on the S&P 500 at 1,654.19. These signals came in a day before today's huge move to the upside.
If you're not yet a MarketClub member, I'd like to invite you to take advantage of our special free trial so you can see what MarketClub can do for you. Remember, MarketClub covers stocks, futures, precious metals, ETFs, mutual funds and foreign exchange.
Many Federal Reserve members agreed last month that the job market's improvement would have to be sustained before the Fed would reduce its bond purchases, according to minutes of their June meeting. Several felt confident that a pullback in bond purchases could occur soon.
The minutes released Wednesday echo remarks Chairman Ben Bernanke made at a news conference after the meeting. Bernanke said the Fed would likely slow its bond purchases later this year and end them around mid-2014 if the economy continued to strengthen. The bond purchases have helped keep long-term interest rates low to spur spending.
Since the purchases began in September, the economy has added an average 204,000 jobs a month, up from 174,000 jobs in the previous nine months. Still, unemployment remains a high 7.6 percent.
The minutes showed that Fed members struggled with how best to convey the Fed's thinking about its timetable for bond purchases. Some wanted to explain it in the post-meeting statement. Others felt the statement might be misinterpreted. In the end, most participants thought Bernanke should lay out the Fed's thinking in his news conference _ and stress that any pullback in bond purchases would depend on the economic outlook. Continue reading "More jobs needed to taper bonds"→