It can be difficult to wrap our heads around the reasons why a diverse market index is bullish or bearish. Often times, the index is nothing more than a mathematical derivation from a disparate set of inputs. Think about an industry group such as “specialty retail,” for example. It is more of a bin for the unclassifiable than anything else. That is the feeling I get in the real estate investment trust (REIT) sector. After all, there is not much similarity among hospitals, storage facilities and apartment buildings beyond the common denominator that real estate is… Read More

It can be difficult to wrap our heads around the reasons why a diverse market index is bullish or bearish. Often times, the index is nothing more than a mathematical derivation from a disparate set of inputs. Think about an industry group such as “specialty retail,” for example. It is more of a bin for the unclassifiable than anything else. That is the feeling I get in the real estate investment trust (REIT) sector. After all, there is not much similarity among hospitals, storage facilities and apartment buildings beyond the common denominator that real estate is involved. From a technical point of view, however, a bottom-up analysis suggests the sector as a whole is in trouble. Basically, if enough component REIT stocks look ready to fall then the index must follow suit. At first glance, the iShares US Real Estate (NYSE: IYR) looks as if it is clinging to a short-term trendline breakout. The problem is that no matter how the chart is presented, the long-term picture shows a trendline breakdown. It does not make a difference beyond nuance if we use a linearly or logarithmically… Read More

The S&P 500 lost 7.5% in the first eight trading days of the year, a dismal way to kick off the new year. At this rate, 2016 is sure to be the market’s worst year since 2008’s 36.6% loss. Or is it? #-ad_banner-#History tells us such predictions are folly. True, you’ll see plenty of articles implying the opposite. They’ll say this could be the worst January ever, and that the market is already doomed to a negative calendar year. There’s some validity to that prediction. Being several percentage points in the hole will make it difficult for the market to… Read More

The S&P 500 lost 7.5% in the first eight trading days of the year, a dismal way to kick off the new year. At this rate, 2016 is sure to be the market’s worst year since 2008’s 36.6% loss. Or is it? #-ad_banner-#History tells us such predictions are folly. True, you’ll see plenty of articles implying the opposite. They’ll say this could be the worst January ever, and that the market is already doomed to a negative calendar year. There’s some validity to that prediction. Being several percentage points in the hole will make it difficult for the market to rally enough to generate a strong positive return for the full year. After this 7.5% drop, the S&P 500 needs gain of 8.1% to get back to break-even for the year. But regardless of the market’s total return for the 2016 calendar year — an arbitrary time period for most investors — can we make any predictions about the future direction of the market after this poor beginning? Let’s look at the historical record. Since 1950, the S&P 500 has had a negative January 26 times. In the succeeding 12 months (February through the following January), the S&P 500 had… Read More

As I write this, the bull market has lasted for 2,473 days, making it the third-longest in U.S. history. The record is 4,494 days from 1987 to 2000, followed by the period from 1949 to 1956. While 2016 may well emerge as the best year the market has ever seen — and presidential election years are typically above average — the evidence I’m seeing suggests standout performance is not likely. The most optimistic forecast I’ve come across for 2016 has been “high single digits.” #-ad_banner-#That’s hardly a barn-burner. But these predictions… Read More

As I write this, the bull market has lasted for 2,473 days, making it the third-longest in U.S. history. The record is 4,494 days from 1987 to 2000, followed by the period from 1949 to 1956. While 2016 may well emerge as the best year the market has ever seen — and presidential election years are typically above average — the evidence I’m seeing suggests standout performance is not likely. The most optimistic forecast I’ve come across for 2016 has been “high single digits.” #-ad_banner-#That’s hardly a barn-burner. But these predictions are defensible based on the available evidence. Growth in the developed world is hardly robust. Estimates call for 3% growth in the United States and 2% in the European Union, which puts the majority of the world economy in low gear. Commodities are losing steam. Oil is trading for about $30 a barrel, more than $110 off its all-time high. This downtrend is also evident in the agriculture space, and even precious metals. Gold may well settle below $1,000 an ounce for the first time in recent memory, and silver isn’t faring any better. Read More

The S&P 500 is close to 10% off its 52-week high, while all of its sectors are in the red for the year. Meanwhile, the small-cap Russell 2000 is teetering on the edge of a bear market. Stocks are at a critical point. They could rebound as they have over and over in this seven-year bull market, or we could be facing a major correction. #-ad_banner-#One important piece of data coming out this month could be the straw that breaks the market’s back and sends stocks tumbling. Market Head Fake Or Heading Down? Investors have enjoyed a great… Read More

The S&P 500 is close to 10% off its 52-week high, while all of its sectors are in the red for the year. Meanwhile, the small-cap Russell 2000 is teetering on the edge of a bear market. Stocks are at a critical point. They could rebound as they have over and over in this seven-year bull market, or we could be facing a major correction. #-ad_banner-#One important piece of data coming out this month could be the straw that breaks the market’s back and sends stocks tumbling. Market Head Fake Or Heading Down? Investors have enjoyed a great ride over the past seven years, though it hasn’t all been smooth sailing. The S&P 500 has undergone a 10% correction in three of the past five years. While the market recovered each time, rewarding investors with the guts to stay in, there is good reason to believe we won’t be so lucky this time. On Monday, Alcoa (NYSE: AA) kicked off the unofficial start to the fourth-quarter earnings season. FactSet expects companies in the S&P 500 will show a 5.3% year-over-year decline in profits. If earnings do come in lower, it will be the third consecutive quarter of falling… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts are predicting still higher rates through 2016. Against this fear in the market, there’s good reason to believe that rates aren’t going anywhere. If long-term rates stay low, it could be one of the biggest head-fakes of the year and lead to a huge rebound in rate-sensitive investments. Rates Go Up, Treasuries Fall? The Federal Reserve began its historic path to normalize rates after six years of easy money on December 16. Since that time, the rate on the 10-year Treasury has actually decreased by 0.15% rather than increased. Pundits will attribute the drop in rates to market volatility… Read More

Shortly after Chinese stocks tanked last summer (dragging down global markets as well), I warned that the situation in China was much worse than you might think. Spurred by economic worries and the devaluation of the yuan, Chinese stocks were still up more than 40% year-to-date after the selloff. To put it simply, we saw more pain on the horizon. Here’s what my colleague Jared Levy said about the situation back then:         For a number of years, all we heard from government officials was how fast… Read More

Shortly after Chinese stocks tanked last summer (dragging down global markets as well), I warned that the situation in China was much worse than you might think. Spurred by economic worries and the devaluation of the yuan, Chinese stocks were still up more than 40% year-to-date after the selloff. To put it simply, we saw more pain on the horizon. Here’s what my colleague Jared Levy said about the situation back then:         For a number of years, all we heard from government officials was how fast the country was expanding… how quickly the middle class was expanding… how well the economy was performing… But we now know things weren’t as wonderful as they were made out to be. There’s a lot we don’t actually know about what’s going on inside the country’s walls, which has led to confusion over whether the market is cheap or about to tank. Here’s what we do know: 1) Government meddling has propped up China’s stock market. 2) Even as the Chinese stock market has stabilized, economic data… Read More

The stock market is off to one of its worst Januarys ever. That’s bad news for those of us with significant exposure to stocks. But in a sense, it’s good news for those of us looking to buy great companies at attractive valuations. This winter blizzard has buried many excellent stocks without regard for their individual fundamentals — creating bargains for investors with the fortitude to buy in the face of the storm. I’ve looked into the best stocks to own in a market downturn.  Some experts are pointing to the current selloff as a harbinger of a bear market. Read More

The stock market is off to one of its worst Januarys ever. That’s bad news for those of us with significant exposure to stocks. But in a sense, it’s good news for those of us looking to buy great companies at attractive valuations. This winter blizzard has buried many excellent stocks without regard for their individual fundamentals — creating bargains for investors with the fortitude to buy in the face of the storm. I’ve looked into the best stocks to own in a market downturn.  Some experts are pointing to the current selloff as a harbinger of a bear market. They say the U.S. economy is in its seventh year of recovery and overdue for a recession. China is imploding and the Federal Reserve blundered by raising short-term interest rates at the exact wrong time, they argue. So any seeming bargains in the stock market now are nothing but fool’s gold. #-ad_banner-#Or so they say. From my perspective, certain stocks are buy-and-hold candidates whenever they’re relatively cheap: large, financially strong companies with established brands and commanding shares in growing markets. Under normal circumstances, you can’t buy them at reasonable valuations because of their sterling qualities. But pessimism creates opportunity for… Read More