The last few weeks has seen a growing chasm developing between the US government, the Fed and to a certain extent Donald Trump. Each of these bodies, despite the fact the US government is led by Donald Trump, seems to have had its own agenda which has caused panic and concern in markets. However, today we saw relief with better-than-expected jobs data, a surprisingly upbeat review from the White House and a more patient approach to interest rate rises from the Fed.
No recession in sight
Leading White House economist Larry Kudlow, while acknowledging recent gloomy forecasts, suggested that fears of a recession were exaggerated. His exact words were:-
“There’s no recession in sight. I know this has been a gloomy period and I know people are concerned about the stock market.” Continue reading “Authorities finally come together with positive comments”
It will surprise many people to learn that despite the performance of US stock markets in the first 10 months of 2018, they will end the year back at December 2017 levels. Indicative figures at the moment suggest the S&P 500 will end the year down 3.8% the Dow Jones Industrial Average down 2.1% with the NASDAQ surprisingly ending the year unchanged. The last month has been horrendous for US stock markets with political infighting, an interest rate increase by the Fed and concerns about the economy prompting investors to cash in their chips.
Stock ratings now more affordable
There is an argument to suggest that the recent correction in the Dow Jones Industrial Average, S&P 500 and the NASDAQ 100 have brought stocks down to more affordable levels. Many will also point to the fact that the Fed has increased interest rates as an indication the economy is far stronger than many people believe. The fact that the NASDAQ 100 has been the better performing index so far over the last 12 months will surprise many. Continue reading “US markets back to December 2017 levels”
The Federal Reserve is at loggerheads with President Donald Trump after pushing through an interest rate rise with more expected in 2019. Donald Trump has been extremely dismissive of the move, a view which seems to be supported by stock markets and money markets. So, what does the future hold for US interest rates and has the Fed got it wrong?
Short-term economic growth
The Fed believes the US economy will expand by around 3% in 2018 although it will slow in 2019. However, on the back of a belief there is long-term strength in the US economy the Fed believes that the recent interest rate rise is “fully justified”. Indeed, have already been suggestions that we can expect another two rises in 2019. Suggesting a policy which of “data dependency” there are concerns the Federal Reserve is ignoring international issues which could have a serious impact on the US economy. Continue reading “Federal Reserve at loggerheads with Donald Trump”
As the US stock market turmoil begins to have a greater impact on Europe and the Far East, many investors are growing concerned about the short to medium term outlook. The tech sector, one which historically attracts a greater premium in terms of ratings in the good times, has seen some of the best names struggling. Amazon, Google, Apple and other leading lights in the US stock market have taken a hit with investors banking profits and content to sit on the sidelines.
Quality stocks will come through
There is every chance we could see more downside in the short to medium term amid a delicate balancing act of investor sentiment and market stability. In reality, if you have a significant profit and markets are tumbling there is nothing wrong with banking a profit and letting markets settle down. Even if you have to buy back your favourite quality stocks at a slightly high-level, knowing the markets have settled, this is not the end of the world. Continue reading “Quality stocks will rise again”
Despite very public comments to the contrary, investors are still extremely concerned about the fragile trade relationship between the USA and China. Despite positive comments at various press conferences, we have yet to see concrete news of an amicable arrangement between the two parties. As a consequence, markets have suffered a sell-off and there could be further bad news in the short to medium term.
Defence stocks in favour
It says everything when you realise that 10 out of 11 sectors in the S&P 500 index fell on Friday. The only sector to stay in positive territory was utilities where generous dividend payments offer a welcome degree of support. The Dow Jones, NASDAQ and S&P indexes are all showing a triple bottom graph pattern. In summary, the markets have tried to rally on three separate occasions only to return to their recent lows. Further weakness from this level could prove challenging with few obvious support levels in the short term. Continue reading “Markets fall on heightened trade concerns”
As the chasm between passive investment and active investment continues to grow, many are now looking towards tracker funds. On one side, we have tracker funds literally tracking the make-up of a particular index such as the Dow Jones industrial average or the NASDAQ, while on the other side we have investors using artificial intelligence and complicated mathematical formulas to beat the markets. Is it time to go back to basics?
What are tracker funds?
Tracker funds are basically investment funds which reflect the make-up/weightings of a particular index. If for example Google had a weighting of 2% of a particular index then 2% of the tracker fund investments would be in Google. As the make-up of individual indexes changes on a regular basis, any adjustments to Google’s weighting would mean either buying more shares or selling shares. It is fair to say that tracker funds are extremely popular because they are a passive type of investment which “follows the market”. Continue reading “Are tracker funds the way forward for investors?”
The truth is that nobody knows with any real certainty how stock markets will perform tomorrow, next year or over the next decade. This degree of risk is what creates potential profit and different investor strategies and views. Be honest, when was the last time you looked at the long-term investment picture with concern? When was the last time you looked at the short term investment picture with concern?
Short-term pain long-term gain
It is highly unlikely you have looked at the long-term investment picture and not had a modicum of hope for the future. We have all seen the graphs, stock markets outperforming other assets in the longer term even if short-term the picture can be mixed. On the flipside of the coin, whether you are investing in the UK, Europe or the USA, there is more than enough scepticism and concern out there to put you off investing in the short term. So, surely we should all be focusing on the longer term and riding the short term fluctuations? Continue reading “Should we feel more comfortable investing in the longer-term?”
The intricacies of economies around the world can often be difficult to understand and how they are impacted by various subtle issues. Two such elements are wage inflation and cost of living inflation which tend to vary significantly and can eat away at the relative value of your money. The best way to demonstrate the dangers of low wage inflation and high cost of living inflation is to give you some figures.
Let us look at household budgets and the ever increasing cost of living. To simplify matters we will assume household income of $1500 a month and household expenditure of $1000 a month. This leaves a surplus to spend in other areas of everyday life of $500 a month. Let us assume wage inflation is running at 1% per annum while cost of living inflation is running at 4% per annum. Continue reading “The dangers of low long-term wage inflation”
While there has been no comment from Apple, one of the company’s suppliers, Lumentum, has released a reduced outlook for the quarter. Even though Apple was not mentioned in the report, the company confirmed that “one of its biggest customers” had delivered a reduced shipping request. There was already speculation that Apple was reducing production of its latest iPhone products and this announcement would seem to be the next bit of the jigsaw.
Life as an Apple supplier
Lumentum is a supplier of facial recognition products for use in the latest iPhones with Apple accounting for around 30% of revenues. While no figures were announced, there is speculation that Apple may have cut its shipment request by up to 30%. This would indicate there is reduced demand for the latest iPhone products which has led to some broker forecast adjustments. As we stand the Lumentum share price is down more than 17% at just under $39 with Apple shares down 4.5% at just over $195. Continue reading “Apple supplier indicates weak iPhone demand”
The term cash flow is King is one used quite often in the investment world. To all intents and purposes a business with negative cash flow will eventually run out of funding no matter what the level of “paper profits”. Just recently it was announced that Tesla “should be” cash flow positive in each quarter from here on in. This is a massive about turn for the company after a very troubled period in its history.
Is all good and well buying assets today which could make you three or four times your investment in five years. The problem here is that your funds will be tied up for the next five years and you may have insufficient cash flow to cover your expenses/loan repayments. In essence, the potential future returns for your company may seem very attractive what happens when you run out of cash? Continue reading “Cash flow is King”