SPY

The Market – On Its Head

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By Brian Nelson, CFA The sector/theme returns have almost been turned on their head as some of the worst performers in the first few weeks of 2016, namely materials (XLB), energy MLPs (AMLP, AMZ), and energy (XLE), have transformed into leaders through the latest data update, April 21. As we outlined in “Alerts: Adding More High-Quality Exposure, (April 2016)” the dividend “track record” growth craze is on, in our view, and yield-rich exposures from utilities (XLU) to the dividend-growth focus itself (SDY) have rallied more than 9% in the year thus far. The metals gold (GLD) and silver (SLV) have also proved to be good trades out of the gates thus far in 2016, up ~18% and 23%, respectively, though … Read more

The Corporate Buyback Conundrum

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The above is a trailing 15-month chart of the broad market index, the S&P 500 (SPY). As you can see, the markets have gone nowhere fast. The fallout in the energy complex coupled with emerging market uncertainty and political unrest in the US is making for quite the choppy market environment. Interestingly, however, since the middle of last year, the Best Ideas Newsletter portfolio has quietly been distancing itself from this broad market benchmark, as strong performance from constituents coupled with a larger cash position in a generally weaker market have paid off. Where indexers focus on controlling costs instead of focusing on generating strong returns with relatively low turnover (and commission and tax implications), the strategy powering the Best … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

More Market Weakness: We Haven’t Hit Bottom Yet

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Global equity markets are falling yet again February 11, in part due to cautious comments from US Federal Reserve chair Janet Yellen about the health of the global economy and the legality/efficaciousness of negative interest rates, “Dividend Growth ‘Bubble’ To Continue But For How Long? (Feb 2016).” Market onlookers continue to fear that the Fed has nothing left to give, “out of ammunition,” with the tank of accommodative policy empty, and it might just be. To us, however, the news flow is more of the same. The world continues to be awash in crude oil (USO), and many are now starting to think that what was once mostly an oversupply problem is now being compounded by a demand problem as … Read more

The Bounce in Energy and Potash’s “Surprising” Dividend Cut

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Nothing like Valuentum’s optimistic article last week, January 21, in Barron’s to get the energy markets popping, “Is Kinder Morgan on Road to Recovery,” would you say? Of course, we say that in jest. The equity markets January 28 were defined by optimism that two of the globe’s major energy resource producers, the cartel OPEC and Russia (RSX), would finally come together to alleviate the pain that has been exerted on the price of the black liquid the past 12-24 months with a “meeting.” What we found to be peculiar, however, is that instead of OPEC letting what turned into a “rumor” run, helping to further drive crude oil prices higher, OPEC delegates quickly denied the talk of a potential … Read more

Not Doom and Gloom – But Just Cautious…

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You wouldn’t know it on the basis of the strong US market action January 26, but it wasn’t all quiet in overnight trading. Local markets in China (FXI) took another hit, with Shanghai and Shenzhen exchanges experiencing declines to the magnitude of 6%-7%+ on the session. Though some optimistically dismiss the local China markets as irrelevant, the implications on weakened Chinese banks, other Asian nations via trade, and interconnected financial institutions from Standard Charted to HSBC (HSBC) and even Citigroup (C) are material, in our view, and we’re paying close attention. Some may even say that China stocks represent less than 15% of household financial assets in the country — certainly not enough to cause a global calamity… Or is … Read more

What’s Working in Today’s Market?

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By Brian Nelson, CFA As emerging markets around the world suffer from commodity-price-led economic weakness, capital continues to find a safe-haven in US government bonds (TLT, TBT), but for those equity-oriented funds that mandate a fully-invested status, not something we’re particularly advocates of, assets within US equities have favored “lower-beta” utilities (XLU) and consumer staples (XLP) sectors while cyclically-dependent and credit-levered sectors such as the financials (XLF) and materials (XLB) have suffered thus far in 2016. The industrials (XLI) and energy (XLE) sectors have also encountered higher-than-normal selling pressure in the first few weeks of the New Year, as investors evaluate the global economic landscape and what a prolonged period of low energy prices may mean for the lowest quality … Read more

Breaking: Markets in Free Fall

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By Brian Nelson, CFA I was up late last night watching the 10-year Treasury fall below 2%, crude oil drop below $28 (and now below $27) per barrel, and the Dow futures collapse more than 500 points. Asset correlations are going to 1 — so much for modern portfolio theory, right? The benefits of diversification are sometimes absent at the very time you need them the most. If market observers didn’t learn this during the Great Depression, certainly they must have learned it during the Financial Crisis of 2008-2009. That’s why we like cash so much at times. We have a 35%+ cash weighting in both newsletter portfolios. The Dow Jones Industrial Average (DIA) is now down ~400 points (-2.5%), … Read more

ICYMI: 5 Concerns About Impending Rate Hikes

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The first Fed rate hike in nearly a decade came and went December 16, putting an environment of ZIRP (zero interest rate policy) to an end, a policy that grew out of the Financial Crisis and the depths of the Great Recession late last decade. The Fed had paused plans to hike the federal funds rate for much of 2015 as a result, in our view, of getting a more informed read on the potential implications of emerging market developments–namely dislocations in the local Chinese equity markets (FXI) and recessionary conditions in Brazil (EWZ)–and the stock market crash (SPY) in the US in August that sent equities of some of the most well-known stocks including Apple (AAPL) and General Electric … Read more