XLY

How We’re Prepared for the Debt Ceiling Deadline

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Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.Mayor: What do you mean, “biblical”? Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff. Dr. Peter Venkman: Exactly.Dr Ray Stantz: Fire and brimstone coming down from the skies! Rivers and seas boiling!Dr. Egon Spengler: Forty years of darkness! Earthquakes, volcanoes… Winston Zeddemore: The dead rising from the grave! Dr. Peter Venkman: Human sacrifice, dogs and cats living together… mass hysteria!Mayor: All right, all right! I get the point!– Ghostbusters (1984) If you turned on the business channel today, you might have seen a certain network compare the potential repercussions of the ongoing debt-ceiling debate in Washington to a scene from … Read more

President Obama Tells Wall Street to Worry

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“I think this time is different. I think they (Wall Street) should be concerned.” — Barack Obama Wednesday afternoon, President Barack Obama sat down with CNBC’s John Harwood to discuss the government shutdown, the next debt ceiling debate, and other pertinent topics. Obama’s warnings are very real, and we’re taking notice. Government Shutdown The government shutdown remains top of mind since it occurred earlier this week, and it continues on with no clear end in sight. President Obama made a fiery speech Thursday morning blaming House Speaker John Boehner for not allowing a vote on the issue in the House of Representatives. Regardless, the primary issue remains that certain members of the Republican Party would like to repeal the Affordable … Read more

Market Yawns at Government Shutdown

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It finally happened Monday night. After weeks of discussing the possibility of a government shutdown, the US government came to a standstill over the Affordable Healthcare Act and the budget, forcing governmental agencies to shutter doors and not pay employees on Tuesday. The shutdown impacts the Department of Defense most, where 400,000 workers out of the total 800,000 on leave are employed. The Department of Energy, Department of Commerce, and Department of Transportation are all also meaningfully impacted. At this time, the duration of the shutdown is unknown. It may not last long.   We think most market participants are not expecting a prolonged shutdown. Political parties should be sufficiently embarrassed, pride will be swallowed, and a deal will eventually … Read more

The Fed Won’t Taper

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Wednesday afternoon, Federal Reserve Chairman Ben Bernanke stunned the consensus and announced the continuation of quantitative easing. Nearly every major investment bank expected the Fed to taper bond purchases in September, so Bernanke’s surprise announcement ignited a rally in both the stock market and Treasury bonds. Why not taper? According to the Fed, the economy has not performed up to expectations over the past year, and more importantly, the Fed reduced its growth outlook for 2014. However, in our view, the real reason is that the Fed is concerned about another bout of incompetence from Congress stalling economic progress. The following words came from Bernanke during his post-policy announcement press conference: “A government shutdown, and perhaps even more so a failure … Read more

Summers Bows Out

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Equity markets jumped higher Monday as Federal Reserve Chairman frontrunner Larry Summers ended his pursuit of the position. The news suggested Summers had been President Obama’s preferred successor to current Chairman Ben Bernanke, but several Democratic senators opposed the nomination, and Summers may be bowing out to avoid any chance of embarrassment. With Summers out of contention, Fed Vice-Chair Janet Yellen is the clear frontrunner. As we’ve mentioned before, Yellen is viewed as a consensus builder and receives credit for predicting the housing bubble. Powerful Democratic Massachusetts Senator Elizabeth Warren, who sits on the Senate Banking Committee, supports Yellen and indicated that she would be able to gather the necessary votes for her nomination. Regardless of the politics behind the decision, … Read more

Which Sectors Are Leading the Market Higher? And Why Is This Important?

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Missed the ’13 Most Important Steps to Understand the Stock Market’? Click here. Demand academic evidence regarding the efficacy of the Valuentum process? Click here. Tobias J. Moskowitz and Mark Grinblatt documented the “strong and prevalent momentum effect in industry components of stock returns which accounts for much of the individual stock momentum anomaly” in their scholarly article published in the Journal of Finance, ‘Do Industries Explain Momentum’ (download here; stable link here; updated by Fraulo and Nguyen here). Moskowitz and Grinblatt also concluded that “industry momentum investment strategies, which buy stocks from past winning industries and sell stocks from past losing industries, appear highly profitable.” Such findings are consistent with the ‘Case for the Valuentum Style of Investing,’ and … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more

US Congress Is Getting Ready to Pass a Massive ~$2.2 Trillion Fiscal Stimulus Bill

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Image Shown: US equities have started to recover some of their lost ground as the likelihood that the US Congress will pass a massive ~$2.2 trillion fiscal stimulus and emergency spending package, dubbed the CARES Act, has increased significantly over the past week as seen through the bounce in the SPDR S&P 500 ETF Trust (SPY). President Trump has clearly indicated that he intends to sign such a bill into law as soon as possible, with the US House of Representatives expected to take up the legislation this upcoming Friday morning on March 27. By Callum Turcan On March 25, the US Senate worked late into the night to secure a bipartisan compromise on a massive ~$2.2 trillion fiscal stimulus … Read more

Valuentum’s ETF Reports

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Image Source: GotCredit Welcome to Valuentum’s ETF coverage. If you’re new to the site, please be sure to access the stock reports and dividend reports as part of your membership. If you are looking for the archives to the Best Ideas Newsletter, they can be found here. The Dividend Growth Newsletter archives can be found here. The Exclusive and High Yield Dividend Newsletter have their own website with archives, the latter coming soon. To learn more about Valuentum’s ETF reports, please see  here . To request a report of an ETF we do not currently cover, please contact us. To access the relevant Valuentum reports for each major ETF category, please click on the respective link, “Click Here to Access Valuentum Report.” The links … Read more

Assessing Reactions to Trump’s Victory

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Image Source: Gage Skidmore Donald Trump will be the 45th President of the United States of America. Let’s dig into some of the reactions across the market. We’re keeping our cool. By Kris Rosemann and Brian Nelson, CFA The global markets often don’t know what to make of surprises, a characteristic that was on full display as news came rolling in that Donald Trump would soon become the 45th President of the United States, “trumping” Secretary Hillary Clinton in a decisive electoral college victory, despite the popular vote eventually going to the Democratic candidate. In the wee hours of the morning Wednesday, November 9, major markets across the globe were in shock, showing red almost across the board. At one … Read more