Why Utility Stocks Are Worth a Second Look
Lawrence C. Strauss
https://www.barrons.com/articles/why-utility-stocks-are-worth-a-second-look-1531344310
Can Companies Keep Up Strong Beat Rates in Q2 Earnings Season?
Jul 11, 2018
One thing we’ll be watching closely this earnings season is whether companies can keep up the extraordinarily high beat rates seen over the past two quarters.
Over the past two earnings seasons, even though analysts had to up their estimates quite a bit due to the Trump corporate tax cuts, companies were easily able to beat expectations. Since 1999, 62.1% of earnings reports have reported EPS that were greater than consensus expectations. As shown below, though, the last two quarters saw much higher than average beat rates.
Not only have bottom line EPS beat rates been strong, but top-line revenue beat rates have been strong as well. Revenue beat rates over the last two earnings seasons were higher than any quarter since Q4 2004.
The chart below takes the average of each quarter’s earnings and revenue beat rate. When looking at the strength of both the top and bottom line beat rate each earnings season, the only other two-quarter period that showed stronger beat rates than the last two quarters was back in Q4 2003 and Q1 2004.
Needless to say, investors have gotten used to stronger than expected earnings reports over the last six months. If companies aren’t able to keep up the pace this season, we think the market will struggle.
By Stephen Grocer
July 3, 2018
More than $2.5 trillion in mergers were announced during the first half of the year, as fears of Silicon Valley’s growing ambitions helped drive a record run of deal-making.
Four of the 10 biggest deals were struck in part to fend off competition from the largest technology companies as the value of acquisitions announced during the first six months of the year increased 61 percent from the same period in 2017, according to data compiled by Thomson Reuters. That has put mergers in 2018 on pace to surpass $5 trillion, which would top 2015 as the largest yearly total on record.
Even rising global trade tensions did not manage to stifle acquisitions: Deals involving companies based in different countries nearly doubled compared with the first half of last year, and accounted for more than 40 percent of all announced transactions.
Indeed, investors can’t be blamed for wondering whether it’s worth investing in bonds at all, now that they’re finding negative returns across the market: Investment-grade corporate bonds are down 4.9% this year, including interest payments, which puts them on track for their worst calendar-year performance since 1974, according to Bank of America Merrill Lynch
Barrons
https://www.barrons.com/articles/bolster-your-bond-portfolio-1530915409
https://seekingalpha.com/article/4130422-u-s-corporate-debt-2018
From Dave Lutz at Jones.
Financial Select Sector SPDR Fund ETF sees 8 days of outflows
The decline follows a sharp drop in the second half of last year as pressure from both Beijing and the Trump administration curbed a recent surge in cross-border investment. Completed Chinese deals in the U.S. hit a record $46 billion in 2016, and dropped to $29 billion in 2017, according to Rhodium.
Source: Rhodium Group. *Includes completed M&A transactions with over 10% resulting stake and greenfield projects that have broken ground. **January to May 2018.
Barrons-Rob Arnott
Studying S&P 500 index data from 1989 to 2017, Arnott found that the stocks added to the index underperformed those that were kicked out by an average of 23 percentage points over the next 12 months Stocks added are almost always trading at high multiples. Discretionary deletions, when companies are removed for not meeting criteria, are almost always trading at bargain-bin prices. It occurred to me that no one had taken a close look at the “buy high, sell low” nature of indexes, exploring that as trading cost.
https://www.barrons.com/articles/rob-arnott-on-beating-stock-indexes-1527897602
Traders’ interest in VIX options keeps on waning. The collapse of a popular exchange-traded note amid a surge in market turmoil earlier this year helped send the number of Cboe Volatility Index contracts tumbling, and this month options volume has slumped to a three-year low. The VIX is heading for a May drop, a pattern that led to gains in June in the past four years, Bloomberg notes.
@sentimentrader notes “Using big 1-day jumps in the VIX as a signal that volatility is about to pick up going forward has been, to put it mildly, unsuccessful.”
From Dave Lutz at Jones.
https://oxlive.dorseywright.com/research/bigwire
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Source: @trevornoren; Read full article
Want some good news? S&P 500 is positive YTD and it is May. You have to go back to ’90 last time that happened and the full year didn’t sport a total return that was positive. In fact, since ’70, the full year has been green 35 out of 36 years that saw the SPX up YTD in May (@RyanDetrick)
The Advance-Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances. It rises when Net Advances is positive and falls when Net Advances is negative. Chartists can use Net Advances to plot the AD Line for the index and compare it to the performance of the actual index. The AD Line should confirm an advance or a decline with similar movements. Bullish or bearish divergences in the AD Line signal a change in participation that could foreshadow a reversal.
http://stockcharts.com/school/doku.php?id=chart_school:market_indicators:ad_line
On page 6 of this month’s report, we provide the chart below which shows the spread between the weightings for Consumer Discretionary and Consumer Staples. At +6.12 percentage points, the only time Consumer Discretionary’s weight versus Consumer Staples has been higher was in April 2000.
Bespoke’s Sector Snapshot — 5/3/18
May 3, 2018
If you’re not yet a subscriber and would like to see the report, please start a two-week free trial to Bespoke Premium now.
Below is one of the many charts included in this week’s Sector Snapshot, which highlights the year-to-date percentage change of the eleven S&P 500 sectors. At this point, just three sectors are still in positive territory, while eight are in the red. Consumer Staples and Telecom are down the most with declines of more than 13%.
https://www.bespokepremium.com/think-big-blog/
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U.S. Dollar Bull ETF Pops Out of Range…Big Macro Funds Bet on Dollar Staying Weak.
Historically, I am not sure if the S&P witnessed $20 earnings jump in one quarter…Let me know if someone has long-term data.
Equity Markets: Analysts are boosting US corporate earnings forecasts again.
Source: Deutsche Bank Research
https://blogs.wsj.com/dailyshot/
About 10 years ago, Strategas devised a “lobbying” index of companies that get the most bang for their lobbying buck, including interactions with regulators. The index, it says, has outperformed the Standard & Poor’s 500 for nearly a decade by an average of almost five percentage points annually. The lobbying index returned an average 14.4% annually from its 2009 launch through April 13, versus 9.5% for the S&P 500. About $1 billion of assets are pegged to the performance of the Strategas index.
https://www.barrons.com/articles/lobbying-index-beats-the-market-1524863200
https://www.barrons.com/articles/lobbying-index-beats-the-market-1524863200
Earnings
Source: Credit Suisse
https://pensionpartners.com/value-investing-and-tolerating-pain/
Guru Focus
https://www.gurufocus.com/news/666219/the-good-shepherd-investor Continue reading
An exclusive WSJ analysis shows how venture-capital investment from Asia is skyrocketing, threatening to shift power over innovation
By Phred Dvorak and Yasufumi Saito
Silicon Valley, long the undisputed king of venture capital, is now sharing its throne with Asia.
A decade ago, nearly three-quarters of the world’s financing of innovative, tech-heavy startups and young companies took place in the U.S., with American investors plowing money into mostly U.S.-based venture firms.
Now, a surge of new money—mostly from China—has helped drive funding totals into the stratosphere and has transformed the venture landscape, according to an exclusive Wall Street Journal analysis of venture funding data.
Asian investors directed nearly as much money into startups last year as American investors did—40% of the record $154 billion in global venture financing versus 44%, the Journal’s analysis of data from private markets data tracker Dow Jones VentureSource found. Asia’s share is up from less than 5% just 10 years ago.
LPL Research
https://twitter.com/JohnLynchLPL
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“Tobacco (1992), financial (2010), biotech (2015) industries illustrate how waves of regulation can lead to investment underperformance” noted BofA – “As Facebook has grown, people everywhere have gotten a powerful new tool to stay connected to the people they love, make their voices heard, and build communities and businesses,” Mr. Zuckerberg says, in prepared testimony released by a House committee on Monday. “But it’s clear now that we didn’t do enough to prevent these tools from being used for harm as well.”
From Dave Lutz at Jones
Speculators are now positioned net long Vix futures to a near record extent (orange line). In the past decade, that has reliably coincided with at least a near term top in volatility (blue line; from Movement Capital).
From the Daily Shot
https://www.ftportfolios.com/retail/etf/home.aspx
Behind it all are facts of investing known well by anyone who sold after Brexit, the U.S. election, or five market corrections since 2009 that look just like this. One, it’s hard to see the end of things. Two, a lot of money is made at the top. Three, you miss any payoff in equities right now at grave risk to your career.
“It can be 6 or 8 percent costly, or even 10 percent costly” if you bail too soon, said John Augustine, chief investment officer for Huntington Private Bank in Columbus, Ohio, in an interview at Bloomberg’s New York headquarters. “That can mean a lot to folks in a 2 percent nominal world.”
It can actually mean more. A study by Bank of America Corp. on market peaks since 1937 shows that being uninvested in the last year of an advance meant foregoing one-fifth of the rally’s overall return. While every episode is different, that math translates into additional 470 points in the S&P 500, if the bull market goes on for another year.
By Lu Wang
and Sarah Ponczek
Over the past two decades, U.S. companies bought back vastly more stock than they issued. On net, according to a new paper by Craig Doidge and colleagues, companies purchased $3.6 trillion more stock than they offered. Stock buybacks are a perfectly appropriate way to return value to shareholders, but the disparity is still surprising.
https://www.uschamberfoundation.org/blog/post/are-capital-markets-healthy-some-thoughts-corporate-concentration-and-dwindling-public
Found at Abnormal Returns Blog www.abnormalreturns.com
A Big Test for BondsThis week’s planned $294 billion of U.S. debt sales — the largest slate of supply ever — point to “a volatile near-term path for the Treasury market,” according to Bank of Montreal. The auctions begin with Monday’s $30 billion two-year note sale, which will be the biggest since 2014.
From Ned Davis Research… www.ndr.com
http://www.etf.com/sections/daily-etf-flows/etf-fund-flows-2018-03-23?nopaging=1
Volatility has been extremely, well, volatile this year.
The Cboe Volatility Index VIX, -1.84% has seen multiple days with extremely sharp moves so far in 2018, including on Thursday, when it jumped 30.7% to 23.35.
According to data from the WSJ Market Data Group, the so-called “fear index” has experienced six sessions this year that saw a jumped of least 20%, along with one day that saw a 20% drop. Notably, volatility more than doubled on Feb. 5, amid the start of a steep selloff in the U.S. stock market spurred by inflation concerns.
The tally of seven sessions stand as the most one-day 20% moves in a calendar year since 2014, when there were also seven throughout the entire year. Looking solely at the six 20% increases, the total is the most for a calendar year since 2015, when there were also six.
There’s been a historic amount of earthshaking stock-market volatility this year
Source: Credit Suisse
www.thedailyshot.com
Source: @trevornoren; Read full article
From The Daily Shot
https://www.ishares.com/us/products/239708/ishares-russell-1000-value-etf
As for Treasuries themselves, they have settled into a new trading range after an almost 1 percentage point increase in the 10-year yield from September to late February. That stability has kept it from retesting the 3 percent level for now, a move above which is seen as a risk to many markets.
— With assistance by Andrew Janes, and Joanna Ossinger
https://www.bloomberg.com/
Wages: Same As It Ever Was?
03/14/2018
Kevin Flanagan, Senior Fixed Income Strategist—Wisdom Tree
The jobless rate remained at 4.1% for the fifth consecutive month, which is the low watermark for this expansion. The alternate measure of job creation, civilian employment, has been surging thus far in 2018, producing a two-month average of just under +600,000.
Let’s turn our attention to wages. Average hourly earnings (AHE) rose at an annual rate of +2.6% in February, following a downward revision of 0.1 percentage points for the prior month. In other words, the +2.9% surprise to the upside in January has now been dialed back a bit to +2.8%. Remember, one of the lynchpins behind the rise in the UST 10-Year yield this year was an increase in inflation expectations, led by said “January surprise.” The current pace leaves wages essentially “stuck in the mud,” at least for the time being, illustrated by the fact that the average year-over-year increase over the last two years has been that same +2.6% (see the graph).
So, when will that jobs trend translate to higher wages? According to the new Fed chair, a key force behind the frustrating lack of significant progress has been the result of “the weak pace of productivity growth in recent years.” Powell also stated that given the economic backdrop and strong job creation, he expects to see wages rising. This line of reasoning is definitely justified, but thus far, the results have been lacking. Nevertheless, there does seem to be an expectation that later this year, the annual rate of increase for AHE will eventually hit, and possibly eclipse, the +3.0% threshold. The bottom line is that, barring any unforeseen circumstances, the Fed will not be dissuaded from raising interest rates this year, a development expected for next week’s FOMC meeting.
Wisdomtree Blog
https://www.wisdomtree.com/blog/2018-03-14/wages-same-as-it-ever-was
Posted by lplresearch
We shared the following chart in our latest Weekly Market Commentary, “The Bull Is 9, Can It Make 10?”, which shows that this is the second largest and second longest bull market ever—with only the ‘90s bull standing in the way of the record books.
https://lplresearch.com/2018/03/07/where-does-this-bull-market-rank/
January sales of semiconductors topped records marking a year and a half of consecutive monthly gains, according to the Semiconductor Industry Association in a statement late Monday. January chip sales rose 22.7% to a record $37.6 billion, SIA said. Year-over-year sales in the Americas saw the largest rise with a gain of 40.6%, followed by Europe with a 19.9% rise, “Asia Pacific/All Other” seeing a 18.6% rise, China gaining 18.3%, and Japan rising 15.1%. “After notching its highest-ever annual sales in 2017, the global semiconductor industry is off to a strong and promising start to 2018, posting its highest-ever January sales and 18th consecutive month of year-to-year sales increases,” said John Neuffer, SIA president and chief executive, in a statement. Over the past 18 months, the PHLX Semiconductor Index SOX, +0.89%has grown 71%, compared with a 24% gain by the S&P 500 index SPX, +1.10% and a 39% gain on the Nasdaq Composite Index COMP, +1.00%
Warren Buffett offers his ‘strongest argument’ against a practice investors are doing in record numbers
Berkshire Hathaway CEO Warren Buffett has argued against borrowing money to invest in stocks.
Warren Buffett doesn’t recommend going into debt to buy stocks.
But that’s exactly what investors are doing in record numbers.
Margin-debt balances — loans individual investors take from their brokers to beef up their portfolios and maximize returns — rose to a record $665.72 billion in January, according to datafrom the Financial Industry Regulatory Authority.
http://www.businessinsider.com/warren-buffett-on-margin-debt-for-stocks-investing-2018-2
From Nasdaq Dorsey Wright.
A stream of rosy profit reports has helped soothe the nerves of investors rattled by this month’s stock market plunge. U.S. companies are seeing the biggest growth spurt in quarterly earnings in six years, and the pace is set to accelerate.
The question now is whether that momentum will fuel further stock gains.
The $171 billion in YTD stock buyback announcements is the most ever for this early in the year. In fact, it is more than double the prior 10 year average of $77 billion in YTD buyback announcements.
https://www.zerohedge.com/news/2018-02-17/years-stock-buybacks-are-already-bigger-all-2009s
Bespoke Investment Group
Below is one of the many charts included in this week’s Sector Snapshot, which highlights how much each S&P 500 sector fell from its 52-week highs to its recent low as well as how much each sector has now rallied off of its low. As you can see, Tech has bounced the most off of its low, followed by Financials and then Materials. Energy has struggled the most. It had been down 14.8% from its 52-week high, but it’s only up 1.4% off of its low.
When Stocks and Bonds Go Down Together
Charlie Bilello
High on the list of the greatest fears among investors is a scenario in which stocks and bonds go down together.
Last week those fears were realized when the S&P 500 (SPY) suffered its worst week since January 2016 while long-term Treasury bonds (TLT) also declined.
Source Data: Pension Partners, YCharts
This was an unusual occurrence to say the least. Of the 20 worst weekly S&P 500 declines since July 2002 (inception of the long duration ETF), last week was only the 2nd time long duration Treasuries also finished lower.
Treasuries tend act as a safe haven during times of equity market stress, showing positive returns on average during the worst stock market declines. This tendency is amplified on the long end of the curve, as investors are often positioning for weaker economic conditions that coincide with falling interest rates. A precipitous drop in interest rates, of course, is the best friend of duration.
However, there are certain times when the very source of equity market anxiety is a rise in interest rates and potential inflation. During such times you can see stocks and long bonds fall together. We last saw this briefly in 2013 during the so-called “taper tantrum”…
https://pensionpartners.com/when-stocks-and-bonds-go-down-together/
Found at www.abnormalreturns.com
Bespoke
https://www.bespokepremium.com/get/The_Bespoke_Report_020918.pdf
The stock market is finally getting a long-awaited bout of volatility. The Cboe Volatility Index — or VIX — spiked 84% on the day, its biggest single-day increase of all time, according to data going back to 1990. The VIX reflects expectations for volatility in the S&P 500, and trades inversely to the benchmark roughly 80% of the time.
The Ultimate “Pain Trade” as the street was max short Volin the latest FMS form BofA. Margin Clerks ramped hard at 2:30-3pm today. Twits saying “8M SPY options trading on the day after more than 7M on Friday” – @OptionsHawk replied “Highest marks in over 2 years…when everyone finally starts buying protection, we tend to be close to a bottom (June ’16, Nov. ’16, Aug ’17)”
Chart from Dave Lutz at Jones
From Charles Schwab.
Millennials are leading an investment revolution. Now the largest demographic in the economy, young investors under 35 are catalyzing a transformation in the asset management and stock trading world.
Investment accounts opened by this demographic rose 72% annually, TD Ameritrade CEO Tim Hockey told Business Insider.In a wide-ranging interview following the $1.2 trillion brokerage’s earnings report that beat Wall Street expectations, Hockey said the firm has seen an explosion of interest in cryptocurrencies, cannabis stocks, and ETFs, particularly from millennials.
Hockey: Funny you should ask, last quarter I sat down at a restaurant with my 26-year-old son and we traded 100 shares of stock at the table using Facebook Messenger’s bot. We launched that last quarter.
Rapier: You recently turned on 24-hour trading, what was the logic behind that new offering? Is it receiving the response you expected?
Hockey: I’m glad you asked! It’s 24/5, so that allows clients to participate in after-hours market moving news that they didn’t have before because markets were open 9:30 to 4. Previously they had opportunities to do this only in the futures markets, but now we’ve offered 12 broad-based ETFs that are quite liquid, for example SPY, QQQ, the gold sector, oil, gas, China… these are all broad-based ETFs that can all now be traded 24 hours a day, five days a week.
It’s only been two days, so it’s just starting to get traction now in the media. It’s still quite narrow, but even last night we’re seeing a three cent spread, which is a nice tight range for people to trade in, even after hours.
Rapier: You also launched bitcoin futures for some clients back in December, how much interest are you seeing from clients in the cryptocurrency space? Will more products show up soon?
Hockey: We just turned on the Cboe product in a very limited release — just to futures clients that were more sophisticated and understood the risk they were taking, and we’ll expand that over time.
This market is certainly not mature. I would say that what we saw in terms of levels of absolute interest prior to the holiday season seemed to peak. Everybody was talking about crypto of all types all the time because it seemed like it was a one-way increase.
Ever since the pricing has been normalized and there’s been a bit of a correction, then you’ve seen a little bit less froth, if you will, in the market. We’ve actually seen that in the first few weeks of January, crypto trades — not just the Cboe product, but companies that are related to blockchain — have contributed a couple of points less toward our trading activity. It seems to have peaked just before the holidays.
The technology certainly has not matured, and I believe the transformative nature of what blockchain can do is only just starting to be understood by the majority of the world.
https://www.bespokepremium.com/think-big-blog/
https://businessradio.wharton.upenn.edu/programs/behind-the-markets
The February 2016 kickoff rally continued to build momentum. One way to quantify momentum was shown in the Nov. 19, 2017, Profit Radar Report:
“The S&P 500 was higher 8 of the first 9 months of 2017. This has only happened 8 other times (1936, 1950, 1954, 1958, 1964, 1995, 1996, 2006). 2, 3, 6, and 12 months later, the S&P was higher every time but one (0.7% loss 2 month later in 1964).
Such strong momentum readings (and they are seen across all time frames) are extremely rare. As mentioned in December 2016 and March 2017, stocks rarely top out at peak momentum. We have to go back to 1995/1996 to find similarly strong and persistent upside momentum.”
Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report. He has appeared on CNBC and FOX News, and has been published in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.
From Dave Lutz at Jones.
Shares of Eastman Kodak Co. KODK were rising 64% in premarket trading on Wednesday following a jump of 119% in the previous session after the photo company said it would shift its focus toward blockchain technology and enter the world of initial coin offerings.
Kodak said Tuesday it would launch its own form of cryptocurrency, KODAKCoin, that would “empower photographers and agencies to take greater control in image rights management” inside its existing KODAKOne platform.
Shares in the group surged more than doubled in Tuesday trading following the release, rising to a three-month high of $6.80 each.
But at least one large position amassed last week looks prescient. Someone bought 50,000 put options on bond futures at an average price of 1’04 ticks, according to a trader familiar with the transaction, wagering that the price of long-dated Treasuries would fall as 30-year yields increased. That price jumped to 2’21 ticks Tuesday amid a sustained climb in long-end yields to 2.82 percent, leaving the bet showing a profit of about $60 million.
Global venture capital investment has hit an all-time record, with more than $142 billion already disbursed in 2017, according to data provider PitchBook.
https://www.axios.com/vc-investments-2518448702.html
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December 15, 2017
Investors poured nearly $30 billion into U.S.-listed ETFs in the past week, bringing total net creations so far in 2017 to $466 billion.
The massive, record asset-gathering pace now sits just inches away from what could be a new milestone for the ETF market: $500 billion in net inflows in one calendar year. With two weeks to go in December, hitting $500 billion seems very likely.
For perspective, consider that 2016 also saw record-breaking asset gathering in the U.S. ETF space, with net creations reaching $287.5 billion last year. We are on pace to almost double that haul in 2017. What’s more, combined with performance, the asset inflows grew the ETF market to $3.4 trillion in total assets—that’s almost $1 trillion bigger than where the market sat a short year ago.
http://www.etf.com/sections/weekly-etf-flows/weekly-etf-flows-2017-12-14-2017-12-08
Dec 11, 2017
The S&P 500 is up nearly 20% in 2017 after gaining 9.5% in 2016. The chart below highlights the annual price change of the S&P 500 since the current bull market began in 2009.
Contrarian investors might be prone to think that the market is likely to fall after a big up year, while momentum investors like to trade on strength one year turning into strength the next year. But if we look at the correlation between returns one year to the next, we find that there is none.
Below is a scatter chart showing the S&P 500’s move one year versus its move the next year. If the contrarian bet were true, you’d see a trend-line in the scatter chart that goes from the upper left to the lower right. If the momentum bet were true, you’d see a trend-line that goes from the lower left to the upper right. In reality, the trend line is flat as a pancake, meaning market returns one year have no correlation with market returns the next.
https://twitter.com/JackDamn/status/939878437925347329
Found at www.abnormalreturns.com
It’s the end of the world as we know it
It’s the end of the world as we know it
It’s the end of the world as we know it and I feel fine
REM “IT’S THE END OF THE WORLD”
Key Takeaways
The daily shot blog https://blogs.wsj.com/dailyshot/2017/12/04/the-daily-shot-sector-rotation-accelerates-as-investors-play-the-tax-game/
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Here’s Ari’s chart and comment:
Advance Is Broader than Many Realize
The message coming from our research is that the S&P 500 is in the midst of a healthy middle innings advance and investors should participate by buying cyclical sectors, like Technology, Financials, and Industrials. One key point we continue to stress is the broad-based nature of the rally. For instance, the Value Line Geometric index, an equal-weighted aggregate of approximately 1,700 companies, has broken above secular resistance dating back to the year 2000, and is accordingly positioned for additional gains, in our view. Rallies that include the participation of many stocks are typically the rallies that continue (or conversely, internal breadth typically narrows into a market top), and with the S&P 400 and S&P 600 indexes also making new highs with the S&P 500, we expect strength to continue.
Josh here – last week witnessed a new all-time high for the Nasdaq 100, Dow Jones Industrial Average, Russell 2000, NYSE Advance-Decline Index and a new 52-week high for the All Country World Index-ex US. You’re welcome to interpret that as a negative indicator if you feel the need to, but you’d be on the wrong side of one hundred years of market history.
These things end with a narrowing, not a broadening. Which could certainly happen – it’s just not happening right now.
Source:
Technical Analysis: Inflection Points
Oppenheimer & Co – November 25th 2017
From Josh Brown Blog.
http://thereformedbroker.com/2017/11/26/secular-bull-takes-flight/
Nov 22, 2017
If we had a bitcoin for every time we heard someone say that the S&P 500 has been too reliant on the performance of tech stocks for its gains this year, we would be very rich. But if you think the S&P 500 is dangerously overweighted towards the Technology sector, beware of emerging markets. While the Technology sector’s 23% weighting in the S&P 500 makes it by far the largest sector in the index, the ETF tracking Emerging Markets (EEM) is even more heavily weighted towards technology. The chart below compares sector weightings in the ETFs that track the S&P 500 (SPY) and Emerging Markets (EEM). As you can see, Technology has a 26.5% weighting in EEM. So if you think the S&P 500 is too top heavy with tech, EEM is even more exposed.
In addition to the large weighting in tech, EEM also has a lot of exposure to Financials. That sector’s weighting is nearly 60% larger in EEM (23.1%) than it is in SPY (14.6%). With such large weightings in both sectors, just under half of EEM’s weighting is in Technology and Financials. So where is EEM underweighted relative to SPY? That would be in the Health Care sector. As shown below, Health Care accounts for 14.5% of SPY, but the sector’s weighting in EEM is a puny 1.95%.
https://www.bespokepremium.com/think-big-blog/
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http://www.businessinsider.com/north-korea-defector-video-2017-11
Barron’s
The dearth of companies making their trading debuts is an unusual feature of what has been a record run for the stock market. In the heady 1990s, there were an average of 436 IPOs per year in the U.S., based on Ritter’s data. Last year, there were just 74. A number of reasons have been cited, including increased regulations and scrutiny for public companies, as well as the deluge of private capital.
The flood of private money is overwhelming ..Stat of week
FOR NOW, IT’S HARD to blame entrepreneurs for holding back on IPOs. The flood of private capital has changed the calculus. In one example, Japanese conglomerate SoftBank Group has raised over $93 billion for a technology investment fund. Those dollars alone exceed the $84 billion in total proceeds raised in U.S. IPOs since the start of 2015.
Read full story
https://www.barrons.com/articles/unicorns-what-are-they-really-worth-1510974129
Investors around the globe are increasingly showing signs of “irrational exuberance”, putting more chips on the table even as they worry equities markets have become “overvalued”, according a closely watched survey by Bank of America Merrill Lynch – Forty-eight per cent of investors in BofA Merrill’s November survey said that equities are “overvalued”, a record proportion that has sent the three-month moving average above the level that came at the turn of the millennium ahead of the bursting of the dot com bubble.
At the same time, average cash balance among the 178 fund managers with $610bn in combined assets under management that BofA Merrill surveyed slipped to 4.4 per cent from 4.7 per cent. It marked the lowest level in more than four years and was below the 10-year average of 4.5 per cent, FT reports.
Traveling again this week…
That represents its best performance after a White House contest since 1945, when the blue-chip gauge was up 29.83% in a year following the election of Franklin D. Roosevelt and his vice president Harry S. Truman. (FDR died early his fourth term, putting Truman in the Oval Office in April 1945.)
Check out: Good news for the president in latest Trump Scoreboard
The table below from WSJ Market Data Group shows that Calvin Coolidge ranks No. 1 by this measuring stick, FDR gets the silver and bronze medals, Trump is fourth, and Bill Clinton, fifth.
Josh Brown
Posted November 6, 2017 by Joshua M Brown
Your favorite stock; see if it’s a buy, sell or hold opportunity
I came across this infographic from Wharton via 13D Research and I think it makes a powerful point about how quickly things have changed.
One of the biggest posts of the year here on TRB was “Just own the damn robots.“, where I talked about the mood right now surrounding the automation meteor headed right for us. This is another way of understanding the reality:
Getting bigger by market cap – and by revenues – with less people is the new normal. It’s not going back the other way. The only escape for our children is to join the education arms race and hope they choose the right major – or to embrace entrepreneurialism and create their own jobs.
http://thereformedbroker.com/2017/11/06/chart-o-the-day-how-quickly-things-have-changed/
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But has the gap between the performance of the two indexes grown too big? MKM Partners technical analyst Jonathan Krinsky compared how big that gap is relative to its 200-day average, and found it’s at a level that often signals a peak in momentum. Sometimes it’s simply a pause—that was the case in 2005—but sometimes it can signal an impending peak, as it did in 2008. “Momentum names are stretched relative to the market,” Krinsky says. “But they can become more stretched.”
http://www.barrons.com/articles/new-highs-for-this-momentum-powered-market-1509765341
https://www.ishares.com/us/products/251614/ishares-msci-usa-momentum-factor-etf
Source: BofAML
And it is strange how quiet the market is. October, remember, is supposed to be the market’s most volatile month. Through Thursday, however, it was the least volatile October on record going back to 1928, according to Ben Bowler, global head of equity derivatives research at Bank of America Merrill Lynch
http://www.barrons.com/articles/stocks-surge-to-highs-as-tech-roars-again-1509158124
But now, Kostin warns that this could be as good as it gets. He points to the ISM Manufacturing Index, which jumped to a 13-1/2-year high of 60.8 in September. Any reading above 50 signals growth.
“Although economic data are extremely strong now, an ISM reading above 60 typically marks the peak of growth and presages economic and equity deceleration,” he said. “Since 1980, the ISM has exceeded 60 in eight separate episodes; four of those lasted only one month.”
“Economic growth is the most important driver of corporate earnings and equity performance,” Kostin said.
http://portfolios.morningstar.com/fund/holdings?t=ROBO
https://www.blackrockblog.com
