Thanks for your article Dan. In regards to your statement; "... the period leading up to 2000, S&P 500 was lagging the Dow Jones Industrial. The reason for this is that from the early 1980s, interest rates were very high." I was wondering if you could explain more fully how and why interest rates had more of an effect on the SPY when compared to the Dow? Is it simply a result of larger companies being better able to borrow money when compared with smaller ones or is there another explanation? My other question is regarding the entire process of predicting market performance. I think one of the first lessons any investor learns or is told to be aware of is that past performance does not guarantee future performance ie we have no clue whatsoever how the SPY, DIA, IWM or any other index will perform tomorrow, next week, and for sure not next year. Any thoughts?
Sounds like analyzing tea leaves to me. Any major bad news out of China or Japan, a further drop in oil, or any myriad of factors could well stymie a rebound in the SPY. As you said, the markets have a habit doing what is least expected. Others have commented that the signs are all there that global drops in stock markets indicates a first sign of a recession. Others say we are already in one. If that's the case, we could be seeing the last signs of life in the SPY as it begins to breath its last bullish breaths!
Currently at around $89, not that it couldn't drop lower but Gilead is now trading not too far off its 52 week low of $81. Out of 23 analyst opinions this month, 6 are a strong buy, 10 are a buy, and 7 are a hold. I believe biotech is still a very volatile sector and as you pointed out both GILD and IBB both rose over 30% and yet also dropped around the same amount in the past year or so. It may seem counter intuitive, but with the extreme volatility in this sector, its also not clear if diversifying to the ETF is that much safer than investing in one stock alone. Maybe one way to go is to watch out for major insider buying then buy then.
We all knew that one of the longest bull markets in US history eventually had to come crashing down.Perhaps the bull market ended when Yellin raised interest rates or perhaps it preceded that when China's stock markets started to see huge drops several months back. Either way, I think the worst possible thing that investors can do now is to panic and sell as the markets are unraveling.It might be a good time to hedge with some gold ETFs like GDX and GLD or other precious metals. Gold is certainly enjoying a considerable awakening of late. GDX is up over 36% in the past 3 months, and gold hit over $1260/ounce today for the first time in a year. We are certainly in a correction if not already in a recession.
I think we will see a lot of volatility in the precious metals sector as investors run back and forth between beaten down bargain stocks and the safety and security of gold and other metals. Just today, gold hit an important landmark reaching a high of over $1260 for the first time in years. Gold prices are still down around 34% from their peak of $1,800 in 2011. Investors should dip their toes in carefully because gold is a dangerous place to be especially if the Fed raises interest rates. If and when that happens and that might be a very big IF, then we will see everyone abandoning gold as prices drop, and the dollar shoots up. Gold is great for the day trader but as a long term investor I believe stocks will bounce back and out perform gold.
As global markets seem to be falling apart everywhere we look, it seems that Gold is one of the only few rays of light out there. This as investors seek the "perceived" security of precious metals. And news just in that as of a few hours ago, gold hit $1260 for the first time in years. Gold prices are still down around 34% from their peak of $1,800 in 2011. Of course, don't jump on the gold bandwagon too fast because this all could come to a grinding halt if the Fed raises interest rates, then you'll see everyone abandoning gold as prices drop and the dollar shoots up. Welcome to the seesaw market of 2016!
Two recent upgrades in January from Wedbush, and Monness were an encouraging sign but in this segment of mobile/digital payment companies, there are some heavy hitting competitors including Google, and Apple. Given the choice I would always pick Google over Paypal.
As well as recent weak U.S. economic data, another reason the US dollar was weakening this week was because of dovish comments from Fed president William Dudley. Belief that the FEd will NOT raise rates anytime soon has been causing the dollar to drop. If currencies fluctuate based on perceived strengths and weakness, I think we will continue to see a tremendous amount of volatility. I certainly feel that the US dollar will continue to be one of the strongest global currencies while the Euro, pound, Yuan, and Yen will struggle to keep pace. Like the rest of us, the Fed is probably realizing it was too premature in raising rates, but now it has to contend with a potentially weakening dollar.
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What's The Prospect For The "Equity Market" For 2016/2017?
Thanks for your article Dan. In regards to your statement; "... the period leading up to 2000, S&P 500 was lagging the Dow Jones Industrial. The reason for this is that from the early 1980s, interest rates were very high." I was wondering if you could explain more fully how and why interest rates had more of an effect on the SPY when compared to the Dow? Is it simply a result of larger companies being better able to borrow money when compared with smaller ones or is there another explanation? My other question is regarding the entire process of predicting market performance. I think one of the first lessons any investor learns or is told to be aware of is that past performance does not guarantee future performance ie we have no clue whatsoever how the SPY, DIA, IWM or any other index will perform tomorrow, next week, and for sure not next year. Any thoughts?
Three Charts That Say A Rally Is Ahead In The S&P 500 Index
Sounds like analyzing tea leaves to me. Any major bad news out of China or Japan, a further drop in oil, or any myriad of factors could well stymie a rebound in the SPY. As you said, the markets have a habit doing what is least expected. Others have commented that the signs are all there that global drops in stock markets indicates a first sign of a recession. Others say we are already in one. If that's the case, we could be seeing the last signs of life in the SPY as it begins to breath its last bullish breaths!
How Low Will Biotech Go?
Currently at around $89, not that it couldn't drop lower but Gilead is now trading not too far off its 52 week low of $81. Out of 23 analyst opinions this month, 6 are a strong buy, 10 are a buy, and 7 are a hold. I believe biotech is still a very volatile sector and as you pointed out both GILD and IBB both rose over 30% and yet also dropped around the same amount in the past year or so. It may seem counter intuitive, but with the extreme volatility in this sector, its also not clear if diversifying to the ETF is that much safer than investing in one stock alone. Maybe one way to go is to watch out for major insider buying then buy then.
LIBOR Destroyed Subprime. But The Fed Deepened The Great Recession
Do you foresee the US following Japan and going negative on rates?
Watch Out For The Head And Shoulders
We all knew that one of the longest bull markets in US history eventually had to come crashing down.Perhaps the bull market ended when Yellin raised interest rates or perhaps it preceded that when China's stock markets started to see huge drops several months back. Either way, I think the worst possible thing that investors can do now is to panic and sell as the markets are unraveling.It might be a good time to hedge with some gold ETFs like GDX and GLD or other precious metals. Gold is certainly enjoying a considerable awakening of late. GDX is up over 36% in the past 3 months, and gold hit over $1260/ounce today for the first time in a year. We are certainly in a correction if not already in a recession.
Seven Reversal Points In Play
I think we will see a lot of volatility in the precious metals sector as investors run back and forth between beaten down bargain stocks and the safety and security of gold and other metals. Just today, gold hit an important landmark reaching a high of over $1260 for the first time in years. Gold prices are still down around 34% from their peak of $1,800 in 2011. Investors should dip their toes in carefully because gold is a dangerous place to be especially if the Fed raises interest rates. If and when that happens and that might be a very big IF, then we will see everyone abandoning gold as prices drop, and the dollar shoots up. Gold is great for the day trader but as a long term investor I believe stocks will bounce back and out perform gold.
Gold Forms A Doji Below 1200
As global markets seem to be falling apart everywhere we look, it seems that Gold is one of the only few rays of light out there. This as investors seek the "perceived" security of precious metals. And news just in that as of a few hours ago, gold hit $1260 for the first time in years. Gold prices are still down around 34% from their peak of $1,800 in 2011. Of course, don't jump on the gold bandwagon too fast because this all could come to a grinding halt if the Fed raises interest rates, then you'll see everyone abandoning gold as prices drop and the dollar shoots up. Welcome to the seesaw market of 2016!
PayPal: Up And Away
Yes, I was comparing with Apple Pay and Google Wallet.
PayPal: Up And Away
Two recent upgrades in January from Wedbush, and Monness were an encouraging sign but in this segment of mobile/digital payment companies, there are some heavy hitting competitors including Google, and Apple. Given the choice I would always pick Google over Paypal.
US Dollar To Stabilize After Yesterday's Wild Ride
As well as recent weak U.S. economic data, another reason the US dollar was weakening this week was because of dovish comments from Fed president William Dudley. Belief that the FEd will NOT raise rates anytime soon has been causing the dollar to drop. If currencies fluctuate based on perceived strengths and weakness, I think we will continue to see a tremendous amount of volatility. I certainly feel that the US dollar will continue to be one of the strongest global currencies while the Euro, pound, Yuan, and Yen will struggle to keep pace. Like the rest of us, the Fed is probably realizing it was too premature in raising rates, but now it has to contend with a potentially weakening dollar.