Stocks and bonds are really expensive now

Stocks and bonds are really expensive now

I understand why no one wants to get off the rally bus. Last week’s gains pushed the Standard & Poor’s 500’s total return for 2024 above 20% again. The index jumped 1.7% on Thursday, putting in its 39th record close of the year. Both stocks and Treasuries are headed for a fifth straight month of gains. But anyone expecting the S&P 500 to build on its year-to-date gain should consider that Wall Street’s own strategists already see the upside exhausted.

So much for those recession fears

So much for those recession fears

What happened to all that selling? And the conviction that the U.S. economy ws headed for a recession? The Standard & Poor’s 500 finished Thursday, August 15, with another up day for a 6-day rally that has pushed the index up 6.6%.Treasury yields surged with the yield on the 2-year Treasury, the maturity most sensitive to shifts in sentiment about the direction of Federal Reserve interest rate policy, climbing back above 4%. The S&P 500 climbed 1.6% on the day. The Nasdaq 100 added 2.5%. The small-cap Russell 2000 gained2.5%. The CBOE Volatility Index, Wall Street’s “fear gauge,”the VIX, dropped back to near 15, below its long-term average, and hugely below its August 5 close at 38.57. The proximate cause of the rebound rally? Three reports showing that the U.S.consumer is alive, well, and still buying stuff.

Please Watch My New YouTube Video: The Uncertainty of Uncertainty

Please Watch My New YouTube Video: The Uncertainty of Uncertainty

Today’s video is The Uncertainty of Uncertainty in the Stock Market. Right now we’re seeing uncertainty on top of uncertainty. The CPI numbers just came out and April showed a slightly lower annualized inflation rate than March. The market took this as a signal that we’ve moved past inflation stagnation and have resumed the march towards 2%. This is, of course, an uncertainty. Another uncertainty is the what we don’t know about the inner thinking at the Fed. How much of a decline does the Fed really need to see to start cutting rates? Right now, according to the CME Fedwatch tool, there is a 70% chance that we’ll see interest rate cuts at the September Fed meeting. This prediction has shifted a lot in the last few months and could continue to shift. These uncertainties mean that the market may be fully priced at 5,200. Some analysts suggest we could hit 5,600 by the end of the year, making it a 15-20% year. In the short term, it’s really hard to predict how people react to all these layers of uncertainty. It’s also difficult to hedge this market so I recommend looking at individual stocks in lithium or copper that will continue to go up, even if the market as a whole doesn’t move.

First quarter surprise: Tech didn’t lead the market

First quarter surprise: Tech didn’t lead the market

The results are in. And, surprise the technology sector didn’t lead the market in the first quarter. In fact the 8.8% gain for the Technology Select Sector SPDR ETF (XLK), which tracks the S&P 500’s information technology sector, trailed the 10% gain for the Standard & Poor’s 500 index. And several other sectors outperformed the XLK ETF.

Part 3 Worries Over a Top: OK, it’s not 2000, but that doesn’t mean there’s no risk in this market

Part 3 Worries Over a Top: OK, it’s not 2000, but that doesn’t mean there’s no risk in this market

When I wrote my post “Was the Meta Platform 20% pop the market top? An important sign, yes,, but not for the reasons you think” I wasn’t thinking of a three-part series. But then came Part 2 “Why his isn’t 2000–I don’t see a replay of the Dot-Com Bear Market.”
And now Part 3: “OK, It’s not 2000, but that doesn’t mean there’s no risk in the market.” Part 3 in this series is going to segue right into the new Special Report that I’ll post on Wednesday with seven concrete steps I think you should implement now to protect your portfolio. But for today, I’m going to focus on a framework for thinking thinking about reward and risk in the current market. Think of the topic as “Why your portfolio needs protection now–even if we aren’t looking at a Bear Market.”

Stocks and bonds are really expensive now

Part 2 Worries over a top: Why this isn’t 2000–I don’t see a replay of the Dot-Com Bear Market

As I wrote a few days ago in my post “Was the Meta Platform 20% pop the market top? An important sign, yes,, but not for the reasons you think” I do think this stock market rally is putting in a top.

But I’m not worried that we’re looking at a reply of the Dot-Com crash and Bear Market that took the NASDAQ Composite down 40% in 2000 after that tech-heavy index gained more than 85% in 1999.

Why not? Let me count the ways. I get to four.

Part 1 Worries over a top: Was the Meta Platforms 20% pop the market top? An important sign, yes,, but not for the reasons you think

Part 1 Worries over a top: Was the Meta Platforms 20% pop the market top? An important sign, yes,, but not for the reasons you think

I think we’re seeing stocks put in a top. Not immediate–I think we’ve got the impending Federal Reserve interest rate cuts to help stretch out this rally into a sideways move. But the signs are there. And the most important signs aren’t the “overvaluation” of the Magnificent 7 stocks or the narrow leadership in this market. (More on why this top isn’t likely to lead to a Bear Market in tomorrow’s post “Why this isn’t 1999.) Nope. To me the most important sign if the big announcement from Meta Platforms (META) of a $50 billion stock buy back and the initiation of 50 cents a share dividend, the company’s first.

Please Watch My New YouTube Video: How Long Does FOMO Drive This Market?

Please Watch My New YouTube Video: How Long Does FOMO Drive This Market?

Today’s Trend of the Week is How Long Does FOMO Drive this Market? FOMO is “fear of missing out” and I’m using it to describe a market that is not driven by facts and fundamentals, but is largely focused on a fear of missing out on another rally, as many did in 2023. So what is the emotional trend and how long will it last? My sense is that there is one factor determining behind a lot of FOMO is expectations for a rate cut from the Fed. A potential rate cut could bring a lot more money into the market and drive prices higher– something investors don’t want to miss. In my opinion, we’ll have to wait until May or Jun for that cut to happen. So the hope of a cut will keep the market moving sideways and limit selling on high valuations. We’ll see some consolidation in the market leaders, but nothing that is likely to upend the market before these highly anticipated rate cuts.

Please watch my new YouTube video: Too Far, Too Fast

Please watch my new YouTube video: Too Far, Too Fast

Today’s video is Too Far, Too Fast. Yesterday, on January 24, the market hit Wall Street’s consensus 2024 target for the end of 2024. Yep, a bit early. The consensus target for the end of the year 2024 close is an average of 4867 and yesterday the S&P closed at 4868. The median target is 4950, and the high end forecast is around 5200–only 350 points from where we are. We’re still awaiting confirmation that the Fed will cut rates and when that happens (likely in June or July–not March), more money will come into the market. This mid-year injection of money is good, but how much of a reward is there in a market that may have already reached its target for 11 months from now? At this point, investors are chasing momentum in an attempt to make up for missing the mark in 2023. That leaves the market  risky at the moment. There’s not a whole lot of reward in a market that moves sideways with very few big moves on the up side. We may very well finish the year flat from these levels.

Bonds keep chugging higher, stock investors have doubts

Bonds keep chugging higher, stock investors have doubts

Bond traders and investors kept the bond rally going today December 20. The yield on the 10-year Treasury dropped another 8 basis points to 3.85% today. The yield on the 2-year note fell 4 basis points to 4.40%. The drop in yields came as a result of gains in bond prices. On the other hand, the major stock indexes had a big down day. The Standard & Poor’s 500 fell 1.47% and the Dow Jones Industrial Average ended the day down 1.27%. The small-cap Russell 2000 dropped 1.86%. The NASDAQ Composite and the NASDAQ 100 soared 1.50% and 1.53%, respectively.. The differing results don’t reflect a divergence of views on interest rates–both bond and stock markets see the Federal Reserve cutting interest rates in 2024. The difference does, however, reflect differing views on valuation