Special Report on Investing in a Late Cycle Market Part 2: Sell offs in Late Cycle Markets are contagious, very contagious

Special Report on Investing in a Late Cycle Market Part 2: Sell offs in Late Cycle Markets are contagious, very contagious

The big reason to distinguish the business cycle from the credit cycle–as I did in Part 1 of this Special Report “Investing in a Late Cycle Market: Late Cycle Markets are crazy–Part 1, The problem”–is that the disruption caused by late credit cycle markets is way more contagious globally than the disruption created by late business cycle markets.

Rethinking 2018: Growth looks marginally slower, risk higher even in first half

Rethinking 2018: Growth looks marginally slower, risk higher even in first half

It’s only March but I’m rethinking my take on 2018.When the calendar pages turned over into 2018, my take on the year was that for stocks the first half would be much like 2017: Despite rising interest rates from the Federal Reserve, there was enough earnings growth to move stocks up even from near record highs. The bond market would be more problematic with those interest rate increases keeping downward pressure on bond prices and upward pressure on bond yields. With inflation still relatively quiescent, though, the downward trend in bond prices would be relatively gradual. It was the second half of the year that investors had to worry about, I thought then.

What’s happened to the fear?

Trick or Trend: What’s with the punishment being dished out to low-risk stocks lately?

This week investors and traders have been treated to one of the most difficult kinds of stock markets to navigate–the news-driven, trendless market. This week the downward direction of the market has been in reaction to the President’s announcement of tariffs on imported steel and aluminum. Next week the market could reverse if President Donald Trump changed his mind. Or it could sink further–and quickly–if nations such as China and Brazil and nation-groups such as the European Union decided to implement retaliatory tariffs

What we learned in this rout: This is what a late stage market looks like

What we learned in this rout: This is what a late stage market looks like

Before this market rout and from the safety of the World Economic Forum in Davos, hedge fund legend Ray Dalio talked about the coming bear market in bonds and likelihood that we were near the end of this cycle of economic boom. Sometime in the next two years, he remarked, we were likely to experience a recession and that would put an end to one of the longest periods of economic growth in the United States. With the experience of the big market rout of January 26 through February 8 behind us–if it indeed is–when the Standard & Poor 500 stock index fell 9.03%, I’d like to make Dalio’s comments a little more explicit and apply them more directly to the stock market.

What’s happened to the fear?

Low volatility traders bet BIG (again) that the worst is over

After getting their heads handed to them when volatility rocketed to 37.32 on the VIX on February 5 from 11.33 on February 1, low volatility traders were back today betting the the CBOE S&P 500 Volatility Index (VIX) would continue its fall from 25.61 at the close today. That’s another drop of 11.87% today. After that 230% move to the upside, which resulted in some low volatility ETFs recording 90% losses, the VIX is down 31.4% from its February 5 high.

Chinese stocks bounce back on better than expected but still tight liquidity

Chinese stocks bounce back on better than expected but still tight liquidity

As is so often the case, liquidity was the driver for Chinese stock today, Monday. The Shanghai Composite Index rose 0.78% to 3,154.13 points by the close of trading Monday, after initially falling 0.45% during the morning. Two indexes with more exposure to China’s smaller companies and entrepreneurial sector showed bigger gains. The Shenzhen Component Index rebounded by 2.91%, while the startup-heavy ChiNext exchange gained 3.49%