Stock Market
-
We Want to Hear From You: Are You Seeking 'Safe Haven' Shelter in the U.S. Bond Market?
Ongoing stock market worries and a string of discouraging economic reports have imbued the U.S. bond market with "safe-haven" status. The upshot: Investors have poured record amounts of money into bond funds.
"It is hard to pick up the newspaper and see anyone optimistic," Francis Kinniry from The Vanguard Group Inc., told Bloomberg News. "The problem is there is not a lot of good news on the recovery front and that translates in people's mind to poor capital markets."
Bond funds for the past two years have seen inflows almost as high as stock funds did during the Internet bubble, according to the Investment Company Institute (ICI). From January 2008 through June 2010, outflows from equity funds totaled $232 billion, while inflows to bond funds hit a staggering $559 billion.
-
Are Bonds a Bubble? Don't Bet on It
With the stock market unsteady, don't overlook the value of adding bonds to your portfolio. They provide income and are more reliable than equities.
Indeed, bonds have had a strong run up in the past decade - so strong, in fact, that many investors are afraid they've entered bubble territory. But not Albert Edwards, chief strategist at the old-school French bank Societe Generale SA (PINK: SCGLY).
Edwards isn't your typical white-shoe analyst. Guys in his position tend to have a perpetually optimistic worldview. Since they are in the business of selling the dream, they need to talk up assets. But Edwards is an iconoclast who is known as one of the dourer professional forecasters.
-
Emerging Stock Markets Thrive as U.S. Shares Tumble
As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.
Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook fromCisco SystemsInc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.
Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.
Read on to find which markets are outshining the U.S.... -
Will the Fed Opt For More Stimulus as the Economic Recovery Founders?
Weaker-than-expected job growth is fueling speculation that the Federal Open Market Committee (FOMC) will unveil new stimulus measures to prop up the economic recovery when it meets today (Tuesday) for its regular rate-setting session.
Friday's July unemployment report was by most measures a disaster, providing the latest indication the economic recovery is running out of steam with 14.6 million Americans still searching for work.
The economy shed 131,000 jobs, as 143,000 temporary census workers fell off federal payrolls. Private-sector employment grew by 71,000 in July after a downwardly revised June increase of 31,000 workers.
The private sector so far this year has added 90,000 jobs a month on average, well below the 125,000 needed to keep up with population growth - let alone recover the eight million jobs lost during the recession.
"It's a double whammy because it causes people to take a psychological step back," Tig Gilliam, chief executive of staffing firm Adecco Group North America, told The Wall Street Journal. "Now, it looks like not only has the economy slowed, but maybe it wasn't as good when it was originally reported as we thought."
-
History Gives a Reason to Be Hopeful about U.S. Stocks
Volatility has hamstrung U.S. stocks recently, but history suggests there's a reason for hope on the horizon.
The past week and a half has been a welcome reprieve from the extreme volatility we've seen over the past few months. There have been no fewer than 19 days this year in which up or down volume has accounted for more than 90% of total volume.
The rapid up-and-down, all-or-nothing nature of the stock market has confounded even the most talented, highly paid and well informed traders. The hedge fund industry as a whole has been caught flat-footed - posting losses in each of the last two months.
-
What Can 1962 Tell Us About Today's Stock Market?
We dove into market history a lot recently with studies of the 3%+ up day a couple weeks ago as well as a look at the growth rate of the index of Leading Economic Indicators. The takeaway: History suggests there are grounds for being optimistic about the stock market.
Now here's a new reason for optimism: The current situation bears a striking resemblance to the 1962 summer stock market rebound.
Here's the scoop: In early 1962, a head-and-shoulders pattern emerged that looked very similar to the one that appeared to have taken shape in April-June this year. When the neckline of the pattern was violated in April 1962, stocks fell like a ton of bricks into a June low that was ultimately 27% lower than the January 1962 high.
-
MLPs Top the Yield Charts, but Don't Overlook the Risks
With bank and money market rates bumping along between 1% and 2%, 30-year Treasury yields barely edging above 4%, and many old standby companies having slashed or eliminated their dividends, it's been a rough year or two for income-oriented investors.
As a result, many have turned an eye toward Master Limited Partnerships (MLPs), virtually the only game in town with the potential to give you a double-digit yield on your cash.
MLPs, for those not familiar with them, are tax-advantaged limited partnerships whose units are traded on stock exchanges, just like the regular common shares of corporations. MLPs provide very high yields - typically 5% to 12% - because U.S. law mandates that they pass most of their income on to unit holders. As such, it's not taxed at the partnership level.
-
History Shows Stock Market Plunge May Just Be Par for the Course
Although the stock market plunge last week was certainly unsettling, history and a slew of positive leading indicators show that this may just be part of a normal pattern with better news ahead.
Stocks were hammered on Tuesday as a negative revision to an economic report out of China and fears over European bank funding set off a global firestorm of selling. A very weak consumer confidence report didn't help matters.
The major U.S. stock indices fell through critical support levels, with the S&P 500 returning to levels first reached last August. That's almost an entire year of stock market appreciation out the window.
In the end, the Dow Jones Industrial Average lost 2.7%, the S&P 500 lost 3.1%, the NASDAQ lost 3.9%, and the Russell 2000 lost 4%. Large-cap stocks outside the United States fell 3.5%, while emerging market stocks fell 4%. Some of the European exchanges fell the most, including iShares MCSI Spain Index ETF (NYSE: EWP), down 5%, and iShares MCSI Switzerland Index Fund ETF (NYSE: EWL), down 6%.
Click here to see how the stock market plunge fits a historical pattern... -
High-Yield Hangover: Cash Pouring Into Junk-Bond Funds May Signal Stormy Seas For Stocks
Investors are plowing money into junk-bond funds, which leveraged borrowers at private equity funds are using to pay dividends to themselves and to buy out more public companies.
The huge-and-growing overhang of debt-laden portfolio companies that private-equity shops want to take public - when combined with additional leveraged deals in the pipeline - will keep a lid on U.S. stock prices and could even spark a sell-off for stocks in both the United States and Europe.
Let me explain...
To understand how this push into junk bonds is magnifying stock-market risk, please read on... -
Don't Give Up on U.S. Stocks Just Yet
There's no denying that bearish investors have made their case in recent weeks. They are legitimately afraid that the economies of the United States and Europe will fade so much in the next few months that they will sink back into recessions punctuated by credit blowups and a resumption of a bear market for U.S. stocks.
Still, the simple fact that there are a few economic boogey-men lurking behind each suspect piece of data doesn't mean that investors should run screaming away from stocks.
In fact, if you take the time to listen to the opposite point of view before you make up your mind about the direction the economy is headed, you might be pleasantly surprised.
