The biggest slump in commodity prices since 2008 is undermining confidence on Wall Street and fueling speculation that a new bear market has been born.
Despite forecasts for accelerating economic growth and higher prices, commodities, with the notable exception of gold, are taking a big hit.
The Journal of Commerce (JOC) Commodity Index that tracks the growth rate of steel, cattle hides, tallow and burlap plunged 57% in May, the most since October 2008 - something that gave analysts a sense of déjà vu.
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Should Investors Sell in May and Go Away, or Ride the Bull Awhile Longer?
I'm sure you have heard the old saw that it's a smart idea to "sell in May and go away."
That concept is based on the notion that the May-to-November span provides a weak environment for investors. I have already heard the cry go up recently because the major indexes are already up a lot more than anyone expected, and this would seem to be a convenient time to take profits.
Yet like most old market adages, there's not much substance to the concept if you take a good look at history.
That concept is based on the notion that the May-to-November span provides a weak environment for investors. I have already heard the cry go up recently because the major indexes are already up a lot more than anyone expected, and this would seem to be a convenient time to take profits.
Yet like most old market adages, there's not much substance to the concept if you take a good look at history.
Question of the Week: Overlooked Problems Will Kill the U.S. Bull Market
The U.S. stock market has staged one of its most powerful rallies in history, zooming nearly 70% in the 12 months that followed the March 9, 2009 market low. U.S. stocks soared another 5% during the first three months of 2010 - its best first quarter in a dozen years. But where do we go from here?
Between the New York Stock Exchange continuously reaching new highs, the Dow Jones Industrial Average rising up along its eight-day average, and a rebounding retail sector, there's reason to celebrate what appears to be a market recovery offering investors profit opportunities.
"You can't bury your head in the sand and ignore what's happening," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "If you did that, you've missed a 60%-plus rally in the [Standard & Poor's 500 Index] since early last March. You cannot fail to acknowledge what's happening" in the markets, even though top traders understand that cheap money from the government bailout - and not a well-rounded economic recovery - is most likely behind the torrid run-up in U.S. share prices.
Money Morning Question of the Week: Is this a true bull market? A year from now, are U.S. stocks - as measured by the Standard & Poor's 500 Index - trading higher, lower, or at the same level as they are today?
What follows are some of the most well thought-out responses we received (as well as a previous comment regarding the bull vs. bear market argument posted on our Web site) with many agreeing this bull market is too good to be true.
Between the New York Stock Exchange continuously reaching new highs, the Dow Jones Industrial Average rising up along its eight-day average, and a rebounding retail sector, there's reason to celebrate what appears to be a market recovery offering investors profit opportunities.
"You can't bury your head in the sand and ignore what's happening," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "If you did that, you've missed a 60%-plus rally in the [Standard & Poor's 500 Index] since early last March. You cannot fail to acknowledge what's happening" in the markets, even though top traders understand that cheap money from the government bailout - and not a well-rounded economic recovery - is most likely behind the torrid run-up in U.S. share prices.
Money Morning Question of the Week: Is this a true bull market? A year from now, are U.S. stocks - as measured by the Standard & Poor's 500 Index - trading higher, lower, or at the same level as they are today?
What follows are some of the most well thought-out responses we received (as well as a previous comment regarding the bull vs. bear market argument posted on our Web site) with many agreeing this bull market is too good to be true.
Despite the Near-Record Run in U.S. Stocks, Oil, Commodities and China Will be the Long-Term Winners
Although U.S. stocks have made a fairly smooth transition into Year Two of what's so far been a near-record bull market, there are still many traps that can quickly ensnare a less-than-cautious investor.
Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.
"I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."
In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:
Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.
"I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."
In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:
- Predicted that oil and commodity prices are headed higher, making them "must-invest" asset classes for investors who don't want to be left behind.
- Stated that ongoing miscues in Washington coupled with higher growth abroad make it imperative that U.S. investors embrace a truly global view when planning their investing strategies.
- And predicted that many blue-chip U.S. companies will go for dual-listings, listing their shares on China's Shanghai Stock Exchange (SSE), providing those U.S.-based firms with access to the plentiful capital and robust growth available in that Asian giant's marketplace.
For a full transcript of this interview, read on...
With this Bear-Market Insurance, You Can Keep Riding the Bull
During the last few weeks, the U.S. stock market has recovered from its mid-February swoon and clawed its way to a new high for the year - returning share prices to levels not seen since late 2008.
At this point, based on consideration of its change in value since the money supply inflation began in early 1995, stocks appear to be substantially overvalued, perhaps by as much as 40% to 50%.
However, if our experiences of the late 1990s taught us anything, it's that the stock market can remain overvalued for years - meaning investors who opt out of the market completely risk getting left behind.
Still, given the soaring run-up we've seen since the stock market's March 9, 2009 nadir, I thought this would be an excellent time to review the ways nervous investors can protect themselves - even as they remain invested. That's just good, sound risk management.
And there is a way to achieve both goals - with a type of bear-market "insurance' that's fairly easy to use.
To find out about “bear-market insurance,” please read on…
At this point, based on consideration of its change in value since the money supply inflation began in early 1995, stocks appear to be substantially overvalued, perhaps by as much as 40% to 50%.
However, if our experiences of the late 1990s taught us anything, it's that the stock market can remain overvalued for years - meaning investors who opt out of the market completely risk getting left behind.
Still, given the soaring run-up we've seen since the stock market's March 9, 2009 nadir, I thought this would be an excellent time to review the ways nervous investors can protect themselves - even as they remain invested. That's just good, sound risk management.
And there is a way to achieve both goals - with a type of bear-market "insurance' that's fairly easy to use.
To find out about “bear-market insurance,” please read on…
New Banking Regulations ... Same Old Story
U.S. banks, drunk with greed, drove the nation's economy to the brink of financial Armageddon.
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,
A Year After the Bear-Market Bottom, Investors Must Still Pursue Profits - Without Ignoring Risk
With the Standard & Poor's 500 Index up nearly 70% from the post-financial-crash low it set on March 9, 2009, U.S. stocks on Tuesday recorded their second-strongest showing ever for the first 12 months of a bull market.
But that near-record-setting performance brings to light two key issues.
But that near-record-setting performance brings to light two key issues.
- First, despite the numbers that stand as evidence of the market's stunning surge, many still-shell-shocked investors refuse to label this as a true "bull market."
- And second, no matter how great a market's performance has been, the real question to answer is "where do we go from here ... and how do I position myself to maximize possible returns while mitigating risk as much as possible?"
Bulls Vs. Bears: Who's Winning Wall Street's Biggest Battle?
Two big economic reports dampened the mood on Wall Street in the past week: The Standard & Poor's/Case-Shiller Home Price Index and the Conference Board's Consumer Confidence Index.
But despite what the bears would have you believe, several strong companies have shrugged such data aside and broken through to new highs. In fact, long-term, we continue to see evidence that a robust business-led recovery is underway.
But despite what the bears would have you believe, several strong companies have shrugged such data aside and broken through to new highs. In fact, long-term, we continue to see evidence that a robust business-led recovery is underway.
To find out what companies are leading a new bull market click here...
Is it Time For Investors to Beware of the Bear?
With U.S. stocks down about 5% from their 2009-2010 rally peak, investors basically want to know one thing: Is this just a correction, or are they looking at a potentially long bear market?
That's no small question. U.S. stocks could be experiencing one of three scenarios at present. They could be:
But a new bear market is an entirely different animal. A bear-market cycle could last as long as two years and could be marked by a decline of 20% or more.
That's no small question. U.S. stocks could be experiencing one of three scenarios at present. They could be:
- Undergoing a short-term "correction" of its 2009 gains.
- Beginning a multi-month "pause."
- Or starting a new bear-market cycle.
But a new bear market is an entirely different animal. A bear-market cycle could last as long as two years and could be marked by a decline of 20% or more.
To learn the warning signs of a new bear market, please read on ...
In an Uncertain Market, Defensive Investing is Smart - And Profitable
For U.S. investors looking to profit in the near term, the best offense may be a good defense.
"Defensive investing" becomes a mantra for investors who are seeking to navigate periods dominated by high risk, slow growth or excessive uncertainty. Given that the current market outlook probably contains an element of each of those scenarios, a strategy that includes elements of care and caution will make for a wise course of action.
This is actually a healthy thing, and will likely include a pause in the broader market. But all indicators point to the prospective pause being just that - not a new bear market, just a time out as overfed risk appetites take a breather before being reinvigorated.
Despite the emphatic negative trading session we saw on Friday, most of last week was rather buoyant, with a net gain in the broad market averages. Yet measures of internal market health continued their slow deterioration, with much more volume appearing on down days than up days.
My belief: U.S. stocks are in the process of remedying the overbought condition created by the big upward move in the first week of the year, as well as the overbought condition that's visible on some monthly charts.
"Defensive investing" becomes a mantra for investors who are seeking to navigate periods dominated by high risk, slow growth or excessive uncertainty. Given that the current market outlook probably contains an element of each of those scenarios, a strategy that includes elements of care and caution will make for a wise course of action.
This is actually a healthy thing, and will likely include a pause in the broader market. But all indicators point to the prospective pause being just that - not a new bear market, just a time out as overfed risk appetites take a breather before being reinvigorated.
Despite the emphatic negative trading session we saw on Friday, most of last week was rather buoyant, with a net gain in the broad market averages. Yet measures of internal market health continued their slow deterioration, with much more volume appearing on down days than up days.
My belief: U.S. stocks are in the process of remedying the overbought condition created by the big upward move in the first week of the year, as well as the overbought condition that's visible on some monthly charts.
For the Top Defensive Plays to Make Now, Read on...
How to Profit From the "Road Map to Recovery," Regardless of What Lies Ahead
Getting both sides of a bear market and recovery right is the biggest test that investors face because it requires doing an about-face on a winning strategy.
The ideal investor would have sold in October 2007 when stocks were making new all-time highs, then stayed out of all subsequent rallies during the worst bear market in seven decades, and then bought back into the market at its once-unimaginable low after not just the wheels of the economy had fallen off, but seemingly the engine, doors and steering wheel as well.
Also, the ideal investor didn't just need to recognize those inflection points, but make the most of his observation by exiting in full in October 2007 and re-entering with guns blazing in March 2009. That is even harder. The most common scenario would be to exit partially and enter partially.
Recognizing that only the most prescient investors will get these inflection points exactly right, I have focused my long-term research since the 2000 bear market on paying as much attention as possible to the message of the ticker tape rather than economics or fundamentals when it comes to these calls.
The ideal investor would have sold in October 2007 when stocks were making new all-time highs, then stayed out of all subsequent rallies during the worst bear market in seven decades, and then bought back into the market at its once-unimaginable low after not just the wheels of the economy had fallen off, but seemingly the engine, doors and steering wheel as well.
Also, the ideal investor didn't just need to recognize those inflection points, but make the most of his observation by exiting in full in October 2007 and re-entering with guns blazing in March 2009. That is even harder. The most common scenario would be to exit partially and enter partially.
Recognizing that only the most prescient investors will get these inflection points exactly right, I have focused my long-term research since the 2000 bear market on paying as much attention as possible to the message of the ticker tape rather than economics or fundamentals when it comes to these calls.
How Simple Investing Strategies Can Generate Maximum Profits
If you're feeling overwhelmed by the investment choices and economic challenges in today's financial markets, that's understandable. As a veteran writer and investor, I can attest that it's all too easy to wander off into the weeds by getting too complicated.
That's a big reason why - in my Strategic Advantage advisory service - we try to keep things as simple as possible. It's a strategy individual investors would do well to follow.
If you can stay out of bear markets and participate in the largest portion of bull-market cycles, you can make a lot of money as an investor. They key idea is to make the markets work for you when they are open for business - and to get out of them when they're closed.
That's a big reason why - in my Strategic Advantage advisory service - we try to keep things as simple as possible. It's a strategy individual investors would do well to follow.
If you can stay out of bear markets and participate in the largest portion of bull-market cycles, you can make a lot of money as an investor. They key idea is to make the markets work for you when they are open for business - and to get out of them when they're closed.
Two Sentiment Indicators Investors Should Watch
Want to get an edge on the market? Sentiment might be a good place to look. Sentiment tells you how the majority of investors are positioned in a particular market, giving you clues about the next short-term move. Most of the time, it's an exercise in futility. The bulls and bears are about equally balanced, […]
Four Ways to Profit as You Keep the Bear at Bay
By Keith Fitz-Gerald Investment Director Money Morning/The Money Map Report We didn't get the 500-point drop in the Dow Jones Industrial Average that we appeared headed for yesterday, but that doesn't mean we're out of the woods. The U.S. Federal Reserve is of the opinion that an emergency-rate cut of three quarters of a percentage […]