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Posts Tagged ‘Stocks’

Beneath the dull surface, Europe’s stockmarket is a place of extremes

Posted by hkarner - 18. Mai 2019

Date: 17-05-2019
Source: The Economist: Buttonwood

The gap between value and quality stocks has widened into a chasm

It would be hard to tell a story about America’s stockmarket without mention of at least one company that listed this century—Google or Facebook, say. Europe is rather different. Its bourses are heavy with giants from the age of industry but light on the digital champions of tomorrow. It is telling, perhaps, that its character can be captured in the contrasting fortunes of two companies, Nestlé and Daimler, with roots not even in the 20th century, but in the 19th.

Nestlé began in 1867 when Henri Nestlé, a German pharmacist, developed a powdered milk for babies. The firm, based in Switzerland, is now the world’s largest food company. It owns a broad stable of well-known brands, including Nescafé and KitKat. Its coffee, cereals and stock cubes are sold everywhere, from air-conditioned supermarkets in rich countries to sun-scorched stalls in poor ones. Daimler was founded a bit later, in 1890. Its Mercedes-Benz brand of saloon cars and suvs is favoured by the rich world’s professionals and the developing world’s politicians. Den Rest des Beitrags lesen »

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Stocks Post Their Worst Day in Months on Trade Anxiety

Posted by hkarner - 15. Mai 2019

Date: 14-05-2019
Source: The Wall Street Journal

Dow drops more than 600 after China says it will raise tariffs on some U.S. imports

Stocks posted their biggest drop in months Monday after officials in Beijing and the White House exchanged fresh threats in a trade fight that many observers fear could crimp growth.

The Dow Jones Industrial Average fell 617.38 points, or 2.4%, to 25324.99 and the S&P 500 dropped 69.53 points, or 2.4%, to 2811.87, with both indexes posting their biggest one-day losses since Jan. 3. The Nasdaq Composite declined 269.92 points, or 3.4%, to 7647.02 in its worst showing since December.

The moves showed investors that one of the biggest assumptions many had held this year could be in danger of falling apart. Many money managers had credited the stock market’s 2019 rally to a combination of easy monetary policy, steady growth in the U.S. and signs of progress in trade negotiations.

There is still time for the U.S. and China to carve out a trade agreement, analysts said, noting the two countries’ increased tariffs won’t hit goods in transit immediately. And U.S. indexes are still up solidly for the year: The S&P 500 and Nasdaq are up by double-digit percentages in 2019, rebounding from a fourth-quarter rout. Stocks pared some of Monday’s losses after President Trump said he would meet with Chinese President Xi Jinping at the coming G-20 summit.

Still, investors and analysts say a breakdown of trade talks risks damaging business and consumer confidence, potentially crimping spending at a time when growth is already widely expected to moderate.

UBS analysts estimate U.S. growth could drop by 0.75 to 1 percentage point and stocks could fall by double-digit percentages if the U.S. hits all Chinese exports with 25% tariffs. Den Rest des Beitrags lesen »

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Stock Markets in Europe Break Records for Calm and Quiet

Posted by hkarner - 2. Mai 2019

Date: 01-05-2019
Source: The Wall Street Journal

A leading European stock index has barely budged for 17 trading days in a row, breaking the previous streak set in 1993

In Europe, markets have hit their summer lull early—very early. As with markets in the U.S. and elsewhere, this very stability could be a dangerous thing for investors desperately hunting for returns.

One illustration of the quiet: The Stoxx Europe 600 index of leading European shares set a record for apparent investor apathy on Tuesday with the 17th consecutive trading session when its price has moved by less than 0.5%. The last longest streak of such little variation was 16 straight days ending in May 1993.

This is part of a broader, multicountry pattern in financial markets driven by the near uniform turnaround in the attitude of major central banks, led by the Federal Reserve, which is expected to retain its supportive policies toward investors and the economy in its policy statement Wednesday.

Central banks “seem to think their job at the moment is to suppress volatility to encourage risk-taking”, James Athey, senior investment manager at Aberdeen Standard Investments. He says there are few sellers in equities, government debt or corporate bonds. “Who’s going to take the other side of the trade because you’re fighting the Fed?”

But just as in previous periods of calm, investors who trade options are hunting for yield by selling insurance against future price moves, which is a great source of extra income so long as markets stay quiet. But it can become a source of painful losses when sentiment turns—as it did last December and before that in February 2018.

In December’s volatility shock, French bank BNP Paribas suffered losses big enough in its equity derivatives business to drag down its fourth-quarter results. And last February, an even bigger spike caused turmoil among exchange-traded funds that bet against a rise in volatility, leading Credit Suisse to liquidate its popular VelocityShares Daily Inverse VIX Short-Term Exchange Traded Note.

Sébastien Galy, senior macro strategist at Nordea Asset Management, says similar yield hunting can be seen in another big build up of investors selling market insurance against large scale price moves in several asset classes.

The effects of this in U.S. and European stocks can be seen in the extremely low levels of the volatility indexes and investment products tied to them. The VIX index, which measures expected volatility in the S&P 500 over the next 30 days is at its lowest level since early October, while the VDAX, a popular European alternative that measures volatility in Germany’s DAX index, is at its lowest since January 2018.

“Investors are betting on range trading, on nonevents, and the way to do this is generally to bet against volatility,” Mr. Galy said. “Everyone thinks this isn’t going to end well but then they keep doing it anyway.”

While volatility can come from prices moving up or down, very low expected volatility readings on the VIX tend to occur when stock markets keep edging steadily higher. For Europe, even though economic growth remains disappointing, fears of political flare-ups that dominated headlines at the beginning of 2019 have receded: From spendthrift policies in Italy to the instability of Britain dropping out of the EU with no agreement on how to settle future ties.

For Daniel Morris, senior investment strategist at BNP Paribas Asset Management, this is all the more reason to expect that this period won’t last. “There are always bumps in the road,” he said.

Mr. Morris is cautious because of the range of things that could cause throw markets off track in the coming months, such as fresh U.S. tariffs targeting European car makers or signs that stimulus measures in China won’t help growth among Europe’s exporters, especially Germany.

Others are more optimistic about Europe, despite the general trend for investors to keep pulling money from equity funds that has continued all year so far.

“It’s fashionable to hate European stocks but it’s now appearing that the EU isn’t in such a bad state after all, so it is a slow melt-up,” said Gregory Perdon, co-chief investment officer at private bankers Arbuthnot Latham .

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Global Stock Rally Defies Dimming Economic Outlook

Posted by hkarner - 16. April 2019

Date: 15-04-2019
Source: The Wall Street Journal

Some investors look warily on gains delivered while global slowdown continues apace

Indexes from New York to China have risen double-digit percentages this year.

Global stocks are rising at the fastest pace in decades as growth around the world slows, leaving many investors questioning how much longer the market can defy the gravity of the underlying economics.

Indexes from New York and Europe to China have soared double-digit percentages this year to regain most of their ground after tanking in the fourth quarter, supported by signs that central banks are willing to keep holding interest rates at low levels for the foreseeable future.

The S&P 500 has risen 15%, vaulting above the level where banks ranging from Morgan Stanley to Barclays expected it to end the year. Benchmark indexes elsewhere have rallied, too, with the Shanghai Composite rising 28%, the Stoxx Europe 600 up 15% and a measure of emerging market stocks up 14%.

All told, global stocks would close out 2019 with their best annual returns ever if they kept rising at their current pace, according to a Bank of America analysis. Den Rest des Beitrags lesen »

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Was the Stock-Market Boom Predictable?

Posted by hkarner - 1. April 2019

Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance, the third edition of which was published in January 2015, and, most recently, Phishing for Phools: The Economics of Manipulation and Deception, co-authored with George Akerlof.

While the conventional wisdom holds that it is never possible to „time the market,“ it might seem that major shifts – like the quadrupling of the US stock market over the last decade – should be at least partly foreseeable. Why aren’t they?

NEW HAVEN – Should we have known in March 2009 that the United States’ S&P 500 stock index would quadruple in value in the next ten years, or that Japan’s Nikkei 225 would triple, followed closely by Hong Kong’s Hang Seng index? The conventional wisdom is that it is never possible to “time the market.” But moves as big as these, it might seem, must have been at least partly foreseeable.

The problem is that no one can prove why a boom happened, even after the fact, let alone show how it could have been predicted. The US boom since 2009 is a case in point. Den Rest des Beitrags lesen »

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How Big Tech Has Powered Global Stocks

Posted by hkarner - 12. März 2019

Date: 11-03-2019
Source: The Wall Street Journal

Profits at Facebook, Alibaba and others are boosting stocks that got walloped last year

Alibaba Group is among the tech companies whose shares have risen more than 25% this year.

Booming profits are driving a fresh rally in technology shares from New York to Hong Kong, helping boost stock markets and showing the allure of rapidly growing companies even as the global growth outlook dims.

Companies including Facebook Inc., Netflix Inc., Alibaba Group Holding Ltd. and Rakuten Inc. have risen more than 25% this year, well outpacing the gains of the stock indexes on which they are listed. The advance is a marked turnaround from the final months of 2018, when tumbling technology shares wiped out trillions of dollars from the global stock market.

Fund managers have credited some of the advance to the group’s record of generating robust and, in many cases, record profits as broader earnings growth has cooled. Earnings are a key driver of stock prices, making industries delivering high growth like technology an appealing bet for investors who are worried about slowing growth across the global economy.

“Big tech is looking far more interesting now than it has any time over the past year,” said Jim Tierney, chief investment officer of U.S. concentrated growth at AllianceBernstein, which owns shares of Google parent Alphabet Inc., Facebook and Microsoft Corp. As the growth outlook becomes more murky, “if you can find companies that can grow a heck of a lot faster, they’re looking attractive,” Mr. Tierney said.

Stocks broadly have gotten a lift from the Federal Reserve’s pivot from signaling further rate increases to keeping rates on pause as it gauges a slowdown in the global economy, as well as easing trade tensions. The World Bank and the International Monetary Fund slashed their forecasts for 2019 and 2020 growth in recent months, citing risks including weakening industrial production, a potential “no-deal” Brexit and cooling earnings growth. Den Rest des Beitrags lesen »

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Bond Rally Suggests the Stock Market Honeymoon Is on Borrowed Time

Posted by hkarner - 5. Februar 2019

Date: 04-02-2019
Source: The Wall Street Journal

Some investors say it is difficult to imagine stocks being able to continue at January’s pace

One force helping boost the stock market is faith that the Fed will leave short-term interest rates unchanged for now.

U.S. stocks and bonds are rallying together, an atypical pattern that some investors worry suggests the January rebound in equities is fated to run up against a painful reversal.

Major indexes have started off the year on an upbeat note, closing out their best January since the 1980s. The gains are a testament to fresh optimism about the U.S. and China’s trade negotiations, as well as confidence that the Federal Reserve will pause its campaign of raising interest rates while it gauges a slowdown in global growth.

Yet yields on both shorter- and longer-term government debt have continued a monthslong slide, a development that has historically signified growing pessimism about the outlook for the U.S. economy. Den Rest des Beitrags lesen »

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Stocks Climb As Fears of Economic Slowdown Subside

Posted by hkarner - 20. Januar 2019

Date: 19-01-2019
Source: The Wall Street Journal

Economic data, signs of easing trade tensions, and a batch of upbeat earnings help lift major indexes

U.S. stocks climbed Friday to notch their fourth consecutive week of gains as the fears of an economic slowdown that gripped markets in December seem to have subsided.

Data showing a healthy labor market, as well as signals from central bankers that the Federal Reserve will be flexible with monetary policy, have offered relief to investors who earlier worried that the Fed’s pace of interest-rate increases could jolt an economy on shaky footing.

The four-week winning streak by the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite is their biggest on a percentage basis since October 2011. The blue-chip index has rebounded 13% since bottoming out on Christmas Eve and suffering its worst December since 1931.

“Investor sentiment has really improved from the turmoil just before Christmas,” said Brian Jacobsen, a senior multisector strategist at Wells Fargo Asset Management, adding “we almost got a do-over” since then as investors have jumped back into the market at improved valuations.

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What Amazon’s Rise to No. 1 Says About the Stock Market

Posted by hkarner - 13. Januar 2019

Date: 12-01-2019
Source: The Wall Street Journal By Jason Zweig

The biggest companies are the still the most dominant. The biggest companies today make up less of the overall market than those in the past. And the biggest companies can still be toppled.

On Jan. 7, Amazon.com Inc. became the world’s largest company by market capitalization. Its rise might make you think today’s biggest technology companies are turning into unstoppable juggernauts of growth, or that turnover at the top is only accelerating.

First, consider the history of all the companies that have ranked No. 1 by market size. It’s full of surprises.

From the beginning of 1926 through the end of last year, only 10 companies have ever ranked No. 1 among all U.S. stocks by market capitalization. Amazon has just become the 11th, succeeding Microsoft Corp. , Apple Inc., Exxon Mobil Corp. , General Electric Co. , Walmart Inc., Altria Group Inc., International Business Machines Corp. , DowDuPont Inc., General Motors Co. and AT&T Inc. Den Rest des Beitrags lesen »

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In the Stock Market, It’s a Dog-Eat-Dow World

Posted by hkarner - 26. Dezember 2018

Date: 24-12-2018
Source: The Wall Street Journal

Going into the last week of the 2018, major stock indexes are on track for their worst year since 2008

Experts think more trading volatility could be in store in the year ahead.

Market volatility spurred by recent worries about interest rates, trade tensions and slowing economic growth are sending investors to the dogs—the Dogs of the Dow, that is.

Investors have fled shares of companies like technology firms that are known for their growth prospects in favor of those that offer higher dividend yields, benefiting followers of the classic investing theory, which is beating the benchmark Dow Jones Industrial Average in 2018.

The strategy entails buying the 10 highest-yielding components of the 30-stock Dow industrials at the beginning of a year and holding the shares over the following 12 months. That gives investors dividend income and the benefit of buying cheaper stocks. Excluding dividend increases, yields rise when stock prices fall, highlighting a hallmark of the strategy.

Going into the last week of the 2018, major stock indexes are on track for their worst year since 2008, and more volatility could be in store. Trading tends to be light during the holiday-shortened week, which could trigger bigger-than-normal price swings, though heavy volume in recent sessions signals things could also prove busier than usual. Worries about the Federal Reserve’s path of interest-rates increases, simmering trade tensions with China and stalling economic growth around the world have tested the durability of the nearly 10-year bull-market run in U.S. stocks in recent sessions.

The Dogs’ returns this year are negative through Friday, but the losses are smaller than those of the broader blue-chip index. That is a reversal from earlier in the year when Dogs underperformed as major indexes climbed to records on the back of robust corporate earnings growth and 2017’s massive tax overhaul.

Among this year’s Dogs are health-care giant Merck & Co., which has surged 34% in 2018 on a total-return basis including dividend payments; Cisco Systems Inc., which has climbed 13%; and Verizon Communications Inc., up 8.7%. The biggest drag is a company that lost its home in the blue-chip index earlier this year: General Electric Co.

“Buying strength in anything other than utilities or dividend payers has not worked out,” said Frank Cappelleri, executive director at Instinet LLC. He added he expects more investors to rotate into haven stocks at the start of the year when investors tend to make adjustments to their portfolios after reviewing their end-of-year performance statements.

That flight from risk appears to be accelerating heading into the final week of the year. Investors have yanked money out of both stock and bond funds at a quickening pace, in some cases moving their positions to cash. Meanwhile, utilities and real-estate companies, beloved in weak economies for their steady distribution payments, are among the best recent performers, posting smaller losses than other sectors.

Despite the outperformance of the Dogs this year, they haven’t been immune to the fears rattling the broader stock market and are on track for their first negative return since 2008, according to Dow Jones Market Data. They have slumped 2.7% through Friday on a total-return basis, versus a 7.1% fall for the broader index. That contrasts with the first three quarters of the year when the Dogs returned 5.8%, short of the Dow industrials’ 8.8% gain.

Over a longer time frame, the Dogs’ returns are more impressive. They have beaten the broader index in three of the past four years and 60% of the time over the past 20 years, according to Dow Jones Market Data. Last year was an exception: As the Dow industrials hit five 1,000-point milestones, the Dogs returned roughly 15% compared with the broader average’s 28% return.

One big attraction of the Dogs is their high distribution payments to investors. Each of the Dogs at the end of 2017 boasted a dividend yield of at least 3.1%, which is well above the current yield of 2.792% on the benchmark 10-year Treasury note and the 2.4% average dividend yield for all Dow components.

“The value in owning dividend stocks right now is these have strong balance sheets,” said Sandy Pomeroy, portfolio manager at Neuberger Berman Equity Income Fund. “Right now in particular with the economy potentially slowing and the Fed tightening, all of a sudden these things look stronger rather than buying the dream.”

Her fund holds shares of Verizon and Pfizer Inc., but she has steered clear of International Business Machines Corp. , despite its attractive yields.

“Fundamentals matter,” she said, adding that buying companies solely for a high dividend isn’t necessarily the best strategy. Her fund looks for the sustainability of the dividend and possibility for dividend growth, she said.

Merck, which carried a 3.4% dividend yield at the end of 2017, has soared this year as the pharmaceutical company has made solid progress in research and development of new drugs. Pfizer has also provided some bite in 2018, rising 20% on a total-return basis. Pharma stocks in general have had a good year—the health-care sector of the S&P 500 is the only group other than utilities on track for yearly gains, while Merck and Pfizer are the best performers in the Dow industrials on a price-basis as well.

Only four Dogs have suffered losses in 2018 after factoring in dividends: GE, IBM and energy giants Exxon Mobil Corp. and Chevron Corp. , whose tumble has coincided with a steep drop in oil prices.

GE entered the year with a hefty dividend yield of nearly 5%. Since then, its stock has lost nearly 60% of its value, the one-time industrial stalwart cut its dividend to a token penny a share and the company has been kicked out of the blue-chip index. As a result, it won’t be a part of next year’s pack of Dogs. In its place will likely be JPMorgan Chase & Co.; the other nine dogs are on track to be back in 2019.

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