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Posts Tagged ‘Stocks’

Big Tech’s sell-off

Posted by hkarner - 4. November 2018

Date: 02-11-2018
Source: The Economist: Schumpeter

The shares of the world’s tech giants have sunk. Wobble or wipeout?

Business booms and busts follow a pattern. They start with an exciting change in the economy. Managers and investors collectively create a story about it, which begins as an explanation, then morphs into an extrapolation, and then into an exaggeration. Eventually the data contradict the narrative, boom turns to bust, and a bout of austerity follows. A rout in internet firms’ share prices since August has led plenty of people to ask if the tech industry is experiencing this sequence of hope, hubris and hurt for the second time in two decades. The answer is: to a degree, yes. The level of hype is particularly high, and some of the numbers are decidedly soft. That matters because tech firms are now so big and so spendthrift that a slowdown could damage the economy.

Rarely in stockmarket history have so many investors made so much money from so few shares going up for so long. Some 37% of the rise in the value of all firms in the s&p 500 index since 2013 is explained by six of its members: Alphabet, Amazon, Apple, Facebook, Microsoft and Netflix. About 28% of the rise in Chinese equities over the same period is owing to two firms: Alibaba and Tencent. Managers and investors have bought into a tale of effortless disruption by an elite of firms led by the world’s brainiest people. Den Rest des Beitrags lesen »

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The Big Tech Selloff

Posted by hkarner - 1. November 2018

Date: 01-11-2018
Source: The Wall Street Journal By The Editorial Board

Why the fall from super-high values shouldn’t hurt the larger economy.

Herbert Stein famously observed some 40 years ago that what can’t continue won’t, which bears remembering as tech stocks fall following a fantastic nine-year run fueled in part by the Federal Reserve. Americans no doubt wish that stocks could climb forever, but the tech selloff looks like a healthy correction.

Stocks bounced back Wednesday, but before that the tech-heavy Nasdaq had slumped 12% since its August peak. Falling FAANG stocks— Facebook , Apple, Amazon, Netflix and Google parent Alphabet—have swung the S&P 500 into a correction zone. Netflix tumbled 21% and Amazon fell 20% in October. Texas Instruments , IBM and Nvidia have also seen substantial stock price declines.

A tech revaluation was perhaps inevitable as prices leapt over earnings like LeBron James over Kevin Durant. Amazon’s stock in September was trading at nearly 160 times earnings, which wasn’t going to last. But what makes this month’s tech sale so jarring is that it comes amid strong quarterly earnings growth. Den Rest des Beitrags lesen »

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Falling Share Prices and the Outlook for the US Economy

Posted by hkarner - 30. Oktober 2018

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

Three forces will cause US long-term interest rates to continue to rise. But, in all likelihood, short-term rates will not increase fast enough to give the Federal Reserve sufficient room for monetary stimulus before the next economic downturn begins.

CAMBRIDGE – The Standard and Poor’s 500 index of share prices has fluctuated wildly during 2018 but has returned to nearly the same level that it was at the beginning of the year. The absence of a net fall for the year reflects the combination of a rise in corporate profits and a 12% decline in the price-earnings ratio. And the fall in the price-earnings ratio is an indication of the likely evolution of share prices in the next few years.

The price/earnings (P/E) ratio is now 40% higher than its historic average. Its rise reflects the very low interest rates that have prevailed since the US Federal Reserve cut the federal funds interest rate to near zero in 2008. As long-term interest rates rise, however, share prices will be less attractive to investors and will decline. Den Rest des Beitrags lesen »

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U.S. Stocks Surge, Erasing Recent Losses

Posted by hkarner - 17. Oktober 2018

   Date: 16-10-2018
Source: The Wall Street Journal

Broad rally marks the latest bout of volatility for major indexes; shares of Goldman and Morgan Stanley jump

U.S. stocks soared Tuesday, sending the Dow Jones Industrial Average up more than 400 points, as gains in everything from technology firms to banks helped major indexes claw back recent losses.

Tuesday’s moves marked the latest bout of volatility for stocks, which have swung throughout October as investors have grappled with fresh questions about the nine-year bull market’s durability.

With bond yields at multiyear highs, many say stocks have begun to lose some of the luster they held for years in an environment of ultralow interest rates. Investors are also contending with recent weakness in technology shares, which some worry look overextended after dominating the latest leg of the bull market.

Yet even with those worries, many feel the domestic economy still looks strong—something that they say has helped the U.S. stock market keep charging on.

Shares of Goldman Sachs and Morgan Stanley jumped after the two firms said third-quarter profits surged double-digit percentages, thanks to a flurry of deal making and trading. Even technology firms, which had led major indexes lower Monday, got a jolt higher Tuesday. Den Rest des Beitrags lesen »

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What’s Bubbling Under the Surface of the Stock Market

Posted by hkarner - 11. Oktober 2018

Date: 10-10-2018
Source: The Wall Street Journal

The best and the worst performing stocks did a role reversal. It’s something investors should keep a close eye on.

The Last First, and the First Last
The best performing stocks of the past week were among the worst in the year upto last week’s reverse, and vice-versa.

The pillars of this year’s stock rally crumbled in the past week, even as the overall market had only a mild decline thanks to support from what had been among the most-hated companies.

Beneath the small fall of 1.5% was a near-perfect reversal, with the pedigree performers turning into market mongrels and many of the year’s worst stocks back in favor.

The leading examples are dramatic: General Electric was the best stock in the S&P 500 to own over the past week—and the 496th performer for the year up to that point. Advanced Micro Devices , AMD -6.79% Abiomed and Netflix were by far the shares to hold this year until last week, and since then all have lost money, ranking 393rd, 481st and 443rd in the index.

The reversal was marketwide. Grouped into deciles of roughly 50 stocks (there are 505 stocks in the inaptly named index) ordered by their performance over the past week it is clear that the best performers were previously the worst, and the worst performers were previously among the best.

The pattern isn’t so clear when sorted the other way round. The best performers for the year so far did become the worst: The top 50 stocks on average made 51% up to Wednesday last week and lost 3.7% since then. But plenty of stocks that had a terrible time this year carried on being awful in the past week, too. The bottom 50 stocks on average fell 27% for the year to last Wednesday, before losing another 2.4% since, to make them the second-worst decile.

I’m hopeful that the reversal will see a resurgence of cheap value stocks previously abandoned by investors, mitigating losses among the fashionable FANGs and other technology disrupters. But for now value stocks are also down, just by less than the highflying growth stocks.

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Europe Is Left in the Dust as U.S. Stocks Roar

Posted by hkarner - 30. September 2018

Date: 30-09-2018
Source: The Wall Street Journal

While U.S. and Japanese shares raced ahead, Europe’s shares were left behind in third quarter

European stocks have been left behind by a rally that has taken the U.S. market to record highs in the third quarter.

Few analysts see the region catching up soon, unless there is clarity on the political and trade concerns that pushed investors to sell.

Investors have withdrawn money from European equity funds in 28 of the past 29 weeks, driving the share of Europe in global portfolios to its lowest since January 2015, when the European Central Bank announced its massive bond-purchase program, according to data from fund tracker EPFR and the Institute of International Finance.

That has largely reversed the tide of cash that poured into the region in early 2017, when an election in France elevated investors’ preferred candidate to power. In contrast, funds in the U.S., Japan and even some emerging-market equities have drawn inflows this year.

The Stoxx Europe 600 index rose less than 1% in the third quarter, compared with a 7.2% gain for the S&P 500 and 8.1% for Japan’s Nikkei Stock Average. The European index is now trading below where it was one year ago, compared with an 8.2% gain in a broad index of world stocks.

“U.S. client interest in Europe is very low right now—almost as low as it gets,” said Richard Turnill, BlackRock’s global chief investment strategist.

As the U.S. economy continues its robust run, the gap between 10-year German and U.S. government bond yields has reached its widest since the euro was launched in 1999, according to data from Tradeweb and Thomson Reuters.

The downbeat sentiment comes even as Europe’s earnings expectations for the year have remained stable, the euro and British pound have stopped climbing, and the region’s economy has shown signs of stabilizing after a tricky start.

Our view on Europe is predominantly politically driven,” said Candice Bangsund, portfolio manager at Fiera Capital, which currently holds a smaller-than-usual allocation to European stocks.

The future trading relationship between the U.K., one of the region’s largest economies, and the rest of the continent remains uncertain as Brexit negotiations drag on. Italy’s new government, meanwhile, has significantly widened its budget-deficit target, raising questions about the country’s debt sustainability and relationship with Brussels.

The U.K. and Italy’s benchmark stock indexes have both seen double-digit percentage falls in their price-to-earnings ratios this year amid the uncertainty.

European companies are also more exposed than those in the U.S. to emerging markets, and the developing world has been hit by a rising dollar, expensive oil and concerns about trade protectionism.

Roughly 19% of revenues from companies listed in the Stoxx Europe 600 come from emerging markets, according to FactSet. That compares with 14% for the S&P 500, an index of large-cap U.S. stocks.

Roland Kaloyan, head of European equity strategy at Société Générale, said the correlations between European stocks and emerging markets recently reached levels last seen in 2010.

But trade protectionism is by far the biggest risk to Europe’s outlook, analysts say.

Europe’s auto sector has been hit particularly hard by worries about tariffs, trading down about 23% from its peak in January.

“Europe is more exposed to protectionism because it has a more open economy and has closer ties to China,” said Silvia Dall’Angelo, senior economist at Hermes Investment Management.

Uncertainty about future trade relations has already hit eurozone exports. In manufacturing, export orders failed to grow for the first time in five years.

All this means there will be bargains in Europe, should more clarity come on the political front, some investors say.

European stocks now trade at 13.9 times future expected earnings, compared with 15 at the start of the year.

European companies are seeing revenue upgrades for the first time in a year, according to strategists at UBS . “A lot of investors are looking at valuations and looking for a reason to come back” to Europe, said Mr. Kaloyan.

If we got some sort of clarity on Italy or Brexit, we could see a rebound.”

Much will also depend on whether investors continue to favor so-called growth stocks such as technology companies, which make up a small portion of European indexes. Tech stocks in the S&P 500 are up roughly 19% this year and now make up 21% of that index. Tech makes up just 5% of the Stoxx Europe 600. Unless value stocks—those that are trading for the lowest prices relative to their earnings or underlying net worth—start to outperform, it will be difficult for Europe to pull ahead, fund managers say.

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The ‘Dumb’ Money Is Bailing on U.S. Stocks. That’s Smart.

Posted by hkarner - 30. September 2018

Date: 29-09-2018
Source: The Wall Street Journal By Jason Zweig

Now more than ever, investors need to consider investing in overseas stock markets
The ‘Dumb’ Money Is Bailing on U.S. Stocks. That’s Smart.

Does it make sense to invest anywhere but in the U.S?

While the S&P 500 is within 1% of its all-time high, European markets are flat, Chinese stocks are in a deep slump and the Japanese market—after a huge recent run-up—has finally clawed its way back to where it was 27 years ago.

Through Aug. 31, the S&P 500 has outperformed international stocks, as measured by the MSCI World ex USA Index, over the past one, three, five, 10, 15, 20, 25, 30, 35, 40 and 45 years, according to AJO, an institutional investment manager in Philadelphia. Had you put $10,000 in each in 1973 and reinvested all your dividends, your U.S. holdings would be worth $1.06 million; your international stocks, $356,000. Den Rest des Beitrags lesen »

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Do Spectacular Earnings Justify Spectacular US Stock Prices?

Posted by hkarner - 25. September 2018

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.

With share prices and corporate earnings moving together on a nearly one-for-one basis, one might conclude that the US stock market is behaving sensibly, simply reflecting the US economy’s growing strength. But the stock market has not always been so dismissive of the volatility of earnings.

NEW HAVEN – The US stock market, as measured by the monthly real (inflation-adjusted) S&P Composite Index, or S&P 500, has increased 3.3-fold since its bottom in March 2009. This makes the US stock market the most expensive in the world, according to the cyclically adjusted price-to-earnings (CAPE) ratio that I have long advocated. Is the price increase justified, or are we witnessing a bubble?

One might think the increase is justified, given that real quarterly S&P 500 reported earnings per share rose 3.8-fold over essentially the same period, from the first quarter of 2009 to the second quarter of 2018. In fact, the price increase was a little less than equal to earnings.

Of course, 2008 was an unusual year. What if we measure earnings growth not from 2008, but from the beginning of the Trump administration, in January 2017? Den Rest des Beitrags lesen »

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Amazon Closes in on Apple’s Top Spot

Posted by hkarner - 21. Juli 2018

Date: 20-07-2018
Source: The Wall Street Journal

Amazon.com Inc. is making another run at the title of world’s most valuable company.

The e-commerce giant ended Wednesday’s trading session with a market value of $894 billion, according to the WSJ Market Data Group. That puts the Seattle-based company just $42 billion shy of Apple Inc.’s world-topping market capitalization.

Apple overtook Exxon Mobil Corp. in 2011 to claim the title of world’s most valuable company. The iPhone maker and oil giant swapped positions a few times in the following years before Apple retook the top spot in 2016.

But Amazon’s share-price surge in recent months is threatening to unseat Apple. Amazon’s stock is up 80% over the past year, while Apple shares have gained 27%. Both are far outpacing the S&P 500’s 14% gain over that period. Den Rest des Beitrags lesen »

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„Haben Höhepunkt vielleicht schon gesehen“

Posted by hkarner - 17. Juli 2018

BlackRock-Experte Martin Lück hält US-Aktien für relativ attraktiv. Eine Rezession sollte es nicht vor 2020 geben.

Wien. Der Handelskonflikt ist dieser Tage auch an den Börsen das dominierende Thema. Zu Recht? Martin Lück, Chef-Investmentstratege für Deutschland, Österreich und Mittel- und Osteuropa beim Vermögensverwalter BlackRock, rechnet nicht mit einem ausgewachsenen Handelskrieg. Es handle sich eher um Wahlkampfgetöse, das bis zu den US-Kongresswahlen im November anhalten werde.

Für gefährlicher hält Lück das Überhitzungsrisiko durch die US-Steuerreform und die Gefahr, dass die Zentralbank die Zinsen schneller anheben muss als geplant. In Europa drohe ein Konflikt mit der italienischen Regierung, auch das Risiko eines harten Brexits sei nicht vom Tisch. Dass Europas Wirtschaft der US-Wirtschaft vier Jahre hinterherhinke, bedeute nicht, dass sie auch vier Jahre später in eine Rezession schlittern würde.

Vor diesem Hintergrund hält Lück US-Aktien derzeit für attraktiver als europäische. „Ihre Gewinne werden von der Steuerreform angetrieben, die Kurse profitieren von Aktienrückkäufen.“ Dieser Effekt sollte bis 2019 wirken. In Europa hingegen habe sich das Wachstum in der ersten Jahreshälfte etwas abgeschwächt. Hinzu komme, dass die europäischen Unternehmen stärker im Welthandel exponiert sind und daher mehr unter dem Handelskonflikt leiden. Den Rest des Beitrags lesen »

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