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Posts Tagged ‘Stocks’

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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The Great Cheapening of 2018: Global Stock Valuations Now at Five-Year Lows

Posted by hkarner - 13. Dezember 2018

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

Bargain or Fire Sale?

Global equity valuations have dropped considerably, with some measures falling tofive-year lows or further.

The stumble in global equity markets this year has outrun a moderation in expectations for earnings growth, leaving stock valuations at their cheapest in about half a decade by some measures.

What’s Happening
The forward price to earnings ratio for global stocks is at five-year lows, having dropped to about 13.3 times. That’s down from more than 16 times in early 2018, according to FactSet’s World stock index, which includes tens of thousands of listed securities around the world.

The price to earnings ratio is a favorite among analysts and investors for valuing companies.

Valuations for some blue-chip stocks have plumbed multiyear lows: Japan’s Honda Motor Co. and U.S. computing giant International Business Machines Corp. , for example, have both seen their PE ratios fall to around 10-year lows this quarter.

On one alternative, price to free cash flow, which measures the money a company has generated after operating expenses and capital spending, the trend is even more clear. By that measure, stocks are the cheapest they have been since early 2012, when the eurozone sovereign debt crisis was still raging. Den Rest des Beitrags lesen »

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Where to Put Your Money in 2019

Posted by hkarner - 11. Dezember 2018

Date: 10-12-2018
Source: The Wall Street Journal

Don’t give up on stocks, despite their stumbles, and look beyond bonds when allocating assets for the new year. Even ‘cash’ investments might pay off.

It is time to position your portfolio to survive a volatile 2019.

Most veteran market observers agree than an array of factors, from trade disputes to rising interest rates, will create more turbulence as an aging bull market becomes more vulnerable to emotion-driven selloffs. Adding to the uncertainty is the fact that market strategists seem to have an array of forecasts for the markets in 2019—both positive and negative.

For instance, Morgan Stanley ’s chief equity strategist, Mike Wilson, has been calling for the S&P 500, now at 2633 after last week’s slide, to end next year at 2750, while Credit Suisse ’s David Golub says it could hit 3350 as investors are willing to pay more for corporate earnings.

The only point on which everyone seems to agree is that the path ahead will be bumpy. Den Rest des Beitrags lesen »

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No Refuge for Investors as 2018 Rout Sends Stocks, Bonds, Oil Lower

Posted by hkarner - 27. November 2018

Date: 26-11-2018
Source: The Wall Street Journal

The failure of so many investment strategies is viewed by some as a warning of what could come following years of above-average returns

Stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street.

Data show global stocks and bonds could both finish the year in the red for the first time in at least a quarter-century, according to BlackRock Inc. BLK -0.25%

Major stock benchmarks in the U.S., Europe, China and South Korea have all slid 10% or more from recent highs. Crude oil’s tumble has dragged it well into bear-market territory, emerging-market currencies have broadly fallen against the dollar, and bitcoin’s price—which had a meteoric rally last year—crashed below $5,000 last week for the first time since October 2017. Den Rest des Beitrags lesen »

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