Newsletter

Newsletter

Our market newsletter brings a plain-language explanation of the U.S. stock market to individual investors and outlines our approach to managing client money.

The Markets Don’t Care About the Election
Oct 11, 2020

The Markets Don’t Care About the Election

Covid numbers & stimulus dynamic matter much more, in our opinion. Over the next few weeks, we expect to be inundated with articles on discussing each candidate’s respective platform and the potential ramification for stock prices. However, the reality is that not much will change, regardless of who wins, at least in the foreseeable future. Both candidates will continue the Fed's stimulative policies with trillion-dollar packages likely, and neither will make coronavirus go away. Get ready for a few weeks of handwringing and anxiety which will eventually cumulate in the unsatisfying sensation of being exhausted from running in place.

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The Nihilistic Bull Market: Stop Asking it to Care: September Newsletter
Sep 7, 2020

The Nihilistic Bull Market: Stop Asking it to Care: September Newsletter

Following last week’s setback equity markets (the S&P500) are still up 6% YTD and more than 50% above than the depths of corona-panic levels in March. We anticipate it getting more difficult over the near-term. The recovery in sectors hurt by Covid19 is decelerating. Meanwhile, many companies that have benefited from the pandemic have their best results behind them. The Fed remains supportive, but more than 10 million people are still without a job compared to last year. It took five years to create 10 million jobs in the period leading up to 2020. Next up, a two-month countdown to a Presidential election in an era of simmering social tension.

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Embrace the Hegemony of Big Tech: August Newsletter
Aug 3, 2020

Embrace the Hegemony of Big Tech: August Newsletter

Distortion from coronavirus has aided, not hurt, large technology firms, and these continue to lead the market higher. The debate around the valuation of Big Tech is not new but has reached a new level of anxiety with the top five names valued at $6.6 trillion and comprising more than 20% of the S&P500. We are not particularly concerned. We remain bullish regarding the long-term outlook and prospects for exceptional companies including Big Tech to create value.

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July Newsletter: Not a Mystery
Jul 9, 2020

July Newsletter: Not a Mystery

Stock prices may be disconnected from media negativity and risks related to a still-untamed coronavirus pandemic, but this can be understood and is normal, in our opinion. In this newsletter we argue that uncertainty and possibly scary valuations do not mean you should run away from equities. Our view is unchanged. We remain bullish regarding the long-term outlook and prospects for exceptional companies to create value.

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June Newsletter: Pet Market Hits All-Time High
Jun 1, 2020

June Newsletter: Pet Market Hits All-Time High

Dire forecasts for the end of the world have not come to pass. The resurgence reflects 1) investor anticipation of things getting better at some distant point in the future, 2) the fact that some companies have actually seen business improve during the Crisis, and 3) a broad-based shift in sentiment to optimism from fear. We remain bullish on the long-term potential for the U.S. economy and for exceptional companies to do well.

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May Newsletter: Isolated from Bad News
May 8, 2020

May Newsletter: Isolated from Bad News

Despite the biggest disruption to life in a generation, it makes sense that stocks have barely declined. First, as we discussed last month, the market looks forward, and economies are already in the process of reopening. Second, the Federal Reserve is again backstopping the economy and flooding the market with liquidity. Similar efforts successfully saved the U.S. and global economy during the 2008-2009 housing and financial crisis. Most investors remember this. Third, investors are anticipating accelerated secular change, and bidding up the shares of large technology and other companies, which are perceived to benefit.

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April Newsletter: Look Forward, Not Backward
Mar 31, 2020

April Newsletter: Look Forward, Not Backward

Was last week’s mid-week 20% rebound real? Unemployment is exploding. 100 Million Americans are entombed in their homes. Businesses are shuttered. A pandemic threatens widespread death and suffering if some forecasts are to be believed. The stock market staged a dramatic three-day jump. We are saddened by the job losses, business foreclosures, stress, and tragedy but remain optimistic from a clinical investment standpoint.

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Washing Hands Won’t Help: Corona-Mania is Spread via your iPhone
Mar 2, 2020

Washing Hands Won’t Help: Corona-Mania is Spread via your iPhone

Summary: Stocks needed an excuse to pull-back. The media storm and negative feedback loop around coronavirus have proven to be just the trick. Our view: Don’t change your investment strategy. The DJIA dropped 12% last week. The severity of the sell-off is due to three factors. First, stocks were extended following the recent resolution of uncertainty on trade disputes with China. Second, financial and other media have stoked fear by massively amplifying reporting and risk around the threat of coronavirus. Lastly, companies and industries are experiencing a real negative impact from reduced consumer spending, travel, and disrupted supply chains. Earnings will be lower than previous estimates.

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January 2020 Newsletter: Resolution of Uncertainty on Trade Wars, Now What?
Jan 19, 2020

January 2020 Newsletter: Resolution of Uncertainty on Trade Wars, Now What?

Summary: The debate over the past year has considered on one hand consistently strong employment growth and consumer spending (2/3 of U.S. economic activity), and on the other slowing corporate earnings growth and risks including the impact of trade disputes, potential increased regulation for big tech (Facebook, Google, etc.), and actions of the Federal Reserve. The threat from the Fed was reversed early in 2019 when it pivoted to cutting rates (and thus providing stimulus) from raising rates. However, it wasn’t until last week with the signing of both the USMCA (United States Mexico Canada Agreement) and Phase 1 of a deal with China that 2019’s most powerful fear-based narrative on trade disputes lost its force.

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December 2019 Newsletter: Outlook for the Consumer and Markets
Dec 17, 2019

December 2019 Newsletter: Outlook for the Consumer and Markets

Summary: The strongest consumer environment in our lifetimes, low interest rates, and ample access to capital underly the market’s favorable momentum heading into 2020, in our view. 2020 is an election year, which is typically disruptive to the consumer. Certain left-leaning policies would be very negative for economic growth, if they were to be enacted. Our advice is focus on 1) the strength of the consumer (whose spending represents 2/3 of U.S. economic activity), 2) the stability of the financial system, and 3) the innovative nature of U.S. companies and industries.

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November Newsletter: Bearish Positioning Sets Scene for Further Gains
Nov 3, 2019

November Newsletter: Bearish Positioning Sets Scene for Further Gains

Summary: Markets pushed to new highs on the combination of better-than-expected earnings and stimulus from rate cuts, offsetting and providing a counterpoint to the slowing global growth narrative. The debate in the market over the last 12-months has revolved around the length of the current expansion, valuations, and the likelihood of a downturn in the economic cycle. While there are certainly reasons to be concerned, we continue to focus on the strength of the U.S. consumer. (Consumer spending is more than 2/3 of economic activity in the largest economy in the world, after all.) The consumer remains in a very good state due to the best job market in decades and modest-to-non-existent inflation. We also remain bullish on the innovative qualities of U.S. companies and we believe that access to capital (both for companies and individuals) remains good.

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September Newsletter: Bring on the Recession
Sep 19, 2019

September Newsletter: Bring on the Recession

The financial media remains focused on fear-related themes and potential for a recession, but we believe economic weakness can actually be good, if you’re invested in the right companies. On the other hand, the U.S. consumer remains very strong, and consumer spending is more than two-thirds of the U.S. economy. U.S. companies also remain very innovative and ability to raise capital is good. The main risk to global growth seems to be trade disputes between the world’s two largest economies, but, in our opinion, this is a war in name only. We continue to think it makes more sense to position for a positive resolution.

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August Newsletter: Cut Thin & Win
Aug 6, 2019

August Newsletter: Cut Thin & Win

Summary: Threats to economic growth remain minor relative to underlying positives, in our opinion. Last week, markets fell as the Federal Reserve lowered interest rates, but signaled no future cuts. This was followed by Thursday’s announcement that the U.S. would impose a 10% tariff on $300B of Chinese imports. Both events served to stoke fears of slowing global growth. Our view remains more constructive due to our focus on the strong consumer (unemployment is at 50-year low), the innovative nature of U.S. companies and industries, and favorable conditions for access for capital, among both private and public companies. We continue to see the tariff and trade “war” talk as mostly noise relative to economic momentum.

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July Newsletter:  Longest Ever Bull Market Means Nothing
Jul 1, 2019

July Newsletter: Longest Ever Bull Market Means Nothing

Summary: We’ve hit the longest economic expansion and bull market in U.S. history, but it can continue, in our opinion. The market endured a terrible growth scare over October-December last year and again pulled back during May on concerns about tariffs. These worries were ultimately overwhelmed by a combination of ongoing strong economic conditions, and a Federal Reserve that appears willing to act to support equity prices. The possible resolution of tariffs is helping this morning. The duration of economic growth and the bull market are often cited by those predicting a downturn, but current conditions remain favorable, in our opinion.

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May Newsletter: Trade War Torpedoes Market’s Advance
May 14, 2019

May Newsletter: Trade War Torpedoes Market’s Advance

Summary: Trade-related disputes and uncertainty will not derail economic growth, in our opinion. The market (the S&P500) has given back nearly 5% after hitting all time high levels on May 1 in response to the back-and-forth imposition of import tariffs between China and the U.S. The world’s two largest economies bickering cannot be construed as a positive. However, contextualizing this dispute suggests that the risk to world economic growth is likely overstated, in our opinion. Our base assumption is that the negotiating process will cause some disruption but not overturn the current favorable momentum of the U.S. consumer and U.S. economy nor reverse the share gains of companies with superior strategies or technologies.

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April Newsletter: V is for Victory
Apr 8, 2019

April Newsletter: V is for Victory

Summary: The U.S. economy and the corporate earnings continued to grow in the first quarter, fueling the ongoing rally. The fourth quarter of 2018 saw investors sell stocks on the assumption that the Federal Reserve’s intention to raise interest rates would hamstring an already fatigued U.S. and global economy, probably sparking a recession. The year-to-date reversal, on the other hand, reflects the Fed’s pivot away from raising rates, ongoing growth in the economy and corporate earnings, and lately, investors chasing rising stock prices. At least that’s how we see the market’s action in the last few weeks. Our view: the opportunity to buy has passed but we remain bullish.

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March Newsletter: After Recession Scare, Bull Market Remains
Mar 4, 2019

March Newsletter: After Recession Scare, Bull Market Remains

Summary:  Big rebound in stocks to start 2019 leaves professional worriers behind.  Stocks tanked in the last quarter of 2018.  Essentially, many investors had become convinced that a recession was on the horizon and competed with each other to sell stocks ahead of the expected bad corporate and economic news.  Why were investors convinced that things were turning south?  The most significant factor (but not the only one) was the Federal Reserve’s insistence on tightening monetary policy and apparent lack of sensitivity to markets.  Unfortunately for those who sold positions, the Fed subsequently completely changed its posturing and adopted a friendlier stance for stocks.  Simultaneously, economic data remained fairly robust, thus spurring a 12% rise in the S&P500 to start 2019. 

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January Newsletter: Fed Takes Boot Off the Throat to Start 2019
Jan 28, 2019

January Newsletter: Fed Takes Boot Off the Throat to Start 2019

Summary: The market continues to oscillate between concern of slowing global growth and optimism that U.S. economic expansion can be maintained.

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December Newsletter: Yield Curve Inversion Explained
Dec 23, 2018

December Newsletter: Yield Curve Inversion Explained

Summary: Disruption from trade disputes, rising interest rates, uneven signals from housing and automotive markets, nascent inflation from a tight labor market, concerns about “peak” employment and lapping tax reform (at some point) next year have all served to create fear that the U.S. economic growth will slow and possibly enter recession perhaps in late 2019 or early 2020.

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November Newsletter: Sawtooth Market Makes Perfect Sense
Nov 2, 2018

November Newsletter: Sawtooth Market Makes Perfect Sense

Summary: We continue to see the current market dynamic as representative of the tension between current conditions and corporate results (which are very strong) and expected economic growth which is being impaired due to 1) lapping tax reform, 2) rising interest rates, 3) inflation in labor rates, 4) slowing housing related metrics, and 5) potential disruption due to tariffs and trade disputes.

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October Newsletter: Valuation Contraction Starting
Oct 12, 2018

October Newsletter: Valuation Contraction Starting

Summary: The market’s recent action represents the tension between very strong economic and corporate earnings growth & positive price momentum with reasons to expect slower growth next year including (most significantly, in our opinion) lapping tax reform, rising interest rates, and (modest) inflation in labor rates. We see tariffs and political acrimony more as a distraction than a giant concern. Longer-term deficit spending is a worry. Our advice: lower your expectations for near-term market returns but stay involved.

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