Month: August 2017

Consumer confidence can’t be shaken by North Korea

US consumer confidence rose for the 4th straight month and posted its second highest reading in the last 16 years. The Conference Board said its consumer confidence index increased to a reading of 122.9 in August which was above expectations. US consumers remain upbeat thanks to the strong stock market, rising real estate prices and a tight labor market. Consumers have thus far shaken off the news of violence in Charlottesville and the increasing tensions between North Korea and the US. While war is always a risk to markets, we believe that cooler heads will prevail. Tougher sanctions will likely be the next step against North Korea unless they do something really crazy. Keep in mind that North Korea is so puny that it is almost laughable. It is like boxer Floyd Merriweather showing up to your house for a fight. For comparison, in one day, the US makes up over 2x the size of North Korea's annual GDP.

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Summer doldrums for stocks almost over?

As a dedicated reader to our blog, you may have noticed that our blogging pace has slowed this summer much like the stock market. I guess you can say we are both stuck in neutral. Well we are still grinding away but have been busy with conferences and now I am on a much needed holiday to recharge and enjoy some shave ice. Don't worry I will back blogging with more regularity next week. As for the stock market, the sell in May philosophy has worked well again this year. While seasonality doesn't occur exactly the same every year, there definitely are seasonal trends that prevail in the stock market. This year, the S&P 500 has been stuck in a sideways move since June and volatility has picked up a bit as well.

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Global earnings will hit record levels

Since last summer, I have written several blog posts on positive earnings from the S&P 500 constituents. We view accelerating earnings growth as a key driver of stock prices moving forward. Schwab's Chief Global Investment Strategist Jeffrey Kleintop just wrote a very compelling post called “Earnings may be about to do something they've never done before.” Thanks to global growth picking up across virtually all regions, global earnings (measured by the MSCI All Country World Index) are expected to reach new heights in the near future. This is also bullish for the S&P 500 which generates roughly 44% of its revenues from outside the US.

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Tepper: we are ‘nowhere near an overheated’ stock market

Despite the weekly doomsday headlines (this week is from filmmaker Michael Moore – we do not recommend taking investment advice from fimmakers, ever), Billionaire hedge fund manager David Tepper called comparisons of today's market with the tech bubble of 1999 ‘ridiculous' and we wholeheartedly agree. Tepper who runs Appaloosa Management says that the market run doesn't translate into over the top valuations in equities.

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