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The Markets We’re cycling along. It’s easy to forget that economic activity tends to move in cycles. A full cycle, known as the business cycle, typically includes four stages: Contraction occurs when economic growth slows as an economy produces fewer goods and services. Economic contractions often include recessions. As productivity contracts, it can negatively affect the profitability of companies, as well as the number of jobs available and the income security of workers. The United States economy contracted during the first two quarters of 2022. Trough is the stage at which economic growth hits bottom for the cycle. It [...]

The Markets In November, investors were more optimistic than consumers. At the start of November, investors were decidedly bearish. During the week of November 1, the AAII Investor Sentiment Survey found that about 50 percent of respondents were pessimistic about the prospects for stocks over the next six months, and about 24 percent were bullish. The current historic averages are 31 percent bearish and 37.5 percent bullish. (The remainder are neutral.) Many believe the survey is a contrarian indicator, meaning that stocks are likely to rise when investors are bearish and fall when investors are bullish. November offered some [...]

The Markets Is it done? (We’re not talking about the turkey.) Last week, investors enthusiastically embraced the idea that the Federal Reserve (Fed) could be done raising rates – and that it might even begin to lower them. As conviction about the possibility of rate cuts increased, stock and bond markets rallied, reported Koh Gui Qing and Dhara Ranasinghe of Reuters. The catalyst was easing inflation. Last week, the Consumer Price Index indicated that inflation in the United States was flat from September to October, and 3.2 percent for the preceding 12-month period. Core inflation, which excludes volatile food [...]

The Markets Earnings grew in the third quarter. Four times a year, during earnings season, publicly traded companies report how well they performed during the previous quarter. The strength of corporate earnings – also known as bottom-line profits – is one of the economic indicators that investors watch closely. When companies consistently grow earnings, investors feel confident they may continue to do so. Consequently, solid earnings can help lift a company’s share price. The opposite is also true. When earnings are lower than expected, investors may lose confidence in a company or look for better relative opportunities. As a [...]

The Markets Will there be a year-end rally? Last week, there was a lot of speculation about whether the United States will see a year-end stock market rally. Some say yes, and some say no. For example, at Bank of America, “Chief investment strategist Michael Hartnett broke from his usual bearish view to say technicals no longer stand in the way of a year-end rally for the S&P 500 Index. Savita Subramanian, head of U.S. equity and quantitative strategy and an optimist on stocks this year…[said] a contrarian indicator from the bank is also close to offering a buy [...]

The Markets The Mark Twain Effect? Historically, economic theory was based on the idea that financial decisions were grounded in rational thought. In recent years, behavioral economists have recognized that people don’t always behave rationally. In fact, research has found that investors like shortcuts that help simplify decision-making. While rules of thumb can be helpful, it’s important to use common sense. Some investment theories are a bit wacky, such as: The Aspirin Indicator: This theory holds that there is an inverse correlation between aspirin production and stock market performance. When aspirin production is down, markets are up (fewer headaches). [...]

The Markets Stay calm and consider the big picture. Today, investors have a myriad of worries that are creating tremendous uncertainty. A September Investopedia survey found investors are concerned about how their investments may be affected by: Inflation (59 percent), The upcoming election (52 percent), A possible recession, (51 percent) Higher interest rates, (51 percent) S.-China tension, (44 percent) War in Ukraine (35 percent), The United States’ credit rating downgrade (33 percent), Climate disasters (20 percent), and other issues. Now, they’re also concerned about war in the Middle East. Sometimes, in the midst of uncertainty, it can be helpful [...]

The Markets Markets were resilient. Last week, investors had a lot to process – geopolitics, inflation, consumer sentiment, the possibility of government shutdown – and markets were volatile. Toward the end of the week, some investors were reassured when earnings season kicked off with reports showing major banks posted stronger-than-expected profits during the third quarter. Here’s a brief look at what happened during the week: War in Israel. Hamas terrorists attacked Israel, and Israel declared war. The human toll has been high and continues to increase. The conflict has potential to spread across the region. While economics is a [...]

The Markets Financial markets lost ground during the third quarter. While year-to-date returns for the Standard & Poor’s (S&P) 500 Index remain above the historic average, which was 10.24 percent, including dividends, from 1973 to 2022, the rally in U.S. stocks stalled during the third quarter of 2023, reported Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan of Reuters. Early in the quarter, U.S. stocks gained, driven higher by better-than-expected corporate earnings, falling inflation and optimism that the Federal Reserve (Fed) might be near the end of its rate-hiking cycle. Since March of 2022, the Fed has lifted the Federal [...]

The Markets Inflation is slowing but consumers aren’t feeling it. In August, for the first time in two years, inflation (excluding volatile food and energy costs) dropped below four percent. Last week, one of the Federal Reserve (Fed)’s favored inflation measures – the Personal Consumption Expenditures (PCE) Price Index – indicated that prices rose 3.9 percent, year-over-year, in August 2023. That’s an improvement from January, when prices rose by 4.9 percent, year-over-year, but it remains above the Fed’s target of 2 percent. While slowing inflation is good news, many Americans are not feeling relief. “Even as the Federal Reserve’s [...]