Commentary

Fisher Investments Editorial Staff
Into Perspective, Media Hype/Myths

8.15 Bits of Bad News That Haven’t Broken Markets in 2016 (But Were Supposed to)

By, 07/22/2016
Ratings783.980769


Don’t worry, the authorities are aware of the problem. Photo by Olivia Harris/Getty Images.

Folks remain pretty glum about the current bull market, now more than seven years old and arguably history’s least-loved. Headlines constantly spout warnings about the next big bad for markets, adding to the overall gloom. However, is the hype behind the fear real? Now that we are more than halfway into 2016, here are 8.15[i] stories that were supposed to derail stocks but didn’t—a friendly reminder about markets’ resiliency.

1. US Recession Worries

Commentary

Fisher Investments Editorial Staff
Emerging Markets

Turkey’s Failed Coup in Broader Perspective: Statista's Infographic

By, 07/21/2016

Last Friday’s failed attempt by a military faction to overturn Turkey’s elected[i] government and President Recep Tayyip Erdoğan is still garnering headlines. At this point, by some reports, Erdoğan’s purge of the alleged rebels totals nearly 60,000, ranging from military leaders to University professors. Obviously, with its failure, the coup’s primary market impact was rendered null and void—leadership change and the associated uncertainty didn’t happen. However, coming on top of recent terror strikes, the Brexit vote and America’s election, it would be easy to get caught up in headlines and presume this coup is a further expansion of the “wild” times we live in. However, the following infographic, which we share courtesy of Statista, might add useful perspective.

From an equity market perspective, Turkey is tiny. It amounts to only 0.1% of the MSCI All-Country World Index (the MSCI World plus Emerging Markets) by market capitalization and less than 1% of world GDP.[ii] We weren’t likely to see major global ripples even if Erdoğan’s government fell.

Moreover, coups d’etat are a fairly regular occurrence in Turkey, as the infographic shows. (Moreover, even this list omits a brief attempted coup in 1963 and an alleged-but-unproven covert coup in 1993.) But also, note the number of coups by decade globally has been in sharp decline since the 1960s. The world is, of course, not devoid of problems. But seen in proper perspective, it never has been and likely never will be. About all you can say is these types of occurrences have become far less common than in the past, and that’s largely for the best. For investors, keeping broader perspective can help you maintain an even keel when scary headlines hit.

Commentary

Fisher Investments Editorial Staff
Reality Check, Inconvenient Truths

Don’t Be Swayed by Downgrades

By, 07/20/2016
Ratings284.267857

Credit rating agencies continue to be busy, downgrading a record-number of countries this year. Poor old Britain even lost two notches from S&P! Now the Land Down Under is in their sights, causing some to suggest raters are “tightening the screws” on the banking system—presuming a lower-rated Australian Federal government will boost borrowing costs for banks, other firms and states downstream. Here we advise relaxing. Have a Coke. Smile. As ever, raters are acting and jawboning based on flawed assumptions, arbitrary observations, myths and widely known information, none of it actionable for investors.

Rating agencies’ recent downgrades are based on flawed methodology, philosophy and process, which is sort of par for the course for them historically. S&P and Fitch downgraded the UK in the days following June’s Brexit vote, saying Brexit might reduce foreign investment and increase political gridlock. However, bond markets either don’t think these events are likely to come to fruition or don’t agree that they present a credit risk for Britain, as yields have fallen to historic lows since the downgrades amid strong demand at Gilt auctions. There is no evidence Britain relies on “the kindness of [foreign] strangers” to fund its debt.

Soon after, S&P put Australia on negative watch because political gridlock may prevent it from passing measures aimed at reducing its budget deficit, which has ballooned in recent years. But Australia’s net debt-to-GDP ratio—at 18.9%— is much lower than that of the US, UK and all major European nations. The Aussies can easily service their debt. Earlier this year, S&P downgraded Poland after it passed laws S&P claimed weakened key institutions, and all three raters downgraded Brazil to junk status this year amid continued political turmoil and rising debt relative to GDP. But these factors don’t mean these countries’ creditworthiness is imperiled. More political influence over banks and the media isn’t a good thing, but it’s a far cry from being at greater risk of defaulting. As for rising debt, this is a problem only if it increases enough to jeopardize a country’s ability to make debt payments. This is not the case for Brazil, which has a huge piggy bank stuffed with forex reserves. Besides, in each of these cases, the events S&P cites have already happened—markets likely already reflect them.   

Commentary

Fisher Investments Editorial Staff
Into Perspective

Stocks Don’t Suffer From the Summertime Blues

By, 07/18/2016
Ratings724.361111

Here is a thought exercise. Imagine at the start of 2016, we told you presumptive presidential nominees Donald Trump and Hillary Clinton would fill headlines with bombastic rhetoric, Britain would vote to leave the EU and stocks would suffer a correction. Meanwhile, bank fears would run rampant, high-yield bond defaults would rise and Energy earnings would continue to circle the proverbial bowl. How do you think global stock markets would be faring in mid-July, approximately halfway into the year? Maybe down a bit, or perhaps even a lot? Well, all those things happened, and markets are actually up year-to-date! This is a timely reminder that during bull markets, stocks rise more than fall, and those returns often come in unpredictable spurts—frequently rebuking the fear du jour. Despite these recent gains—and US stocks reaching new highs—folks are already doubting stocks’ rally. In our view, this skepticism is another sign of dour sentiment—negativity that should fade as uncertainty continues abating this year, allowing investors to realize reality is better than they perceive. 

After a volatile yet overall flat stretch lasting more than a year, the S&P 500 clawed its way to a record high last Monday, surpassing its May 2015 high, and has continued climbing. Other US indexes grabbed headlines, too. The Dow Jones Industrial Average also made a new record, and the Nasdaq turned positive for the first time this year. Globally, the MSCI World isn’t quite at new highs,[i] but it too is positive for the year.

Now, new highs in and of themselves are mostly trivia—there is nothing special about reaching a specific index level. They simply represent stocks’ tendency to rise higher over time. However, rather than embrace the good news and cheer stocks’ resiliency, the reaction has largely been skeptical and/or worried.[ii] Pundits have offered an array of flawed explanations for stocks’ recent hot streak. Some believe stock buybacks are pumping up the rally, while others say markets are rising on stimulus hopes from central banks. Dour interpretations suggest markets aren’t properly pricing in recent events (e.g., Brexit) or are getting ahead of themselves (e.g., overheating valuations). However, these doubtful rationales are off base, in our view.

Commentary

Todd Bliman
Across the Atlantic

More Reasons Than Usual to Doubt UK Consumer Confidence Data

By, 07/14/2016
Ratings1672.209581

These British consumers in Bath don't seem to lack confidence. Photo by Matt Cardy/Getty Images.

In the wake of last month’s surprising “Leave” victory in the UK’s referendum on EU membership, many pundits, policymakers, politicians and media types are speculating the British economy will suffer. It's understandable, given the particularly acrimonious campaign saw “Remain” proponents link a “Leave” vote to a recession. (Unwisely, as some economists have noted.) Now, with the results known, many suggest the data will confirm these suspicions—and are pointing to consumer confidence surveys conducted by GfK and YouGov as evidence supporting their case. Some even suggest the Bank of England was wrong to hold off on cutting rates, largely based on these data. A suggestion: Don’t buy this at face value. Consumer confidence surveys rarely predict actual behavior. What’s more, this one has a huge asterisk rendering it even less valuable than the norm.

Commentary

Fisher Investments Editorial Staff
Politics

This Week in Global Politics

By, 07/12/2016
Ratings443.897727

The UK Gets a New Prime Minister

Well that was fast! The race to replace David Cameron was supposed to last another nine weeks, as Home Secretary Theresa May and Energy Secretary Andrea Leadsom duked it out in the Conservative Party’s leadership contest. But Leadsom dropped out suddenly over the weekend, after contracting a case of foot-in-mouth disease[i], leaving May with the prize. Cameron will hand his notice to the Queen after Prime Minister’s Questions on Wednesday, May will start her move into 10 Downing Street that evening, and Cameron will go gentle into that good night while perhaps humming a jaunty tune.

May has two main tasks: uniting the Conservatives after a rough Brexit campaign, and overseeing Brexit negotiations. To accomplish the former—and perhaps win over all the Tory voters eyeing UKIP’s populism—she has suggested requiring corporate boards to include workers and consumers and cracking down on foreign acquisitions of UK firms. Pundits are a-tizzy, as these aren’t exactly stereotypical Conservative proposals, but we wouldn’t get too caught up in them. Whether you love or loathe these and other ideas, politicians often talk big, then moderate—especially when they preside over gridlocked legislatures, as May will. The Conservatives’ majority is razor-thin, and those Brexit divisions run deep. Passing significant legislation will be a tall order.

Commentary

Fisher Investments Editorial Staff
Across the Atlantic, Developed Markets, Market Cycles

Think Global, Invest Global

By, 07/12/2016
Ratings834.060241

Photo by Leonello Calvetti/Getty Images

Monday, the S&P 500 price index notched its first new high since May 21, 2015, capping a challenging streak that tried even the steeliest investors. While global markets have rallied sharply, they haven’t yet reached new highs, likely reminding some of US stocks’ leadership in this bull market—and perhaps spurring  some to wonder if a global approach is worth it. But recent US outperformance doesn’t negate the big benefits a global approach provides. Jumping the global ship now in favor of the US doesn’t make much sense.

Commentary

Fisher Investments Editorial Staff
Into Perspective

Some Sunshine From Services Surveys

By, 07/08/2016
Ratings1341.932836


At your service! Photo by Hirz/Getty Images.

Good news seems to be in short supply these days. If screaming heads prophesizing doom about the global economy have you a bit rattled—especially in the wake of Brexit, you can take solace in the economic news since. This week saw the release of new PMIs from the US and abroad. The latest word: Service sectors in developed economies globally seem to be chugging along just fine.

First, a PMI primer. Purchasing managers’ indexes (PMIs) are monthly surveys aiming to capture economic activity in a given sector (usually manufacturing or services). Because of their speediness and easy-to-interpret figures—readings over 50 suggests a majority of businesses surveyed grew—pundits frequently cite PMIs as quick-and-handy evidence of economic growth (or lack thereof). However, by no means are they perfect.[i] Businesses fill out these questionnaires based on a limited timeframe (usually about two weeks), and they also only show the breadth of growth, not the magnitude. In short, PMIs are a rough snapshot of trends, not a measure of output.

Commentary

Michael Hanson
Business in Review

Book Review: Short Ain’t Necessarily Simple

By, 07/08/2016
Ratings1572.372612

Economic Thought: A Brief History -- Heinz D. Kurz (Author), Jeremiah Riemer (Translator)

You can call economic thinking “counterintuitive,” which most economists do. It’s kind of a badge of honor to be part of this brotherhood of thinking that most find inscrutable. I’ve been involved in the study of economics for a long time (though I am no formal economist), and even to this day my interest is piqued by those who—particularly within the academic profession—attempt to write intelligible explanations or histories of the field.

Yet such attempts generally, heroically, fail. At least in the sense that, among the stacks and stacks of books about the basics of economics and its history, most are rigorous and accurate, yet fail to make the basic concepts intelligible to otherwise intelligent people. It’s frustrating because the basic ideas of economics aren’t that difficult. Economic life is something we all do and most or all of it isn’t a secret, nor is it as fantastically difficult as most professors want it to appear (you know, to look smart).

Commentary

Fisher Investments Editorial Staff
GDP, US Economy

Checking in on US Growth

By, 07/05/2016
Ratings2002.7325

With Brexit dominating headlines and driving most investors to fixate on Europe, many have likely missed recent US economic data. With that in mind, we thought you might benefit from a little data rundown—a rundown that suggests the economy is humming along just fine, and should continue to looking forward. In our view, these cyclical factors are much more important to stocks than the implications of Brexit, which likely take years and years to sort out and are unknowable today.

In its third estimate of US Q1 GDP, the Bureau of Economic Analysis revised growth upward, from 0.8% annualized to 1.1%, more than double the initially reported 0.5%. Admittedly, this is backward-looking and stocks have since moved on, but the prior estimates sparked fears of sluggish US growth. It turns out growth wasn’t quite as sluggish as many previously thought.

More importantly, recent economic data suggest growth is already reaccelerating. Consumption data have been strong. May retail sales rose 0.5% m/m (2.5% y/y). This is a subset of overall consumer spending, but notably, gas station sales contributed on a monthly basis for the third straight month. This suggests gas station sales may soon cease detracting from year-over-year figures—an early sign that oil prices’ drop is poised to fall out of economic data in the near future. On a broader level, the Commerce Department reported real consumer spending jumped 0.3% m/m in May (2.7% y/y), after climbing an upwardly revised 0.8% in April (3.0% y/y). As this accounts for about 70% of total output, it’s a fairly good sign the economy is stronger than many think.

Commentary

Fisher Investments Editorial Staff
Politics

This Week in Global Politics

By, 07/12/2016
Ratings443.897727

The UK Gets a New Prime Minister

Well that was fast! The race to replace David Cameron was supposed to last another nine weeks, as Home Secretary Theresa May and Energy Secretary Andrea Leadsom duked it out in the Conservative Party’s leadership contest. But Leadsom dropped out suddenly over the weekend, after contracting a case of foot-in-mouth disease[i], leaving May with the prize. Cameron will hand his notice to the Queen after Prime Minister’s Questions on Wednesday, May will start her move into 10 Downing Street that evening, and Cameron will go gentle into that good night while perhaps humming a jaunty tune.

May has two main tasks: uniting the Conservatives after a rough Brexit campaign, and overseeing Brexit negotiations. To accomplish the former—and perhaps win over all the Tory voters eyeing UKIP’s populism—she has suggested requiring corporate boards to include workers and consumers and cracking down on foreign acquisitions of UK firms. Pundits are a-tizzy, as these aren’t exactly stereotypical Conservative proposals, but we wouldn’t get too caught up in them. Whether you love or loathe these and other ideas, politicians often talk big, then moderate—especially when they preside over gridlocked legislatures, as May will. The Conservatives’ majority is razor-thin, and those Brexit divisions run deep. Passing significant legislation will be a tall order.

Commentary

Fisher Investments Editorial Staff
Across the Atlantic, Developed Markets, Market Cycles

Think Global, Invest Global

By, 07/12/2016
Ratings834.060241

Photo by Leonello Calvetti/Getty Images

Monday, the S&P 500 price index notched its first new high since May 21, 2015, capping a challenging streak that tried even the steeliest investors. While global markets have rallied sharply, they haven’t yet reached new highs, likely reminding some of US stocks’ leadership in this bull market—and perhaps spurring  some to wonder if a global approach is worth it. But recent US outperformance doesn’t negate the big benefits a global approach provides. Jumping the global ship now in favor of the US doesn’t make much sense.

Commentary

Fisher Investments Editorial Staff
Into Perspective

Some Sunshine From Services Surveys

By, 07/08/2016
Ratings1341.932836


At your service! Photo by Hirz/Getty Images.

Good news seems to be in short supply these days. If screaming heads prophesizing doom about the global economy have you a bit rattled—especially in the wake of Brexit, you can take solace in the economic news since. This week saw the release of new PMIs from the US and abroad. The latest word: Service sectors in developed economies globally seem to be chugging along just fine.

First, a PMI primer. Purchasing managers’ indexes (PMIs) are monthly surveys aiming to capture economic activity in a given sector (usually manufacturing or services). Because of their speediness and easy-to-interpret figures—readings over 50 suggests a majority of businesses surveyed grew—pundits frequently cite PMIs as quick-and-handy evidence of economic growth (or lack thereof). However, by no means are they perfect.[i] Businesses fill out these questionnaires based on a limited timeframe (usually about two weeks), and they also only show the breadth of growth, not the magnitude. In short, PMIs are a rough snapshot of trends, not a measure of output.

Commentary

Michael Hanson
Business in Review

Book Review: Short Ain’t Necessarily Simple

By, 07/08/2016
Ratings1572.372612

Economic Thought: A Brief History -- Heinz D. Kurz (Author), Jeremiah Riemer (Translator)

You can call economic thinking “counterintuitive,” which most economists do. It’s kind of a badge of honor to be part of this brotherhood of thinking that most find inscrutable. I’ve been involved in the study of economics for a long time (though I am no formal economist), and even to this day my interest is piqued by those who—particularly within the academic profession—attempt to write intelligible explanations or histories of the field.

Yet such attempts generally, heroically, fail. At least in the sense that, among the stacks and stacks of books about the basics of economics and its history, most are rigorous and accurate, yet fail to make the basic concepts intelligible to otherwise intelligent people. It’s frustrating because the basic ideas of economics aren’t that difficult. Economic life is something we all do and most or all of it isn’t a secret, nor is it as fantastically difficult as most professors want it to appear (you know, to look smart).

Commentary

Fisher Investments Editorial Staff
GDP, US Economy

Checking in on US Growth

By, 07/05/2016
Ratings2002.7325

With Brexit dominating headlines and driving most investors to fixate on Europe, many have likely missed recent US economic data. With that in mind, we thought you might benefit from a little data rundown—a rundown that suggests the economy is humming along just fine, and should continue to looking forward. In our view, these cyclical factors are much more important to stocks than the implications of Brexit, which likely take years and years to sort out and are unknowable today.

In its third estimate of US Q1 GDP, the Bureau of Economic Analysis revised growth upward, from 0.8% annualized to 1.1%, more than double the initially reported 0.5%. Admittedly, this is backward-looking and stocks have since moved on, but the prior estimates sparked fears of sluggish US growth. It turns out growth wasn’t quite as sluggish as many previously thought.

More importantly, recent economic data suggest growth is already reaccelerating. Consumption data have been strong. May retail sales rose 0.5% m/m (2.5% y/y). This is a subset of overall consumer spending, but notably, gas station sales contributed on a monthly basis for the third straight month. This suggests gas station sales may soon cease detracting from year-over-year figures—an early sign that oil prices’ drop is poised to fall out of economic data in the near future. On a broader level, the Commerce Department reported real consumer spending jumped 0.3% m/m in May (2.7% y/y), after climbing an upwardly revised 0.8% in April (3.0% y/y). As this accounts for about 70% of total output, it’s a fairly good sign the economy is stronger than many think.

Commentary

Michael Hanson
Politics, Reality Check

One Simple Investors’ Trick for Navigating Brexit

By, 07/01/2016
Ratings1993.660804

There has been plenty of Brexit fallout. Breaking news seems to hit by the minute: The day after the vote, Prime Minister David Cameron resigns! Monday, Labour head Jeremy Corbyn was struck by a decisive no confidence vote … and then he refused to step down! Thursday, the ostensible frontrunner to be the next PM, Boris Johnson, bowed out of the race after multiple, scathing criticisms! It’s high drama, but we’d advise paying less attention to the bluster and look instead for real fundamental developments. To that end, Spain held an election Sunday that in our view speaks volumes more about what will happen next with the EU, and in stark contrast to all the sensationalism out there.

As we noted in depth here, euroskeptic support didn’t surge in Sunday’s vote—former PM Mariano Rajoy’s People’s Party picked up 14 seats. Importantly, that implies, just a few days removed from Brexit, a nation like Spain isn’t going to fall like a “domino” and directly demand its own referendum. Gridlock prevailed, as did the pan-EU status quo. Both the PP and center-left PSOE are traditionally status-quo parties within Spain, taking turns running the government since 1982 (virtually all of Spain’s history of democracy). Even with still relatively high unemployment and political scandals that eroded support for the PP and PSOE lately, newer, outsider parties like Podemos and Cuidadanos couldn’t capitalize.

So far, short-term sentiment and market pricing have imbibed heavily in all the fear-driven “what if,” “domino effects” the Brexit could one day bring. But the truth is, at this moment, what we have is a large economy voting to eventually leave a trade union within a large economic area. That’s it. Everything else is speculation and short-term hand-wringing, and in the most general sense the global economy is not a lot different today than it was last week. The Spanish election result is a hard piece of fundamental data arguing against all the “what if” fear. Markets are bouncing the last couple days, but it’s impossible to say whether that marks the end of Brexit fears. Maybe turmoil goes on for days more, or even weeks.

Research Analysis

Pete Michel
Into Perspective

Why Bond Market Liquidity Fears Don’t Hold Much Water

By, 09/22/2015
Ratings933.956989

Market liquidity is usually a pretty banal subject, garnering little attention. But in the last year,  it has gone from being a dry afterthought to being the subject of frequent articles claiming it’s a major concern, particularly in the bond markets. So much so, that Bloomberg’s Matt Levine had a running section of his daily link wrap titled, “People Are Worried About Bond Market Liquidity” for months and rarely ran low on articles to share. It is now bigger news when there aren’t “People Worried About Bond Market Liquidity!” So what is market liquidity, and are the recent fears justified—or overblown?

Market liquidity refers to how easily an asset can be bought or sold without dramatically impacting the price or incurring large costs. It’s a defining feature separating asset classes, a key consideration for investors. Some financial assets, like listed stocks, are easy to buy or sell with little price impact and small commissions—they’re “liquid.” Conversely, commercial real estate takes time to sell and likely includes high commissions and significant negotiations—it is “illiquid.” For most investors, particularly those with potential cash flow needs, liquidity is an important facet of any investment strategy.

Bonds are among the more liquid investments available for investors, though liquidity varies among different types. Treasurys, among the deepest markets in the world, are highly liquid. Corporates and municipals are less so, and some fancier debt is actually quite illiquid.

Research Analysis

Scott Botterman
Into Perspective

Greek Contagion Risk Is Minimal

By, 08/11/2015
Ratings274.703704

Flags fly in front of the Parthenon in Athens. Photo by Bloomberg/Getty Images.

After five years of Greek crisis, two defaults and going-on three bailouts, many still fear a contagion across the eurozone. While default and “Grexit” risk persist, the risk of a contagion has fallen significantly over the last few years. The eurozone economy is improving, foreign banks hold less Greek debt, bank deposits aren’t fleeing other peripheral nations, and euroskeptic parties poll well behind traditional parties across the eurozone.  Greece’s problems are contained and shouldn’t put the broader eurozone at risk.

Research Analysis

Fisher Investments Editorial Staff
Reality Check

Quick Hit: ‘Corporate Profits Recession’ and Stocks—There Is No ‘There!’ There

By, 03/27/2015
Ratings364.069445

In Friday’s third revision to Q4 US GDP growth, one thing that seemed to catch a few eyeballs was a drop in US Corporate Profits[i], which some hyperbolically labeled “the worst news.” Others claim a “profit recession”—whatever that means—looms. But here is the thing: A down quarter for corporate profits is not unusual amid a bull market. Here are two charts to illustrate the point. The first shows the Bureau of Economic Analysis’ measure of corporate profits excluding depreciation. The second includes depreciation. The gray bars indicate bear markets and the blue dots denote a negative quarter of profits in a bull market. As you can see, such dips aren’t exactly rare and occur at random points throughout a bull market and expansion.   

Exhibit 1: US Corporate Profits After Tax Without Inventory Valuation and Capital Cost Adjustment

Research Analysis

Scott Botterman
Into Perspective

European Parliament Elections—Setting Expectations

By, 05/23/2014
Ratings493.295918

Thursday marked the beginning three days of voting across the 28 EU nations in the first European Parliamentary (EP) elections since 2009. Also, the first pan-EU elections since the eurozone’s debt crisis and 18-month long recession that ended in mid-2013. When the polls close, voters are expected to add more euroskeptics—members of parties favoring less federalism and, in some cases, leaving the euro. With euro jitters still lingering in the background, some suspect this will rekindle breakup fears anew. However, polls suggest euroskeptics gain some ground but fail to shift power away from more traditional European political parties. The movement toward a more integrated Europe likely continues and, with it, support for the common currency likely remains strong. Should polls hold true, the biggest influence I believe the euroskeptics may have is pressuring the pro-euro groups on economic policy.

European Union Government

  • European Council: Heads of each EU member state with no formal legislative power. The Council defines general EU political directions (and addresses crises).
  • European Commission (EC): Executive body of the EU, consisting of a President (elected by the European Parliament) and 27 commissioners selected by the European Council and the EU President. They are responsible for proposing legislation, implementing decisions and addressing day-to-day EU operations.
  • European Parliament (EP): Directly elected legislative body of the European Union (five-year terms). The EP is an approval body. They do not initiate legislation, instead voting on and amending European Commission proposals. The EP directly elects the European Commission President and confirms the European Commission after its formation.

There will be slight structural differences in Parliament, regardless of the voting. Between 2009’s election and this year’s, the EU ratified the Lisbon Treaty, altering the structure of the body, modestly reducing the influence of larger nations like Germany. The EP will consist of 751 seats, 15 fewer than before. Representation will still be based on population, but with certain caveats. The Lisbon Treaty caps each member state at a maximum of 96 and mandates a minimum of six seats to all. This will automatically reduce Germany’s standing from the present Parliament and slightly boost the power of small EU nations. However, national distribution isn’t really at issue in the race. It’s much more about pro-euro versus euroskeptic.

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What We're Reading

By , The Wall Street Journal, 07/22/2016

MarketMinder's View: This is quite political, so we hope you will turn off your biases, ideological leanings and candidate preferences—political bias is deadly in investing—and just consider what it shows: Politicians have every incentive to sell fear and emphasize their chosen narrative over facts in order to tap into emotions and win votes. Both parties do it. For investors, it’s important not to get caught up in the hype, and not let those emotions impact portfolio decisions. As for the policies discussed herein, markets care about what politicians do, not what they say, and with DC likely remaining gridlocked once the new administration and congresspeople take their stations next January, the likelihood of sweeping change seems lower than it might typically be at the beginning of a new administration.

By , The Wall Street Journal, 07/22/2016

MarketMinder's View: This is a must-read for anyone planning for retirement. Go. Now.

By , Bloomberg, 07/22/2016

MarketMinder's View: “[Italian Prime Minister Matteo] Renzi is trying to navigate European Union rules stating that creditors must take a hit when banks are rescued, while also seeking to protect small investors from the fallout -- a potential vote killer that could cost him his job in a referendum due in the fall. [German Chancellor Angela] Merkel, who repeatedly stressed after the financial crisis that taxpayers should never bail out banks, is aware of Renzi’s dilemma and is prepared to support a flexible reading of the EU rules to help him, according to the officials. That could mean accepting some form of Italian government compensation for retail investors to limit the political fallout, they said.” Once again, political considerations are promoting compromise.  In this case, eurozone leaders’ desire to see traditional parties retain power in Italy, not the anti-euro populist Five Star Movement. Italy’s bank issues were neither new or a global risk for markets, but an investor-friendly resolution might help sentiment somewhat, particularly as it pertains to eurozone banks.

By , Bloomberg, 07/22/2016

MarketMinder's View: While the Atlanta Fed’s GDPNow model has its issues, this is yet more evidence US growth is stronger than most perceive and, in all likelihood, has picked up since Q1.

Global Market Update

Market Wrap-Up, Thursday, July 21, 2016

Below is a market summary as of market close Thursday, July 21, 2016:

  • Global Equities: MSCI World (-0.1%)
  • US Equities: S&P 500 (-0.4%)
  • UK Equities: MSCI UK (-0.1%)
  • Best Country: Norway (+1.3%)
  • Worst Country: Ireland (-0.7%)
  • Best Sector: Utilities (+0.4%)
  • Worst Sector: Energy (-0.5%)

Bond Yields: 10-year US Treasury yields fell 0.02 percentage point to 1.56%.

 

Editors' Note: Tracking Stock and Bond Indexes

 

Source: Factset. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.