Commentary

Fisher Investments Editorial Staff
Media Hype/Myths, US Economy

A Day in the Life of a Bull Market

By, 03/23/2017
Ratings1004.28

Brace yourselves! The S&P 500 fell by more than 1% on Tuesday for the first time since October, sparking a spurt of analysis declaring volatility has returned, investors are “selling off” as they lose faith in the rally, and larger losses will soon follow. But rather than agonize over the decline’s causes or implications, investors are best served to remain cool-headed. Daily dips like Tuesday’s aren’t actionable or ominous.

A 1% swing in either direction isn’t huge by most standards. Most days, it wouldn’t warrant a second glance—volatility is common in bull markets, especially day-to-day. But Tuesday’s drop occurred after nearly half a year of calm, giving the media something new to write about, and perhaps magnifying the decline in investors’ minds.

In proper context, though, Tuesday doesn’t look so unnerving. The S&P 500 has fallen by at least one percent 232 times during this bull market, accounting for 11.5% of trading days.[i] Exhibit 1 is noisy, but focus on the orange line—everything below it reflects a -1% or worse single-day fall. It’s crowded down there! The lull since October doesn’t make the occurrence any more notable.

Commentary

Fisher Investments Editorial Staff
Across the Atlantic, Developed Markets, The Global View

Are Stocks Headed Into Foreign Territory?

By, 03/23/2017
Ratings484.229167

So something rare for 2017 happened Tuesday: Stocks fell kinda bigly.[i] Rather predictably, the media flipped from fretting the “Trump rally’s” sustainability to fretting its end—a common ritual since the election, perhaps exacerbated when daily returns were big. However, despite all the handwringing over the Trump rally, this reality may surprise investors: Markets outside America have led recently, which is hard to square with claims all the upside is tied to lofty expectations of US-specific political developments. Now, non-US stocks’ year-to-date outperformance shouldn’t be overstated, as investors haven’t “missed out” on any leadership rotation yet. But this could be a sign of things to come later, especially as uncertainty falls outside America.  

First, we would be remiss if we didn’t (again) refute the continued assertions of a “Trump rally.” Since Election Day, the S&P 500 is up 10.4%[ii]—a nice run over the past four-plus months. Headlines frequently questioned this rally’s sustainability, arguing markets were rising on hopes of Trump pushing a Republican (read: business friendly) agenda, including deregulation and fiscal spending benefiting certain sectors. (This, of course, is an argument relying on markets’ selectively viewing only these ideas and overlooking protectionist talk and weird border taxes, but we digress.)

Yet in our view, the Trump rally is a myth. For one, presidential power over markets is vastly overrated. Bombastic rhetoric can add to day-to-day volatility, but presidents lack the power to bend the country to their whim.[iii] Second, if Trump truly were great for markets, US stocks should be near the top of the leaderboard after his election last November. Yet they aren’t. After building a small lead as of Monday’s market close, the US fell behind the MSCI ACWI[iv] after Tuesday’s pullback (in USD). Moreover, since the presidential election, the US lags 17 other countries in the MSCI ACWI. See Exhibit 1, which denominates returns in local currencies to eliminate currency conversion skew. (For the same table in USD, click here. The US does a little better here, but only slightly—and still trails 14 other countries).

Commentary

Fisher Investments Editorial Staff
Trade, Reality Check

Checking In on Trump and Trade

By, 03/22/2017
Ratings324.640625


Less to fear upon closer inspection. (Photo by -Oxford-/iStock.)

The G-20 finance ministers’ meeting finally achieved its annual goal of hogging headlines Monday, when news broke that US Treasury Secretary Steve Mnuchin forced his colleagues to delete this sentence from the summit statement: “We resist all forms of protectionism.” It was a slow news day. Most observers concluded Mnuchin had fired the first shot in the Trump trade war, fulfilling investors’ widespread fear. But in our view, this is too hasty. For one, G-20 statements have always been unenforceable platitudes that don’t mean much once you diagram the sentences. Moreover, it’s an isolated incident. Other recent developments suggest the Trump administration is actually softening its stance on trade, lowering the risk of a big protectionist push and global backlash.

Actions speak louder than words, but a lack of action can also be telling—especially if it involves timestamped campaign pledges going unfulfilled. Consider, for instance, what has come of Trump’s trade-related day-one pledges: “I will announce my intention to renegotiate NAFTA or withdraw from the deal under Article 2205 [and] I will direct my Secretary of the Treasury to label China a currency manipulator [supposedly a prelude to tough trade sanctions].”[i] It’s now 62 days in, and the only movement on either of these fronts has been to walk them back.

Commentary

Fisher Investments Editorial Staff
Interest Rates

An Interesting Forecast for Interest Rates

By, 03/17/2017
Ratings893.94382

With the Fed expected to hike rates several times this year and inflation picking up recently, most assume higher long-term interest rates are certain to come this year—bringing potential problems along with them. One prominent forecaster made waves recently for saying the 10-Year Treasury yield piercing 2.6% would be a bearish signal for bonds. Others say 3.0% is the magic mark. However, markets often do what the consensus can’t fathom, and we believe US 10-year yields will actually finish the year below where they started. 

It’s true rates have started the year higher. Since 2017 began, the 10-year Treasury yield is up 9 basis points (0.09 percentage point), from 2.45% to 2.54%.[i] Most observers think this is just the start of yields’ steady climb, which may not only break but stay above the 2.6% “ceiling” within the next month. This forecast relies on several rationales. One, many expect the Fed to hike its fed-funds target range several times this year, and they presume rising short-term rates beget rising long-term rates. Another factor: expectations for higher inflation. CPI has accelerated since last July and just hit 2.7% y/y in February—the fastest year-on-year rate since February 2012. Along with President Trump’s promises of a yuuuuge infrastructure stimulus plan, some worry this increased spending will translate into higher inflation later on.

While inflation expectations do influence long rates, as lenders demand a higher return to compensate for the loss of purchasing power, we don’t think the logic supporting the outlook for rising rates holds. From a high level, markets often go against the consensus and do what few anticipate. Since there are virtually universal expectations for long-term rates to rise this year, this argues for flat or falling rates—especially once you consider the logical errors at hand. For instance, a higher 10-year yield today doesn’t dictate a steady climb through 2017 since recent past movement says nothing about the future. At 2016’s start, the 10-year was at 2.27%. It fell to a low of 1.37% in July and climbed as high as 2.60% in December.[ii] After all those zigs and zags, Treasury yields rose only 18 basis points from year start to year end, finishing at 2.45%.

Commentary

Fisher Investments Editorial Staff
MarketMinder Minute, Investor Sentiment, Market Cycles

Market Insights: All-Time Market Highs

By, 03/17/2017
Ratings254.16

This Market Insights video examines all-time market highs and what they mean (or don't) for the market moving forward.

Commentary

Fisher Investments Editorial Staff
Politics

Wednesday Wasn’t Wilders’ Day

By, 03/16/2017
Ratings434.034883


With the new Dutch Parliament now known, uncertainty is falling in Europe. Photo by Franky DeMeyer/iStock.

It’s fair to say Europe’s year of falling uncertainty took a step forward on Wednesday. Dutch voters went to the polls in a widely watched election we previewed here and here. For most of the year, polls showed anti-euro populist Geert Wilders and his Party for Freedom (PVV) leading, spurring fears his victory meant the Netherlands could leave the euro—a disastrous “Nexit.” But when the dust settled, Prime Minister Mark Rutte’s Party for Freedom and Democracy (VVD) took the plurality of the vote and 33 of Parliament’s 150 seats. This should quell Nexit fears, and is the first of several elections this year that should reduce uncertainty.

Wilders’ PVV did improve its position in Parliament—winning 20 seats, a five-seat increase over the last election. But this was far lower than the 30+ seats polls initially suggested, and is a distant second. Actually, PVV edged two other mainstream parties by only one seat.

Commentary

Fisher Investments Editorial Staff
Market Cycles

No Easy Bull, Reprise

By, 03/16/2017
Ratings1144.188597


It hasn’t been easy staying on. (Photo by BradWolfe/iStock.)

Days ago, this bull market turned eight. Now history’s second-longest—trailing only the 1990s bull market—many investors wonder just how long the party can last. It’s disappointing, but no one can pinpoint exactly when the bull market will end. However, in general, a peak doesn’t seem close. It isn’t scientific, but in Sir John Templeton’s succinct market cycle encapsulation—“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria”—we’re probably somewhere between “grow on skepticism” and “mature on optimism.” In our view, the process Templeton described is far from complete, suggesting spreading optimism—and fading fears—could boost stocks significantly before the bull peaks in euphoria.

While uncertainty has fallen over last year’s major fears, Brexit and the US presidential election, there is still some residual pessimism over policy implementation (or lack thereof). On the docket: Affordable Care Act (potential) repeal and replacement, tax reform, trade renegotiations, infrastructure spending, revising Dodd-Frank financial reform, debt ceiling debates and Fed appointments. Those lingering fears pale in comparison to last year, showing warming sentiment, but some uncertainty lingers—particularly across the pond. Fears remain over European elections, the potential for trade wars and general skittishness about President Trump’s unpredictability. The list goes on.[i]

Commentary

Fisher Investments Editorial Staff
Politics

Seeing Through the Debt Ceiling

By, 03/16/2017
Ratings403.975

In the pantheon of American political traditions, debt ceiling doom-mongering has a special place. The legislative limit on new debt issuance has historically inspired months of political grandstanding and dire default warnings (including from the media), followed by last-minute agreements raising or suspending the cap. A year or so later, policymakers reconvene and do it all over again. Sound like fun? Then get ready, because after lying dormant since October 2015, the debt ceiling returns today—and with it, the false choice of either raising it or defaulting on US debt. But while the debt ceiling’s return may rekindle some old worries, they’re as baseless as in previous years, and no threat to this bull market.

When the ceiling takes effect, it’ll cap US debt at present levels (about $20 trillion). If Congress doesn’t immediately lift or suspend it (unlikely), the Treasury will use “extraordinary measures”[i] to keep all checks flowing for a few months without increasing debt—most estimates say mid to late summer in this case. After that, the popular perception goes, all heck breaks loose. Folks fear the US government would renege on its sacred financial obligations and default; ratings agencies would downgrade America (again), sending foreign creditors fleeing, boosting interest rates on US debt and raising borrowing costs economy-wide.[ii] Hence, many fear markets would plummet, causing general chaos and perhaps another financial crisis.

But this apocalyptic scenario is wildly improbable. Congress has always lifted the limit in the past—all 110 times since 1917. And because of something called “prioritization,” even exhausting extraordinary measures wouldn’t bring default.

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: 2017 Market Outlook

By, 03/13/2017
Ratings173.852941

In this podcast, Fisher Investments’ Investment Policy Committee discusses their views on capital markets and the economy in 2017.

Commentary

Elisabeth Dellinger
Capitalism, Unconventional Wisdom

Everything I Need to Know About Investing I Learned From Buffy the Vampire Slayer

By, 03/13/2017
Ratings894.117978

20 years ago Friday, Buffy the Vampire Slayer debuted on television, and the Internets are justifiably full of anniversary tributes to this most excellent show. So what better time than for me to admit this simple, perhaps silly truth: (Almost) everything I need to know about investing, I learned from Buffy—timeless wisdom about how and why stocks grow and thrive over time, creating wealth for all of you dear readers.

Don’t worry, you needn’t watch all 145 episodes to soak up this knowledge. It all comes from three snappy quotes, which I’ll share with you here.

That’s the reason I love this country. You make a good product, and people will come to you. Season 3, Episode 6

Commentary

Fisher Investments Editorial Staff
Politics

Wednesday Wasn’t Wilders’ Day

By, 03/16/2017
Ratings434.034883


With the new Dutch Parliament now known, uncertainty is falling in Europe. Photo by Franky DeMeyer/iStock.

It’s fair to say Europe’s year of falling uncertainty took a step forward on Wednesday. Dutch voters went to the polls in a widely watched election we previewed here and here. For most of the year, polls showed anti-euro populist Geert Wilders and his Party for Freedom (PVV) leading, spurring fears his victory meant the Netherlands could leave the euro—a disastrous “Nexit.” But when the dust settled, Prime Minister Mark Rutte’s Party for Freedom and Democracy (VVD) took the plurality of the vote and 33 of Parliament’s 150 seats. This should quell Nexit fears, and is the first of several elections this year that should reduce uncertainty.

Wilders’ PVV did improve its position in Parliament—winning 20 seats, a five-seat increase over the last election. But this was far lower than the 30+ seats polls initially suggested, and is a distant second. Actually, PVV edged two other mainstream parties by only one seat.

Commentary

Fisher Investments Editorial Staff
Market Cycles

No Easy Bull, Reprise

By, 03/16/2017
Ratings1144.188597


It hasn’t been easy staying on. (Photo by BradWolfe/iStock.)

Days ago, this bull market turned eight. Now history’s second-longest—trailing only the 1990s bull market—many investors wonder just how long the party can last. It’s disappointing, but no one can pinpoint exactly when the bull market will end. However, in general, a peak doesn’t seem close. It isn’t scientific, but in Sir John Templeton’s succinct market cycle encapsulation—“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria”—we’re probably somewhere between “grow on skepticism” and “mature on optimism.” In our view, the process Templeton described is far from complete, suggesting spreading optimism—and fading fears—could boost stocks significantly before the bull peaks in euphoria.

While uncertainty has fallen over last year’s major fears, Brexit and the US presidential election, there is still some residual pessimism over policy implementation (or lack thereof). On the docket: Affordable Care Act (potential) repeal and replacement, tax reform, trade renegotiations, infrastructure spending, revising Dodd-Frank financial reform, debt ceiling debates and Fed appointments. Those lingering fears pale in comparison to last year, showing warming sentiment, but some uncertainty lingers—particularly across the pond. Fears remain over European elections, the potential for trade wars and general skittishness about President Trump’s unpredictability. The list goes on.[i]

Commentary

Fisher Investments Editorial Staff
Politics

Seeing Through the Debt Ceiling

By, 03/16/2017
Ratings403.975

In the pantheon of American political traditions, debt ceiling doom-mongering has a special place. The legislative limit on new debt issuance has historically inspired months of political grandstanding and dire default warnings (including from the media), followed by last-minute agreements raising or suspending the cap. A year or so later, policymakers reconvene and do it all over again. Sound like fun? Then get ready, because after lying dormant since October 2015, the debt ceiling returns today—and with it, the false choice of either raising it or defaulting on US debt. But while the debt ceiling’s return may rekindle some old worries, they’re as baseless as in previous years, and no threat to this bull market.

When the ceiling takes effect, it’ll cap US debt at present levels (about $20 trillion). If Congress doesn’t immediately lift or suspend it (unlikely), the Treasury will use “extraordinary measures”[i] to keep all checks flowing for a few months without increasing debt—most estimates say mid to late summer in this case. After that, the popular perception goes, all heck breaks loose. Folks fear the US government would renege on its sacred financial obligations and default; ratings agencies would downgrade America (again), sending foreign creditors fleeing, boosting interest rates on US debt and raising borrowing costs economy-wide.[ii] Hence, many fear markets would plummet, causing general chaos and perhaps another financial crisis.

But this apocalyptic scenario is wildly improbable. Congress has always lifted the limit in the past—all 110 times since 1917. And because of something called “prioritization,” even exhausting extraordinary measures wouldn’t bring default.

Commentary

Elisabeth Dellinger
Capitalism, Unconventional Wisdom

Everything I Need to Know About Investing I Learned From Buffy the Vampire Slayer

By, 03/13/2017
Ratings894.117978

20 years ago Friday, Buffy the Vampire Slayer debuted on television, and the Internets are justifiably full of anniversary tributes to this most excellent show. So what better time than for me to admit this simple, perhaps silly truth: (Almost) everything I need to know about investing, I learned from Buffy—timeless wisdom about how and why stocks grow and thrive over time, creating wealth for all of you dear readers.

Don’t worry, you needn’t watch all 145 episodes to soak up this knowledge. It all comes from three snappy quotes, which I’ll share with you here.

That’s the reason I love this country. You make a good product, and people will come to you. Season 3, Episode 6

Commentary

Todd Bliman
Into Perspective

What Investing Wisely Is—and Isn’t

By, 03/10/2017
Ratings974.216495

If there is one theme dominating financial media this week, it’s this: With stocks near record highs, above-average valuations and the bull turning eight, the bull market may be on borrowed time. One article in The Wall Street Journal cites above-average valuations and argues this market is only for speculators—not investors.[i] A CBS News Moneywatch piece counsels you to repeatedly sell slices of your equity holdings (never mind the trading costs and taxes) and boost cash, trembling before record highs. A blog post in The Wall Street Journal quotes one analyst as claiming the bull market is currently a whopping 127 years old—“long in the tooth!”—because one bull market year translates into 15.875 human years, we guess.[ii] We could go on, but suffice it to say many pundits argue owning stocks now is unwise. Here is an alternate theory: That is entirely backwards.

A basic, yet often overlooked, maxim: If you need growth to reach your financial goals, whatever percentage you allocate to stocks is your default. Not cash. What does that mean? It means you don’t need to find one, five or 10 solid “reasons to be bullish”[iii] to own stocks. (Though those may be nice.) What you need is the reverse: a sound, bearish reason not to own stocks. That is, a probable, negative factor carrying trillions of dollars’ worth of economic impact that you see and most don’t. They don’t come often. Sometimes the general public is euphoric and just misses an elephant hiding in plain sight. Other times, it’s out of the blue. The keys are the size and that it is probable, not possible.[iv] That the market is near a record high doesn’t register. Valuations are close to the first thing you learn in security analysis and, as such, they feature nearly daily in most financial publications. Widely known. Moreover, high valuations often get higher; cheap stocks and markets frequently get cheaper. Valuations aren’t predictive. Finally, however you calculate its age, this bull market has been feared “long in the tooth” for years. It’s time to accept the fact bull markets don’t die of old age.

It’s natural to be worried about where stocks will head. This is perhaps especially true if you sat out of stocks for long stretches in this bull market. It’s hard to give up on a thesis that another downdraft will give you a better entry point, or thereabouts. Heck, maybe this is wrong, but perhaps it isn’t just the direction that worries folks per se. Perhaps the embarrassment of suffering a market decline freezes folks—they don’t want to feel like a “sucker” who bought in last.[v]

Commentary

Elisabeth Dellinger
Media Hype/Myths, Into Perspective

How to Analyze Alternative Facts and Ferret Out Fake News

By, 03/10/2017
Ratings1384.358696

Fake news! By now you’ve likely heard it’s everywhere, the scourge of our times. Facebook, considered the main conduit, is on the warpath, working with outside fact-checkers to discover and label fakery. While the concept of fake news is relatively new to the mainstream, it has had a presence in the financial media for decades. It is the stuff of newsletters warning of the end of America, the great currency reset or hyping penny stocks, all urging you to buy gold/silver/life insurance/some proprietary product. But even within the respectable financial news universe, it is increasingly hard to separate fact from fiction. The more media outlets arise, the more they compete for eyeballs through sensationalism. As Robert J. Martorana put it a while back on the CFA Institute’s website, “investment blogs have embraced the golden rule of tabloid journalism: simplify, then exaggerate. Pseudo news and pseudo analysis clutters the web, making it harder to stay well informed.” As my colleague Michael Hanson wrote last week, “reading comprehension and testing narratives is a lost art, and it’s one that’s gaining primacy.” So, how do you do it?

The first step is understanding what the news media really is: entertainment, targeted to a specific audience. If you’ve ever flipped through cable news, you probably get this. When you find a channel whose editorial slant matches your own political views, it makes you happy—you’re their target audience. When it doesn’t match your political views and raises your ire, you aren’t their target. Someone else is. People often self-sort, picking the outlet aligned with their own views, and revel in the echo chamber. The editors tailor the message to keep viewers and attract more, with more sensationalism—entertain more people, get more ad revenue! It’s a for-profit business, after all.

Newspapers have a more venerable reputation, but they too are entertainment—just packaged differently. Some recent New York Times navel-gazing laid it bare. One year ago, the executive editor asked seven staffers “to conduct a review of the newsroom and determine a blueprint for its path forward.” Among the recommendations were “reducing duplicative layers of article editing, and having visual experts play ‘the primary role covering some stories’ – part of an urgent call for more visual journalism. The report also calls for a renewed focus on diversity within The Times as a way of ensuring that the paper’s journalists ‘reflect the audience we seek.’” Boldface mine, because that last bit is the kicker. They have a target demographic in mind and plan to tailor their approach to get it. The goal here is to attract, entertain and retain customers, not inform the populace in an objective manner.

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

MarketMinder Podcast: November 2016 – Assessing Global Macro Drivers

By, 12/12/2016
Ratings74.357143

MarketMinder’s editorial staff sits down with Fisher Investments Capital Markets Analyst Brad Pyles. (Recorded 11/17/2016)

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

MarketMinder Podcast: November 2016 – Energy Update

By, 12/12/2016
Ratings113.545455

MarketMinder’s editorial staff sits down with Fisher Investments Capital Markets Analyst Brad Rotolo. (Recorded 11/3/2016)

Research Analysis

Austin Fraser
Into Perspective

A Political Update From Korea

By, 12/08/2016
Ratings404.0875

From Brexit and Trump to Italy, Brazil and the Philippines, 2016 has been a year of political upheaval and theatrics. And it isn’t over yet. South Korean President Park Geun-hye is embroiled in an influence peddling scandal that has outraged the country and likely numbered her days in office. She has offered to step down from office in April 2017—10 months before her term is slated to end—but lawmakers in the National Assembly instead introduced an impeachment bill, which gets a vote Friday December 9. While Park’s political fall looks inevitable, Korea’s political issues needn’t derail its other positive drivers. For global investors, whether or not you own any Emerging Markets stocks, this is another lesson in the importance of thinking long-term and not getting hung up on short-term events.

The movement against Park appears more about her actions (which you can read all about here), not a broader distaste with the government or the state of society. After decades of chaebol (Korea’s huge, family-run mega conglomerates/corporate fiefdoms) dominating political decisions and the economy, corruption has emerged as the societal cause du jour (see this summer’s draconian corruption bill), and Park appears a victim of the times. The scandal also coincides with some economic softness, as a slowdown in global trade hit export-oriented businesses hard. In response, the country’s largest sectors—which account for a fifth of GDP and employ nearly 15% of the workforce—have undergone significant corporate restructuring. More recently, scandals at several chaebol only further weighed on sentiment.

South Korea has also faced some geopolitical uncertainty in recent months. Besides long-running issues with North Korea, which has made progress in its nuclear program, new tensions with China have arisen as South Korea recently deployed an advanced US missile system. In addition, Donald Trump’s victory made many call into question the future of Asia’s trade relationship with the US given his campaign rhetoric and dismissal of the Trans-Pacific Partnership. There is also a potential domestic political headwind, as the legislature’s opposition party favors tax hikes, with eight different proposals put in the supplementary budget bills. With one of the world’s stronger fiscal positions (40% debt to GDP), such a move makes little economic sense, but the negative fallout is likely short term. 

Research Analysis

Brad Rotolo
Reality Check

What Does OPEC’s Production Cut Mean for Oil?

By, 12/01/2016
Ratings694.086957


There’s more where that came from. Photo by yodiyim/Getty Images.

At long last, the Organization of the Petroleum Exporting Countries (OPEC) reached an agreement to cut production on Wednesday. While details are scarce, comments from oil ministers indicate the group will cut oil production to 32.5 million barrels per day (Mbpd), from recent levels of 33.5 Mbpd. Despite the hype, however, the change is basically window-dressing. It probably won’t much alter global supply or improve the outlook for Energy firms. Their earnings are tied to oil prices, which likely remain lackluster for the foreseeable future (albeit with short-term volatility).

This is OPEC’s first official action of this sort since oil began crashing in 2014. OPEC surprised markets that November by declining to cut production, as had been widely expected at the time. Oil supplies were growing briskly, primarily due to new output from US shale production, which got a boost from developments like horizontal drilling and hydraulic fracturing. The resulting oversupply led to the last two years of oil weakness. With Wednesday’s agreement to cut production, OPEC is arguably moving back to its traditional role of attempting to target a price range for oil.

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What We're Reading

By , The Telegraph, 03/24/2017

MarketMinder's View: IHS Markit’s March flash composite purchasing managers’ index for the eurozone soared to its highest level in six years, signaling a broadening and strengthening expansion. Yippee! As the political fog clears, investors will see strong economic fundamentals more clearly, and falling uncertainty should lift eurozone stocks. While sentiment toward the region is clearly warming up, it still has plenty of room to thaw, as evidenced by the inflation fears and worries about premature monetary tightening at the end of the article. So you haven’t missed the boat.

By , YouGov, 03/24/2017

MarketMinder's View: About one-third of Americans don’t much trust government statistics, and even fewer trust unemployment numbers—regardless of political party, a plurality of Americans think the Labor Department understates unemployment. And on the one hand, they sort of do! The headline unemployment rate, the U-3, counts only those who are unemployed and looking for work. The U-6 unemployment, which also counts those employed part-time for economic reasons or marginally attached to the labor force, is several points higher. There are several other unemployment rates, too, which we discussed last year. U-3 gets all the attention, but the government’s statheads report a smorgasbord of data, which you can download, slice and dice all you want. It’s pretty cool. Then again, stats are only as good as their inputs, and jobs data come from surveys of households and businesses, which aren’t airtight. That’s all a long-winded way of saying we get why folks are skeptical, and we’re always skeptical of any single datapoint, regardless of the source. But it is worth noting that several private-sector outfits report labor market statistics, including payroll processer ADP, and their data show the same broad trends as the official data.

By , Bloomberg, 03/24/2017

MarketMinder's View: “Orders for U.S. durable goods increased more than forecast in February, a sign companies are confident about the outlook for the economy. Bookings for goods meant to last at least three years rose 1.7 percent after a 2.3 percent advance the prior month that was larger than previously estimated, Commerce Department data showed Friday. The median forecast of economists surveyed by Bloomberg called for a 1.4 percent increase. A sixth straight gain in orders for durable goods minus transportation equipment underscores rising demand that will help to broaden economic growth.”

By , The Wall Street Journal, 03/24/2017

MarketMinder's View: We’re automatically skeptical of all “it’s different this time” arguments, but far be it from us to just dismiss anything out of hand, so we dove into this one, hoping (for its own sake) that it at least presented new evidence to show why stress in China’s short-term money markets would be the straw that breaks the camel’s back this time, when it hasn’t done so in years past. Alas, these are all the same arguments we saw four years ago, the last time people really worried about this. The only real change, near as we can tell, is that now some Wealth Management Products (short-term bank funding vehicles that guarantee principal and pay high interest rates) have invested in other Wealth Management Products. Which is interesting, but we fail to see how it creates a negative feedback loop on par with 2008’s financial crisis. The financial system didn’t come to a screeching halt then because, say, Lehman Brothers invested in Bear Stearns. It happened because a misapplied, esoteric accounting rule forced hedge funds and banks to firesell assets and revalue similar securities on their balance sheets at comparable firesale prices. For all the talk of financial derivatives “ballooning out of control” back then, that all turned out to be a tempest in a teapot, as most of those derivatives cancelled each other out. We aren’t saying China’s financial system is in perfect shape, and goodness knows there is some weirdness and shenaniganery, but 2008 this is not. Particularly when the Chinese government underwrites the entire financial system and still has about $3 trillion of firepower to deploy if needed.

Global Market Update

Market Wrap-Up, Thursday, March 23, 2017

Below is a market summary as of market close Thursday, March 23, 2017:

  • Global Equities: MSCI World (+0.1%)
  • US Equities: S&P 500 (-0.1%)
  • UK Equities: MSCI UK (+0.6%)
  • Best Country: Ireland (+1.1%)
  • Worst Country: New Zealand (-0.4%)
  • Best Sector: Materials (+0.3%)
  • Worst Sector: Information Technology (-0.3%)

Bond Yields: 10-year US Treasury yields rose 0.01 percentage point to 2.42%.

 

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. S&P 500 returns are presented including gross dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.