Commentary

Fisher Investments Editorial Staff
Commodities

How Silver Lost Its Shine

By, 07/23/2015
Ratings843.857143

Photo by Chris Ratcliffe, Bloomberg Finance/Getty Images.

With all eyes on gold lately, some may wonder about silver. The story here, folks, is the same: Silver is oversupplied relative to demand, and it has paid the price. The silver craze was a short-lived bubble that burst four years ago and has continued deflating since.

Commentary

Elisabeth Dellinger
Currencies

The Common Currency: Cure or Curse?

By, 07/22/2015
Ratings534.113207

This is a banknote, not a shackle. Photo by Banar Fil Ardhi/EyeEm via Getty Images.

Here, as best as I can sum up, is the popular argument against the euro: It is a straitjacket on southern Europe, robbing countries of monetary policy and forcing them to tackle debt through austerity instead of currency devaluations, dooming Greece (et al) to perpetual fiscal contraction, high unemployment and stagnation. Snazzy-looking charts try to prove the point by comparing GDP growth in euro and non-euro European nations since 2007, with euro-users losing. Pundits and politicians galore argue Greece’s ticket to happiness is a one-way ride on the drachma express. And maybe for Greece in the here and now that’s true, especially if “Grexit” took the path outlined by German Finance Minister Wolfgang Schäuble last week.[i] But the euro itself isn’t the root of economic evil, nor is it destined to fail. It is simply incomplete. Its benefits are many, and while it might take the eurozone years to decide what it wants to be when it grows up, countries in the bloc can do just fine in the meantime—with many opportunities for investors.

Commentary

Fisher Investments Editorial Staff
Commodities

Gold: The Pyrrhic Hedge

By, 07/22/2015
Ratings734.068493

Gold is down.

Yes, we know, you don’t need to come here to find that pithy, to-the-point observation. That is all over the news, triggering a wide array of ruminations about what it all means. But the thing we find striking is that the media seems to think this is new, surprising, big news. It is none of those, of course, and we continue to believe gold has little-to-no place in a long-term investor’s diverse portfolio.

For years, gold has been a hot topic among investors. Newsletter writers hock it. Pundits and commentators speculate wildly on how high it will rise. Some even try to divine the true size of China’s unpublished gold holdings (in metric tonnes, of course). Yet for all the talk since 2009, owning gold versus stocks during this bull market has most often been the wrong move. That’s right, gold—something we’re often told has an inherent value[i]—hasn’t added value during most of this bull market.

Commentary

Fisher Investments Editorial Staff
Others

An Earnings Season Replay?

By, 07/20/2015
Ratings483.71875

It appears analysts have been slow to react to the lesson economics taught them just a few months back: The strong dollar may ding revenues, but it has some pretty big bottom line benefits, too. This was the lesson taught in Q1, when S&P 500 earnings handily beat too-dour expectations. It’s early, but with about 12% of S&P 500 companies having reported for Q2, the same is happening. Thus far, Q2’s earnings reality suggests profit expectations remain too low, possibly setting up more positive surprises going forward.

At the end of Q1, just before firms began reporting earnings for the quarter, analysts were dour, expecting S&P 500 profits to drop -4.6% y/y—down from +4.1% projections as the quarter began. The dour outlook was largely based on the strong US dollar, which many feared would materially dent both the quantity and value of US exports. A strong dollar makes US goods more expensive to foreigners, causing some to choose cheaper alternatives. And if US firms don’t adjust prices, a stronger dollar means lower revenues after conversion.

Yet the expected decline didn’t come—earnings ended up growing +0.8% y/y (+8.6% excluding the Energy sector). It appears analysts didn’t quite account for the fact the strong dollar means firms’ foreign-sourced input costs fall, too: labor, raw materials, components and transportation. In addition, while many fixate on weak oil prices’ potential impact on consumers, they miss the direct positive impact on producers’ profits—lower energy and shipping costs are an immediate boon for profits. All simple “on the one hand, on the other hand” economics Harry Truman probably would have hated.[i]

Commentary

Fisher Investments Editorial Staff
Into Perspective, Across the Atlantic

Greece Gets Some Euros

By, 07/17/2015
Ratings314.193548

The deal everyone seems to hate is a step closer to becoming reality: Greece seems to have secured a short-term loan providing three months’ time to haggle over a third bailout. However, we sincerely doubt Greece is all of a sudden fixed and never to return to headlines. So use this opportunity to see that even as close as Greece was to exiting the euro lately, there isn’t evidence Greece poses an actual threat to the global economy.

Overnight Wednesday, Greek Prime Minister Alexis Tsipras managed to cobble together support from 229 of Parliament’s 300 members and pass the tough austerity measures required by the EU, IMF and ECB (the troika) as a precondition for a potential third bailout. To say this wasn’t exactly a broadly popular move is quite an understatement indeed. Violent protests erupted in front of Parliament. Thirty-two Syriza MPs voted “no,”[i] six abstained and one boycotted, leaving Tsipras with just 124 votes from his own coalition. Greek parliamentary procedures stipulate a government must secure at least 121 votes from its own bloc on major legislation to prove it hasn’t lost its mandate, so Tsipras was just four rebels away from a confidence vote. Many of the rebel MPs say they still support Tsipras and the government despite their rejection of bailout terms, and with a cabinet reshuffle underway, Tsipras should be able to hang on for the near term, but many suspect he’ll be forced to hold early elections sooner rather than later.

Meanwhile, the EU agreed in principle to provide Athens a €7.16 billion bridge loan from the European Financial Stabilization Mechanism (EFSM)—the EU’s (not eurozone’s) temporary bailout fund designed on the fly in 2010 to deal with Greece, Portugal and Ireland. As an arm of the EU, this fund includes contributions from non-eurozone nations like Britain and Denmark, both of which have ongoing notable anti-Brussels movements. This was thought to be a hurdle initially, but the eurozone effectively guaranteed non-euro countries they won’t be exposed to loss, winning their support.

Commentary

Fisher Investments Editorial Staff
Emerging Markets, GDP, Into Perspective

China Hits the Target

By, 07/16/2015
Ratings374.608108

Chinese GDP officially grew 7.0% y/y in Q2, matching Q1’s pace and the government’s target and beating expectations for 6.9%. But the good news hasn’t quieted those long-running “hard landing” fears. They just morphed again, this time into jitters over how mainland stocks’ crash will impact China’s economy from here on. Wild Chinese markets or no, we wouldn’t be surprised if China’s economy continued its modest slowdown for the foreseeable future, but a hard landing still appears highly unlikely—we think investors can still expect China to contribute meaningfully to global growth.

China skeptics claim the trouble in A-shares (which we discussed here) could hurt economic activity on two fronts: financial services and consumer spending. The consumer spending fears center on the supposed “wealth effect”—the belief rising stock markets make folks feel wealthier, driving spending higher, while falling markets make folks feel less rich and thus inspire them to tighten the purse strings. The financial services angle is a little more straightforward: Trading volumes jumped during the mania, boosting financial firms’ growth, and falling back to more normal trading volumes could drive a setback in the industry, hurting China’s service sector—the sector officials are counting on to offset the continued slowdown in heavy industry. There is probably a kernel of truth here, though the impact likely isn’t as great as feared. The consumer spending angle, however, doesn’t wash.

Industry-level data for China’s Q2 GDP aren’t yet available, but analysts crunched the numbers for Q1 and found financial services contributed 1.3 percentage points to China’s 7.0% headline growth rate, way up from its 0.7 percentage-point contribution in all of 2014 (when China grew 7.4%). Considering service sector growth accelerated sharply from 7.9% y/y in Q1 to 8.4% in Q2—and millions of investors reportedly opened brokerage accounts in the quarter—many suspect financial services drove the acceleration. Fair enough, and probably fair to assume things ease off a bit when the frenzy dies down (as we write, many companies’ shares remain halted, so activity is slowing). But the broader impact seems limited. As of 2014’s end, the financial industry comprised just 5.3% of Chinese GDP—about even with real estate, and smaller than retail/wholesale trade and (by a mile) heavy industry. Property sales have picked up lately, and a continued rebound there could help offset any potential iffiness in finance.

Commentary

Fisher Investments Editorial Staff
Into Perspective, Commodities

Assessing the Iran Deal’s Investment Impact

By, 07/15/2015
Ratings594.398305

Tuesday, the US and five other world powers reached a nuclear agreement with Iran: If Iran constrains its nuclear program as agreed, the six will lift economic sanctions. The agreement, which now goes to Congress for review and approval, has sparked passionate reactions—many centered on regional geopolitical and military what-ifs. Those are valid points to weigh sociologically, but for investors, they aren’t really the right considerations. Markets care most about the conditions affecting the private sector over the next 12-18 months or so, and it is highly unlikely anything related to this deal snowballs into a major global conflict within this window. Trying to look much further out is sheer speculation, which markets don’t discount. So the right question, in the here and now, is: What are an Iran deal’s foreseeable implications for corporate profits and the global economy? Some already debate the impact on oil prices and the Energy sector. Should the deal go through—i.e., Iran pass nuclear inspections, sanctions ease and Iran fully returns to global oil markets—crude oil supply would probably increase. But those are a lot of ifs, and any assessments of the impact are pure speculation at this point. Regardless of whether Iran puts an additional weight on oil prices, though, Energy stocks still face many headwinds, and in our view, better investment opportunities exist elsewhere.

Should Iranian oil exports come back online, they would add to an already oversupplied global market—the question is how much and when. Iran currently exports about 1.4 million barrels of oil per day (mbpd), compared to 2.6 mbpd before sanctions were imposed in November 2011. Estimates for a post-sanctions export jump range from 200,000 to 500,000, though Iranian oil minister Bijan Namdar Zanganeh said his country could increase exports by 500,000 barrels a day (bpd) once sanctions are lifted and add double that in the following six months. However, 500,000 bpd equals just 0.6% of total world production. For comparison, the US’s Bakken shale alone produces about 1.2 mbpd, and the Eagle Ford shale churns out about 1.5 mbpd. Iran’s forecast may be overly optimistic, too, as its ability to ramp up production remains to be seen. After getting cut off from export markets, Iran slowed production by 1 mbpd, and it’s unclear when old wells will be ready to produce again. (Exhibit 1) They have every incentive to move quickly and goose exports as much as possible, given how sanctions have hurt Iran’s economy, but sometimes technology trumps will.

Exhibit 1: Iran Oil Production   

Commentary

Fisher Investments Editorial Staff
Into Perspective

Greece Kicks the Can, Now Comes the Hard Part

By, 07/14/2015
Ratings294.465517

Greek Prime Minister Alexis Tsipras and Finance Minister Euclid Tsakalotos managed half-smiles as they departed from all-night bailout talks Monday morning. Photo by Jasper Junien/Bloomberg via Getty Images.

At dinnertime in Brussels on Sunday, eurozone leaders gathered behind closed doors to determine whether to open negotiations on a third Greek bailout. After 17 hours of brutal, acrimonious talks (and, presumably, countless cups of coffee), they reached a deal. Sort of. If Greece passes a raft of new laws by Wednesday, and if Germany’s Parliament approves, Greece and its creditors will begin negotiating the specifics of a roughly €86 billion three-year loan—a process that could take months. Any eventual deal would require approval by eight national parliaments. Greece would get short-term financing to cover debt payments due in the meantime, and markets cheered the announcement, but we’d suggest tempering your enthusiasm. Monday’s agreement is a key step, but the hard part comes next, and the fragile agreement[i] could still collapse. Global risk remains minimal regardless of what shakes out, but we’d encourage all investors to keep their expectations in check.

Commentary

Todd Bliman
Personal Finance

Employer Stock, and the Risk in Buying What You Know

By, 07/13/2015

Unfortunately, Enron wasn’t an isolated case. Photo by James Nielsen/Getty Images.

When I was a fresh-faced college graduate first entering the securities industry about a decade and a half ago,[i] advice many folks spouted amounted to this: Buy what you know.

Commentary

Fisher Investments Editorial Staff
Into Perspective, Capitalism, US Economy

Moore’s Law Gets a New Lease on Life

By, 07/13/2015
Ratings1284.363281

Semiconductors moving through the production line in 2013. Today’s versions are even smaller. Photo by Gianluca Colla/Bloomberg via Getty Images.

Editor’s Note: MarketMinder does not recommend individual securities. The below are merely examples of a broader theme we wish to highlight.

Commentary

Fisher Investments Editorial Staff
Emerging Markets, GDP, Into Perspective

China Hits the Target

By, 07/16/2015
Ratings374.608108

Chinese GDP officially grew 7.0% y/y in Q2, matching Q1’s pace and the government’s target and beating expectations for 6.9%. But the good news hasn’t quieted those long-running “hard landing” fears. They just morphed again, this time into jitters over how mainland stocks’ crash will impact China’s economy from here on. Wild Chinese markets or no, we wouldn’t be surprised if China’s economy continued its modest slowdown for the foreseeable future, but a hard landing still appears highly unlikely—we think investors can still expect China to contribute meaningfully to global growth.

China skeptics claim the trouble in A-shares (which we discussed here) could hurt economic activity on two fronts: financial services and consumer spending. The consumer spending fears center on the supposed “wealth effect”—the belief rising stock markets make folks feel wealthier, driving spending higher, while falling markets make folks feel less rich and thus inspire them to tighten the purse strings. The financial services angle is a little more straightforward: Trading volumes jumped during the mania, boosting financial firms’ growth, and falling back to more normal trading volumes could drive a setback in the industry, hurting China’s service sector—the sector officials are counting on to offset the continued slowdown in heavy industry. There is probably a kernel of truth here, though the impact likely isn’t as great as feared. The consumer spending angle, however, doesn’t wash.

Industry-level data for China’s Q2 GDP aren’t yet available, but analysts crunched the numbers for Q1 and found financial services contributed 1.3 percentage points to China’s 7.0% headline growth rate, way up from its 0.7 percentage-point contribution in all of 2014 (when China grew 7.4%). Considering service sector growth accelerated sharply from 7.9% y/y in Q1 to 8.4% in Q2—and millions of investors reportedly opened brokerage accounts in the quarter—many suspect financial services drove the acceleration. Fair enough, and probably fair to assume things ease off a bit when the frenzy dies down (as we write, many companies’ shares remain halted, so activity is slowing). But the broader impact seems limited. As of 2014’s end, the financial industry comprised just 5.3% of Chinese GDP—about even with real estate, and smaller than retail/wholesale trade and (by a mile) heavy industry. Property sales have picked up lately, and a continued rebound there could help offset any potential iffiness in finance.

Commentary

Fisher Investments Editorial Staff
Into Perspective, Commodities

Assessing the Iran Deal’s Investment Impact

By, 07/15/2015
Ratings594.398305

Tuesday, the US and five other world powers reached a nuclear agreement with Iran: If Iran constrains its nuclear program as agreed, the six will lift economic sanctions. The agreement, which now goes to Congress for review and approval, has sparked passionate reactions—many centered on regional geopolitical and military what-ifs. Those are valid points to weigh sociologically, but for investors, they aren’t really the right considerations. Markets care most about the conditions affecting the private sector over the next 12-18 months or so, and it is highly unlikely anything related to this deal snowballs into a major global conflict within this window. Trying to look much further out is sheer speculation, which markets don’t discount. So the right question, in the here and now, is: What are an Iran deal’s foreseeable implications for corporate profits and the global economy? Some already debate the impact on oil prices and the Energy sector. Should the deal go through—i.e., Iran pass nuclear inspections, sanctions ease and Iran fully returns to global oil markets—crude oil supply would probably increase. But those are a lot of ifs, and any assessments of the impact are pure speculation at this point. Regardless of whether Iran puts an additional weight on oil prices, though, Energy stocks still face many headwinds, and in our view, better investment opportunities exist elsewhere.

Should Iranian oil exports come back online, they would add to an already oversupplied global market—the question is how much and when. Iran currently exports about 1.4 million barrels of oil per day (mbpd), compared to 2.6 mbpd before sanctions were imposed in November 2011. Estimates for a post-sanctions export jump range from 200,000 to 500,000, though Iranian oil minister Bijan Namdar Zanganeh said his country could increase exports by 500,000 barrels a day (bpd) once sanctions are lifted and add double that in the following six months. However, 500,000 bpd equals just 0.6% of total world production. For comparison, the US’s Bakken shale alone produces about 1.2 mbpd, and the Eagle Ford shale churns out about 1.5 mbpd. Iran’s forecast may be overly optimistic, too, as its ability to ramp up production remains to be seen. After getting cut off from export markets, Iran slowed production by 1 mbpd, and it’s unclear when old wells will be ready to produce again. (Exhibit 1) They have every incentive to move quickly and goose exports as much as possible, given how sanctions have hurt Iran’s economy, but sometimes technology trumps will.

Exhibit 1: Iran Oil Production   

Commentary

Fisher Investments Editorial Staff
Into Perspective

Greece Kicks the Can, Now Comes the Hard Part

By, 07/14/2015
Ratings294.465517

Greek Prime Minister Alexis Tsipras and Finance Minister Euclid Tsakalotos managed half-smiles as they departed from all-night bailout talks Monday morning. Photo by Jasper Junien/Bloomberg via Getty Images.

At dinnertime in Brussels on Sunday, eurozone leaders gathered behind closed doors to determine whether to open negotiations on a third Greek bailout. After 17 hours of brutal, acrimonious talks (and, presumably, countless cups of coffee), they reached a deal. Sort of. If Greece passes a raft of new laws by Wednesday, and if Germany’s Parliament approves, Greece and its creditors will begin negotiating the specifics of a roughly €86 billion three-year loan—a process that could take months. Any eventual deal would require approval by eight national parliaments. Greece would get short-term financing to cover debt payments due in the meantime, and markets cheered the announcement, but we’d suggest tempering your enthusiasm. Monday’s agreement is a key step, but the hard part comes next, and the fragile agreement[i] could still collapse. Global risk remains minimal regardless of what shakes out, but we’d encourage all investors to keep their expectations in check.

Commentary

Todd Bliman
Personal Finance

Employer Stock, and the Risk in Buying What You Know

By, 07/13/2015

Unfortunately, Enron wasn’t an isolated case. Photo by James Nielsen/Getty Images.

When I was a fresh-faced college graduate first entering the securities industry about a decade and a half ago,[i] advice many folks spouted amounted to this: Buy what you know.

Commentary

Fisher Investments Editorial Staff
Into Perspective, Capitalism, US Economy

Moore’s Law Gets a New Lease on Life

By, 07/13/2015
Ratings1284.363281

Semiconductors moving through the production line in 2013. Today’s versions are even smaller. Photo by Gianluca Colla/Bloomberg via Getty Images.

Editor’s Note: MarketMinder does not recommend individual securities. The below are merely examples of a broader theme we wish to highlight.

Commentary

Fisher Investments Editorial Staff
Into Perspective

Greece Plays ‘Let’s Make a Deal’

By, 07/10/2015
Ratings654.407692

Here is your obligatory Greece update: A mere four business days after 61% of Greek voters rejected the austerity conditions demanded by the EU/IMF/ECB (the “troika”) in exchange for extending Greece’s second bailout, it seems a third bailout deal may be at hand.[i] A deal containing much of the very same conditions voters just shot down.

All this follows some rather entertaining revelations earlier this week regarding Greek Prime Minister Alexis Tsipras’ actual motivation in announcing last weekend’s bizarre referendum to approve-or-reject a deal that was neither on the table nor translated correctly. As reported by The Telegraph’s Ambrose Evans-Pritchard, Tsipras never expected to win the July 5 referendum on austerity, instead planning to dissolve his government after the citizenry voted for austerity and against his position and letting a caretaker administration deal with the unpleasant cleanup job. After the vote, according to Evans-Pritchard, Tsipras moped around the Maximos Mansion,[ii] wondering what to do. We can’t say this happened at that moment,[iii] but according The Wall Street Journal, sometime shortly after the vote, French President François Hollande telephoned Tsipras, offering support and urging him to capitulate … quickly … and put forward a serious proposal soon.

That proposal has now been made. And it looks eerily similar to the terms the voters rejected days ago, with one major difference. Here is a side-by-side view of the major terms:

Research Analysis

Akash Patel
Into Perspective

Heating Up—A Look at UK Housing

By, 11/27/2013
Ratings124.041667

Is the UK housing market overheating, or is it merely the latest example of froth fears that are detached from reality?

Recent home price data and the UK’s Help to Buy scheme’s early expansion already have some UK politicians and business leaders wondering—some going as far as calling for the Bank of England to cap rising home prices. Taking a deeper look, however, I see a different story: Rapid housing price gains have been concentrated in London. Restricting overall UK housing with more legislation likely won’t fix that, and it probably won’t help spread London’s gains to UK housing elsewhere. More importantly, the fact UK housing gains aren’t widespread tells me a nationwide bubble neither exists nor is particularly probable—even with an expanded Help to Buy program.

While UK housing started slowly improving after Help to Buy began in April, the program has only been lightly used in the early going—suggesting the housing recovery is coming from strengthening underlying fundamentals and isn’t purely scheme-driven. In Help to Buy’s first phase, the government promised to lend up to 20% of a home’s value at rock bottom rates (interest free for five years, 1.75% interest after) to buyers with a 5% down payment—providing up to £3.5 billion in total loans. Only first-home buyers (of any income strata) seeking newly built houses valued at £600k or less could participate. The Treasury began a second (earlier-than-expected) iteration in October, in which it guarantees 20% of the total loan to lenders, instead of lending directly to the buyer. The program was also expanded another £12 billion for buyers purchasing any home (new or not).

Research Analysis

Fisher Investments Research Staff

MLPs and Your Portfolio

By, 11/26/2013
Ratings833.885542

With interest rates on everything from savings accounts to junk bonds at or near generational lows, many income-seeking investors are looking for creative or, to some, exotic means of generating cash flow. Some are turning to a relatively little-known type of security—master limited partnerships (MLPs). MLPs may attract investors for a number of reasons: their high dividend yields and tax incentives, to name a couple. But, like all investments, MLPs have pros and cons, which are crucial to understand if you’re considering investing in them.

MLPs were created in the 1980s by a Congress hoping to generate more interest in energy infrastructure investment. The aim was to create a security with limited partnership-like tax benefits, but publicly traded—bringing more liquidity and fewer restrictions and thus, ideally, more investors. Currently, only select types of companies are allowed to form MLPs—primarily in energy transportation (e.g., oil pipelines and similar energy infrastructure).

To mitigate their tax liability, MLPs distribute 90% of their profits to their investors—or unit holders—through periodic income distributions, much like dividend payments. And, because there is no initial loss of capital to taxes, MLPs can offer relatively high yields, usually around 6-7%. Unit holders receive a tax benefit, too: Much of the dividend payment is treated as a return of capital—how much is determined by the distributable cash flow (DCF) from the MLP’s underlying venture (e.g., the oil pipeline).

Research Analysis

Elisabeth Dellinger
Reality Check

Inside Indian Taper Terror

By, 11/08/2013
Ratings174.294117

When the Fed kept quantitative easing (QE) in place last week, US investors weren’t the only ones (wrongly) breathing a sigh of relief. Taper terror is fully global! In Emerging Markets (EM), many believe QE tapering will cause foreign capital to retreat. Some EM currencies took it on the chin as taper talk swirled over the summer, and many believe this is evidence of their vulnerability—with India the prime example as its rupee fell over 20% against the dollar at one point. Yet while taper jitters perhaps contributed to the volatility, evidence suggests India’s troubles are tied more to long-running structural issues and seemingly erratic monetary policy—and suggests EM taper fears are as false as their US counterparts.

The claim QE is propping up asset prices implies there is some sort of overinflated disconnect between Emerging Markets assets and fundamentals—a mini-bubble. Yet this is far removed from reality—not what you’d expect if QE were a significant positive driver. Additionally, the thesis assumes money from rounds two, three and infinity of QE has flooded into the developing world—and flows more with each round of monthly Fed bond purchases. As Exhibit 1 shows, however, foreign EM equity inflows were strongest in 2009 as investors reversed their 2008 panic-driven retreat. Flows eased off during 2010 and have been rather weak—and often negative—since 2011.

Exhibit 1: Emerging Markets Foreign Equity Inflows

Research Analysis

Brad Pyles

Why This Bull Market Has Room to Run

By, 10/31/2013
Ratings884.102273

With investors expecting the Fed to end quantitative easing soon, the yield spread is widening—fuel for stocks! Photo by Alex Wong/Getty Images.

Since 1932, the average S&P 500 bull market has lasted roughly four and a half years. With the present bull market a hair older than the average—and with domestic and global indexes setting new highs—some fret this bull market is long in the tooth. However, while bull markets die of many things, age and gravity aren’t among them. History argues the fundamentals underpinning this bull market are powerful enough to lift stocks higher from here, with economic growth likely to continue—and potentially even accelerate moving forward as bank lending increases.

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What We're Reading

By , The Telegraph , 07/27/2015

MarketMinder's View: By our unofficial count, the concerns highlighted here comprise roughly 87% of the bricks in the wall of worry bull markets love to climb, from Chinese hard-landing fears and a shaky eurozone recovery to the current bull market’s advanced age and seasonal circumstances ready to roil the market. Now, we’re not saying August is going to be either a good or bad month for stocks—volatility can always knock markets in the short-term—but we don’t see the bull dying in the near future, especially for any of the reasons listed here. In short, China’s domestic stock market bumpiness doesn’t equal a hard landing, the eurozone has grown despite Greece and the ECB’s quantitative easing, bull markets don’t die of old age and no one month is automatically good or bad for stocks. Also, picking out several random historical events out of context isn’t evidence that one month may be more volatile than another (though it may be a fun and educational summertime activity for the kids). Do you know what the end of World War II, the 1971 “Nixon Shock” and Russian Ruble Crisis of 1998 have in common? None of those events immediately triggered global bear market.  

By , EUbusiness, 07/27/2015

MarketMinder's View: Over the weekend, news broke that now-former Finance Minister Yanis Varoufakis had a secret “Plan B” to set up a parallel payment system, which would create euro liquidity if Greece lost ECB emergency funding and could switch to a new drachma at the push of a button—a currency transformer of sorts. To do this, Varoufakis hired an IT expert from Columbia University and had him hack into the tax revenue systems, copy the source code, and finagle a new system that would attach a new reserve account to every Greek tax ID number. Supposedly it was all ready to go in May, but when they took it to PM Alexis Tsipras for approval he quashed it. Amazingly, this story broke because Varoufakis told it to 84 financial industry bigwigs during a recorded conference call, someone squealed, and the organizers released the whole shebang online Monday. And it is a doozy, if only for sheer entertainment value, it is a must-listen. We’re personally fond of the Godfatheresque tale of brotherly love that starts at 19:51. It all sounds like a scene from a bad Hollywood thriller, and there is plenty more where those spoilers came from. For investors, it highlights Tsipras’ increasing struggle to control rebel members of his Syriza party (though Varoufakis is only loosely affiliated, not a full-fledged party member), which underscores just how difficult it will be to pass legislation to comply with bailout terms, much less implement them over the next several years (assuming he even remains in power). So we probably haven’t heard the last of “Grexit” fears. But we do know this: The likelihood Greece knocks global markets still remains close to nil.

By , The Wall Street Journal, 07/27/2015

MarketMinder's View: For as much progress as the US has made towards the Trans-Pacific Partnership, it isn’t a done deal yet. Even though it’s now in the “final round,” many variables and what ifs still persist. New Zealand is trying to milk out more favorable terms for dairy exports while Canada—and its domestic dairy industry—is sour towards that idea. Australia wants a sweet deal for its sugar exports, which US domestic interests are bristling against. The US also has beef with Japan over some agricultural products, like cattle and rice. As we’ve said before, the completion of the TPP would be a big positive for the global economy (although a huge negative for punnery), but until it actually gets finalized and completed, we wouldn’t count the chickens before they hatch.   

By , CNN Money, 07/27/2015

MarketMinder's View: China’s domestic stock market isn’t a leading indicator for the economy. While China’s domestic (A-shares) stock market is on a wild ride—like Monday’s -8.5% drop—contagion fears are overwrought. For one, foreign participation in the A-share market is extremely limited, as individual investors make up less than 1% of market capitalization. A-share bear markets in 2009-2010 and 2011-2012 didn’t presage Chinese economic hard landings or a global bear market. Plus, slowing Chinese economic data aren’t surprising or particularly alarming—and in some cases, results are better than anticipated. As long as China keeps making its still sizable contribution to the global economy, that’s likely good enough to exceed dour expectations—a bullish scenario for global markets. For more, see our 7/9/2015 commentary, “About China …

Global Market Update

Market Wrap-Up, Friday July 24, 2015

Below is a market summary as of market close Friday, 7/24/2015:

  • Global Equities: MSCI World (-1.0%)
  • US Equities: S&P 500 (-1.1%)
  • UK Equities: MSCI UK (-1.3%)
  • Best Country: Denmark (-0.2%)
  • Worst Country: Australia (-1.7%)
  • Best Sector: Telecommunications Services (-0.0%)
  • Worst Sector: Health Care (-1.9%)

Bond Yields: 10-year US Treasury yields fell 0.01 percentage point to 2.26%.

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.