Commentary

Fisher Investments Editorial Staff
Reality Check, Media Hype/Myths

Don’t Jump to Conclusions on Brexit’s Impact

By, 07/25/2016

Photo by Westend61/Getty Images

Recent UK economic data are insufficient to draw any conclusion about the impact of June 23’s vote to leave the EU.

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
Ratings1074.102804


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
Ratings594.033898

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
Ratings344.264706

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
Ratings794.348101

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
Ratings453.922222

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
Ratings844.071429

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
Ratings1592.349057

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

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
Ratings453.922222

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
Ratings844.071429

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
Ratings1592.349057

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
Ratings2012.741293

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.

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.

Subscribe

Get a weekly roundup of our market insights.Sign up for the MarketMinder email newsletter. Learn more.

What We're Reading

By , The Wall Street Journal, 07/25/2016

MarketMinder's View: While we are rather mixed on this article overall, it does contain some tried-and-true advice for long-term investors, especially those with fixed income exposure: Don’t invest for yield alone, as doing so can lead you to take outsized risks. An asset’s yield is just one part of total return to consider, and it alone shouldn’t determine its place in your portfolio. Higher yield intuitively means the investor must take on more risk to reap the reward, and those risks (e.g., higher likelihood of failing to return your capital, illiquidity) may put investors in a tough spot. As this piece advises, the more successful—and difficult—strategy is to remain patient and disciplined and resist the lure of short-term relief, opting instead to stick to your long-term plan. That said, we are much less high on the discussion of high-yield corporate bonds, which can still play a handy role in diversified fixed income portfolios. We wouldn’t go hog wild or anything, but it is a myth that they (or bonds in general) are in a bubble. Actually, considering credit spreads tend to narrow as rates rise, corporate and high-yield bonds might reduce volatility relative to a Treasury bond portfolio if rates rise from here. Also, while we are also fans of taking “homemade dividends” from a stock portfolio, it is a myth that you should only sell your “losers.” Price movement alone should never influence a transaction. Be more tactical, thinking about risk management (paring back positions that grew to comprise an outsized portion of your portfolio) and a company’s future potential.

By , The Financial Times, 07/25/2016

MarketMinder's View: Amid all the analyses spilled over the impact of the Brexit referendum last month, here is one positive story: Markets didn’t break despite record volumes for some trading venues, as electronic market makers stepped in to provide the needed liquidity. Despite trades happening at incredibly fast speeds due to the increased usage of algorithms, liquidity fears didn’t materialize, even though the traditional market makers providers—big banks—weren’t as prominent. As one analyst noted here, “The major banks have reduced appetite for making markets during these times of crisis. It was interesting to see that the major venues had tremendous volumes and there were no instances of negative feedback.” This should be a reassuring point in favor of algorithmic and high-frequency trading—markets operated just fine even after a well-known, sentiment-shaking event occurred. 

By , Bloomberg, 07/25/2016

MarketMinder's View: The China Minxin Manufacturing PMI, a private-sector measure of Chinese manufacturing activity, was just suspended for the second time in less than a year. Perhaps relatedly, the Chinese government has reportedly banned private-sector Internet news reporting, extending President Xi Jinping’s media crackdown as he consolidates power. For investors, these developments make it that much harder to glean actionable information from the Middle Kingdom, and they illustrate how political risks vary among different Emerging Markets. This isn’t a global market risk by any stretch, but it is something for anyone investing in Emerging Markets to bear in mind.

By , Yahoo! Finance, 07/25/2016

MarketMinder's View: We have qualms with the notion that the profits narrative for Corporate America “just got worse.” The rationale provided here: After Q1’s end, experts projected a Q3 2016 earnings growth rate of 3.3% y/y. This fell to 0.6% at Q2’s end, and today it is at -0.1% (per FactSet). Our issue isn’t with the numbers themselves, but rather, the broader narrative: None of this is new. Analysts have consistently ratcheted down their expectations, only for reality to beat them. For instance, at the onset of Q1 2016, earnings were expected to fall -8.5%. After all 500 S&P companies reported, earnings fell just -6.7%. Both figures are even better when you strip out the struggling Energy sector, which has detracted from the headline number for a while now. By no means are we saying negative earnings numbers are anything to cheer, but context is key—US companies are doing overall better than commonly portrayed. And that—the gap between reality and expectations throughout the economy—is what ultimately moves stock prices. Earnings and earnings expectations are far from the most meaningful driver, contrary to the assertions herein. Also, valuations don’t mean anything for stocks looking ahead. At best, the forward price-to-earnings ratio gives you a rough sketch of current sentiment—otherwise, it’s all just backward-looking gobbledygook that pundits spin to say something scary about markets.       

Global Market Update

Market Wrap-Up, Friday, July 22, 2016

Below is a market summary as of market close Friday, July 22, 2016:

  • Global Equities: MSCI World (+0.1%)
  • US Equities: S&P 500 (+0.5%)
  • UK Equities: MSCI UK (-0.6%)
  • Best Country: Norway (-1.8%)
  • Worst Country: Ireland (+0.1%)
  • Best Sector: Telecommunication Services (+1.1%)
  • Worst Sector: Industrials (-0.3%)

Bond Yields: 10-year US Treasury yields rose 0.01 percentage point to 1.57%.

 

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.