Today's Headlines

By , CNN Money, 10/21/2014

MarketMinder's View: Yes, China’s economy is growing at a slower pace (7.3% y/y in Q3). And there is a chance China might not reach its 7.5% annual growth target. Should we be concerned? Not necessarily—China is still growing at a rate most countries would love. The hard landing so many fret still isn’t here. Plus, GDP growth alone isn’t the only factor to consider—the government has also been in the process of implementing reforms, which will likely be a long-term positive for China. For more, see Joseph Wei’s 08/07/2014 commentary, “China’s Balancing Act.”

By , Bloomberg, 10/21/2014

MarketMinder's View: “By estimating that zero stimulus would be consistent with a 10 percent quarterly drop in equities, they calculate it takes around $200 billion from central banks each quarter to keep markets from selling off.” So by starting from the presumption that the Fed’s actions are in fact stimulus, you find that the Fed has to do a lot to prop up stocks. But the problem isn’t the math, it’s the logic on this thesis, which starts from a fallacious point. Quantitative easing (QE) hasn’t been all that great for the economy—it weighed on long-term interest rates, decreasing banks’ profit margins. Banks had less incentive to lend, which meant money supply growth was painfully slow (which means not much new money could even have leaked into stocks, to the extent that was a thing at all—we think not so much). Now, maybe slow growth is good for stocks because it keeps worries higher for longer. That is possible. But it is equally possible faster growth would have benefited stocks more. Ultimately, this looks to us like trying to explain why markets bounced back the last few days, which presumes there was a fundamental reason they fell.

By , Bloomberg, 10/21/2014

MarketMinder's View: Oil prices have fallen as of late. But concluding that a few weeks’ long blip will cause companies to change behavior and pump less seems like an awfully big leap. Oil firms do not respond to every little wiggle in oil prices real-time—nor can they. It isn’t that easy to switch production on or off. Lastly, recent oil price swings don’t necessary result from longer-term supply and demand fundamentals—sentiment can also drive short-term volatility. Plus, we are a bit skeptical of the notion prices at $80 a barrel are below firm’s shale breakeven points.

By , The New York Times, 10/21/2014

MarketMinder's View: A couple of high ranking Fed honchos, New York Fed President William Dudley and Fed Governor Daniel Tarullo, have launched a bit of a political campaign aiming to refine the culture of big Wall Street firms, on the belief that this could prevent illegal or unethical practices, or just outright greedy behavior that “contributed to the [2008] financial crisis.” Tarullo separately stated that Wall Street firms can’t just apply a “Check the box” regulatory structure. The fallout if they don’t? The two implied big firms will be broken up. However, completely unaddressed was the issue of small firm behavior, like Countrywide Financial Group, which we are told wasn’t good. Or the nonpublic, small firms in the S&L crisis. They do bad things too! And what about other industries? Shall we say, break up GM due to the recall issues it faced last year? Are there cultural issues there, too? We were told it was necessary to bail out GM in 2009 because the macroeconomic fallout would be immense. Which is too big to fail in a nutshell. Our point isn’t that bankers are the Partridge Family or something, but rather, that there are baddies in every industry. Banking isn’t special. Oh and greed had nothing to do with the crisis. The accounting rule Mr. Dudley loosely identified in early 2008 did. Regulators attempting to regulate corporate culture is a rather ridiculous notion.

By , The Wall Street Journal, 10/21/2014

MarketMinder's View: Now, there is no evidence pandemics impact stocks—stocks rose 26% during deadliest on record, the 1918 influenza outbreak. But there is also no evidence an Ebola pandemic is remotely likely, which this article does a fine job of putting into perspective: “A virus’s goal is to survive, which means infecting as many new hosts as possible. There are a number of ways to do this. One is to be highly transmissible, jumping from individual to individual through proximity or casual contact. Think influenza, which causes its hosts to spew massive numbers of infectious airborne particles. Another way is to cause only minor disease, but to remain infectious over long periods. Cold sores, for example, are caused by the herpes simplex virus and are lifelong. Ebola does neither. The period of transmission begins only after symptoms appear. There is no evidence for airborne transmission, and while sexual transmission is possible, it is not likely a major route of infection. Images of health workers in alien-looking protective gear spread fear and anxiety, but Ebola is not very contagious. Transmission requires direct contact with bodily fluids. The reason to use hazmat suits is not the probability of contagion; it is that, if you are infected, the probability of death is high.” Is it possible the illness morphs? Is it possible that impacts stocks? Yes and yes. But neither are very probable and the typical media coverage of this event isn’t helpful to the majority of investors.

By , CNBC, 10/21/2014

MarketMinder's View: Here is one gigantic flaw of many in this piece: The market is not, in fact, “calmer”—it’s just up! The market closed moments before we typed this and it rose almost 2%. 2% up is equally as volatile as 2% down. Plus, searching for meaning in bouncy times is a fruitless exercise—market volatility is normal. Forecasting the degree of dovishness at the next Fed meeting or setting up the straw man of one big tech company’s earnings as a bellwether (and then failing to knock down said straw man) is a fruitless exercise for investors. We’d suggest ignoring the noise and just staying focused on your long-term goals and objectives.

By , Bloomberg, 10/21/2014

MarketMinder's View: Here is a little check-in on a little slice of the US economy—housing. “Sales of existing single-family homes increased 2 percent to an annual rate of 4.56 million in September from the prior month, also the fastest pace in a year. Purchases of multifamily properties—including condominiums—rose 5.2 percent to a 610,000 pace.” This comes on the heels of a rebound in multi-family and single-family housing starts in September. Taken together, housing’s recovery continues its advance, albeit unevenly. Existing home sales are a financial transaction and aren’t captured in GDP. But even if we are generous and suggest all furnishings and household goods are tied to existing and new home sales, and add their economic impact to new housing construction’s, the two account for less than 5% of US GDP. So like we said, a little check in on a little slice of the US economy.

Archive

By , The New York Times, 10/20/2014

MarketMinder's View: It is not impossible that these so-called “thought viruses” could cause fears, triggering stocks to fall and consumers to cease consuming. But it is incredibly unlikely. That back drop—fear or sentiment-driven moves—is associated much more with corrections, brief blips in a bull, than bear markets or recessions. In that way, of course “secular stagnation” fears, Ebola, worries of aging populations and 2011’s debt ceiling debate can influence stocks in the short run. But absent actual fundamental truth to back them up, false fears are bullish—as reality exceeds these expectations, the previously fearful are converted and buy stocks. This is really just how the wall of worry works, and these “thought viruses” are just bricks in it. The grand irony of this is that vastly more often than not, bull markets die when investors are drunk on euphoria (dare we say, irrationally exuberant?), not when they’re fearful. Finally, one thing we did enjoy was the discussion of the fact secular stagnation was a hallmark fear of the 1940s. Sure seems like that one missed the mark! (We’re betting it’s off again now.)

By , The Wall Street Journal, 10/20/2014

MarketMinder's View: Appointing two women just a month ago to his Cabinet was a big symbolic move for Prime Minister Shinzo Abe. Encouraging more female workers and executives was a plank in his “third arrow” of structural economic reforms. This is a symbolic embarrassment for him as the two cabinet members noted here are both embroiled in scandals. Though, the notion that this is a big setback for Abenomics misses the fact the entire program hasn’t taken many steps forward. If Abe intends to push through the more contentious aspects of the third arrow, he will need significant political capital. Scandals like this against a still-sputtering economy do not bode well for future reform efforts.

By , Reuters, 10/20/2014

MarketMinder's View: The ECB’s asset purchase program—a sort of quasi-quantitative easing (QE) program—has officially begun, with the initial purchases of eurozone covered bonds Monday. In our view, this small QE program likely flattens the yield curve, reducing banks’ profits on new loans and, as a result, their incentive to lend. This is a negative, but the program appears likely to be very small relative to the QE programs in the US, UK and Japan over the last few years. While those stymied loan growth and likely slowed the economy, none ended the bull market. We doubt this version is different. More crucially for boosting lending and eurozone growth, the ECB’s stress test results are finally due out this weekend. This, in our view, will be the more telling event for eurozone loan growth looking ahead. Having these tests out of the way—and the rumored shuttering of banks that fail—likely does more to stimulate future eurozone bank lending than anything the ECB could do at this juncture.

By , The Wall Street Journal, 10/20/2014

MarketMinder's View: With just over two weeks until Election Day, polls suggest gridlock could decrease if voters do what they say right now and put more politicians seen as “compromise-friendly” in office. Now, polls, particularly those on vagaries like “bipartisan” cooperation, often mislead. We think it is likely that on a partisan basis, Congress remains divided. As to whether the people elected sing kumbaya and pass more laws, we’ll have to wait and see on that one. However, we’d note that people have decried do-nothing gridlock for years, and yet it remains. We don’t really expect a sea change and widespread handholding now. Rather, the reporting here seems more like the typical buying-in-to-campaign spin that happens ahead of midterms, something that tends to increase stocks’ nervousness before the vote. Afterwards, as it gradually becomes clear gridlock remains, stocks revel in it and rise. As an aside, for those who will bemoan gridlock if (as is likely) it continues post-election, we feel compelled to note that when it comes to the government, by no means does bipartisan mean good, compromise mean sensible or active mean better for the country. For more, see our 10/09/2014 commentary, “Voting For Gridlock.”

By , The New York Times, 10/20/2014

MarketMinder's View: As investing technology continues to advance, in many cases investors continue to reap the benefits—like improved efficiency in fixed-income trading. The bond market has traditionally been a relatively opaque, shadowy market where deals are struck between big players, with high operating costs passed on to customers in the bond price they pay. Having this shift to be more electronic and less human likely improves market liquidity, efficiency and drives firms to compete on price. This seems to us like taking the positive lessons of technology’s role in reducing bid-ask spreads in equity markets and applying it to fixed income.

By , Bloomberg, 10/20/2014

MarketMinder's View: It seems Indian Prime Minister Narendra Modi is sticking to his campaign promises, ending a decade of fuel subsidies. While it’s a politically risky move—a market-based structure may raise oil prices for Indian voters—it’s a bullish development for Energy firms who’ve been discouraged from investing in India over the past decade, as the prices they are able to charge may not reflect the market elsewhere or be sufficient to recoup costs. It also reduces the budget pressure of a costly subsidy. While what happens from here remains to be seen, increased Energy sector investment would be a welcome development for India.

By , Bloomberg, 10/20/2014

MarketMinder's View: This seems about right to us: “’After the comprehensive assessment, when worries about capital levels are clarified, banks will be more open with credit,’ said Giuseppe Castagna, 55, chief executive officer of Italy’s Banca Popolare di Milano Scarl. He’s targeting annual loan growth of about 5 percent through 2016, following a 4.2 percent drop last year.”

By , Bloomberg, 10/20/2014

MarketMinder's View: Here is an interesting and thorough discussion of the impact of vast increases in world oil supply on producers’ profits from various regions. Oil projects vary greatly in complexity, which means oil price fluctuations could cause some to actually run in the red sooner than others. Here is an example from Brazil. The big increase in oil supply does threaten profit growth at oil firms worldwide, including those in the US. This is one key reason why the shale revolution is bullish for the world, but not necessarily for every sector in the world. Energy is one of those it doesn’t favor. As an aside, lower priced oil isn’t really stimulus for the global economy. A dollar spent on oil goes to an oil firm, which then pays people, buys equipment and so on. Spending on Energy is no different than spending on anything else.

By , The Wall Street Journal, 10/17/2014

MarketMinder's View: Yep. Asset allocation is fundamental to long-term portfolio return. But after the mix of stocks, bonds, cash and other securities you use, in our view, the next most impactful thing is the category of those securities you pick. Valuations, including the Cyclically Adjusted Price-to-Earnings ratio (CAPE), aren’t long-term return drivers. They aren’t predictive of cycles or long-run returns, as illustrated by the 1990s—CAPE was above 20 as early as 1992 then. It was at the present level as early as 1996. CAPE was also above-average for pretty much all of the 1960s. While most P/Es illustrate sentiment, the CAPE is too distorted to even accomplish that. Because it mixes in earnings a decade old, the figure wraps in data that may be a full cycle behind. Many CAPE apologists excuse this by claiming it adjusts corporate results for economic cycles. But this is a statement that doesn’t pass the logic test: Stocks and corporate earnings are inherently tied to economic cycles. The macroeconomic picture matters a whole lot for individual company results, and ignoring this factor is a big mistake.

By , The Wall Street Journal, 10/17/2014

MarketMinder's View: The next time someone tries telling you the myth that foreigners are going to shun our debt or dump our debt or whatever, take a look at the actual data. Despite volatility over time, foreign demand for US debt is running high. How else can you see this more broadly? Interest rates, which are historically low today. Oh, and when they inevitably bring up the risk that foreigners fire sell those assets, ask them to consider two points: 1) Who are they selling to? For every seller, there is a buyer. And 2) It is highly unlikely some foreign nation is going to blow out a huge chunk of their foreign reserves desperately, which would probably cause them to take a loss. That is what we call, “Shooting thyself in thine foot.” (Not sure why we went all olde English, but you get the drift.)

By , Bloomberg, 10/17/2014

MarketMinder's View: The SEC has its first high-frequency trading prosecution win, and it seems justifiable to us. But this entertaining article highlights a few really sensible points on its road to wisely concluding, “The lesson here is something like: There are manipulative strategies, and there are good strategies, and it is not easy to tell them apart. You can tell them apart, probably, but you need to understand their purposes first. And dumb e-mails and nicknames can be a big help.” Aside from interesting and humorous, the discussion of a market maker’s role is top notch.

By , The Wall Street Journal, 10/17/2014

MarketMinder's View: The ECB’s negative deposit rate was ostensibly put in place to spur lending—which the eurozone could truly use, given trillions worth of bank deleveraging the last few years.  But merely penalizing banks for holding excess reserves doesn’t incent lending. It might incent holding something else (like government bonds). And when those plunge to negative short-term rates (likely partly as a result), then those for-profit banks likely just whack consumers, passing on costs in a tried and true capitalist practice. Now, the depositors paying this charge are presently large depositors (above €10 million), hedge funds, large businesses and the like, but their response is worth watching, too. All this highlights the fact that when you tell banks they could be shut if they don’t have big capital in a rather arbitrary stress test—as the ECB has—they will find ways to hold that capital. What banks really need to start lending is for stress tests to conclude and the cloud of regulatory uncertainty to clear.

By , Bloomberg, 10/17/2014

MarketMinder's View: The lack of structural reforms—specifically regarding employment—has plagued Italy’s economy for some time. This is very early in the process and details still need to be ironed out, but if Italian Prime Minister Matteo Renzi manages to enact even incremental reforms it would be a positive step for Italy. Since most investors currently seem to consider Italy a political and economic quagmire, even modest moves could provide a positive surprise, boosting stocks.

By , CNBC, 10/17/2014

MarketMinder's View: A few things here. No one—not even nonvoting FOMC member James Bullard—can forecast the Fed’s moves. And two, there is just so much evidence by now that listening to Fed words about what they may, might or even will do in the future is a complete waste of investors’ time. Fedspeak = marketing spin. For more, see our 10/17/2014 commentary “Did a Fed Waffle Cause Thursday’s Rebound?

By , Reuters, 10/17/2014

MarketMinder's View: After quietly injecting roughly $81 billion into China’s five biggest banks last month, China is adding more stimulus as it continues trying to balance its reform efforts and continued growth to placate the masses. China has been fairly successful at balancing the two thus far, and there are few signs this changes. So long as that is the case, China likely doesn’t see a hard landing. For more, see Joseph Wei’s 8/7/2014 commentary, “China’s Balancing Act.”

By , The Street, 10/17/2014

MarketMinder's View: Ummmm. It is incredibly unlikely Ebola has any measurable economic impact. It is a tragedy in West Africa and for those impacted elsewhere. But there is just no evidence, ever, of a pandemic causing major economic or market troubles.  Citing what retailers did in isolation in the last month doesn’t capture Ebola’s pure impact, because markets generally have been swaying. Citing what they did in February – March 2003, while SARS broke out, also doesn’t tell you anything, because that was also when the US was invading Iraq. Heck, as the article notes, SARS cases popped up through July. Stocks and the economy rose. Finally, as this very article says, no company they contacted referenced any reaction to Ebola. Bird flu. SARS. Even the 1918 Spanish flu didn’t derail growth or the economy. Maybe, just maybe, the Black Plague did. But that was also before capitalism, medicine, hand-washing, the Industrial Revolution and the invention of stock markets.

By , Bloomberg, 10/16/2014

MarketMinder's View: Some have credited St. Louis Fed President James Bullard with stabilizing markets today due to his comments that the Fed should consider holding off on ending its quantitative easing (QE) program—on pace to wrap up at the end of the month. And maybe so, but it is frankly more a sign of investors searching for some hidden meaning in bouncy times than anything else. Here’s why: Bullard isn’t a voting member of the FOMC in 2014. All he can do is pitch Yellen and Co. his plan. And though we’ve said this many times already, it bears repeating: the sooner the QE ends, the better. The Fed’s bond buying flattened the yield curve, disincentivizing banks from lending—and denying small firms access to credit to grow their business. Finally, we are talking about $15 billion in bond buying for effectively one month (November, as Bullard suggested they reconsider in December.) While we would gladly take $15 billion to use at our discretion (moohoohahahahaha!), it is a pittance relative to the economy or markets. (We would also point out that this is anecdotal evidence of why we don’t lend much credence to the Fed’s forward guidance. As we have often said, words aren’t set in stone, and Fed people change their minds.)

By , The Wall Street Journal , 10/16/2014

MarketMinder's View: Political instability.  A bloated public sector. Stalled reforms. High debt. High unemployment and a cratering economy. That has been the case in Greece for years. Nothing changed when Greece returned to debt markets in April. But we have a few questions about the thesis this is so problematic: One, if Greece manages to exit the ECB/EU/IMF troika bailout, wouldn’t that be a positive sign of improvement? Remember, they said they needed it to keep Greece’s economy from totally imploding. Two, if they don’t exit and instead remain in the IMF’s bailout program, isn’t that the same scenario we’ve had for four long years of bull market? And three, the Fed has been tapering quantitative easing bond purchases all year. The amount by which they’ve increased their balance sheet isn’t set to change—it just won’t increase much. So why does this suddenly matter now? Why not last December, when the taper became reality? And four, if this is such a general problem, why on earth are Spanish yields hovering near record lows? Or Italian? Or Irish? Portugal’s yields are up some, but they’re still only at 3.5%—at this time last year they were at 6.3%. While the region still faces challenges, reality likely exceeds extremely dour sentiment. For more, see our 10/15/2014 commentary, “Return of the Euro Crisis’ Ghosts.”      

By , Bloomberg, 10/16/2014

MarketMinder's View: In one sense, this is correct—with two weeks to go, October isn’t over yet. But trying to forecast or game short-term volatility is a pointless endeavor for long-term investors. While pundits search for a culprit (like central bankers, hedge fund managers or the time of the year) markets can be volatile for any reason—or none at all! As trying as negative volatility can be, investors would be best served to remain disciplined and tune out the noise. For more, see our 10/10/2014 commentary, “Putting Stocks’ Zigzags in Broader Perspective.”

By , Bloomberg, 10/16/2014

MarketMinder's View: During volatile periods, it can be hard to notice any positive news. Here is one such item, an economic data point that beat every single estimate. While it’s only one such data point, it is still worth noting given the sentiment backdrop. Enjoy.

By , New York Times, 10/16/2014

MarketMinder's View: Yes, stocks are forward-looking and do tend to presage future economic movements. But they have never been shown to be tied to the rate of GDP growth or anything associated with wage growth. And besides, if we are to assume markets are now efficiently discounting future economic conditions, then are we to assume the slow economic and wage growth are really such a shock? Those two topics have only dominated headlines for much of the last few years. The reality: While equity markets are forward-looking and efficiently discount widely known information, they can also be very volatile in the short term. They are not perfectly rational. Most small moves have little major “meaning.” Trying to pinpoint why stocks are up or down on any given day, week or month is an exercise in futility. With broader leading indicators, like the Conference Board’s Leading Economic Index, high and rising, the US looks poised to continue growing, providing a solid backdrop for the bull to keep on running.       

By , Dow Jones Newswires, 10/16/2014

MarketMinder's View: So this is a very narrow gauge of manufacturing in the Philadelphia region, and it isn’t necessarily indicative of broad economic conditions. But we note this still-growing indicator with accelerating new orders because during yesterday’s volatility some noted a similarly narrow gauge’s plunge (the Empire State Survey) was a sign of gloom to come.

By , The Telegraph, 10/16/2014

MarketMinder's View: If you ask 17 people for an opinion, you’ll likely get 17 different answers—that’s kind of how humans are. (And central bankers are decidedly human, with all the biases and limitations people have.) And yep, the further from today you go, the less certainty anyone has. So of course average Joe has no hope of forecasting future rate hikes, but that is not terrifying, it has been the case since always and forever. The only new thing is that the Fed now publishes the dot plot of forecasts. Plus, broadly speaking, we don’t need any one class of people—central bankers, politicians, etc.—to solve the biggest problems in the world. Somehow, markets (and the people that compose them) tend to find solutions that work.   

By , Bloomberg, 10/15/2014

MarketMinder's View: The media is all over the map in its efforts to find meaning in oil’s sharp downturn. In this episode, folks claim central bankers will struggle to deal with it because it is dis- or deflationary. Which it is! But there is little central bankers are going to be able to do to counter a sentiment-driven move against a backdrop of a market in which supply growth has outstripped demand growth. Also this article from yesterday highlights a contrary theme: Falling oil prices will boost consumption elsewhere. The reality is that neither of these are really quite correct. Spending on oil is spending, and mild, energy-price driven deflation hasn’t be shown by historical evidence to be a drag on growth either.

By , CNBC, 10/15/2014

MarketMinder's View: Perhaps volatility will be higher looking forward than the relative calm we’ve seen recently. Perhaps not. Volatility doesn’t predict volatility or directionality. But here is something we can say: The reasons alluded to here as causing this dip are actually just merely widely known, long chewed over concerns that really don’t amount to much. Ebola is not an economic or market issue, pure and simple. But the theory this is driven by the end of QE has big holes. That’s been basically telegraphed for some time, yet the volatility didn’t begin until very recently. Markets—as they did with the end of QE in 2013—move ahead of anticipated events.

By , The Reformed Broker, 10/15/2014

MarketMinder's View: We disagree on the importance of the 200-day moving average in the sense that we don’t believe past price movement predicts anything, no matter how charted, blended or averaged. However, we agree there has been a rotation—and that a major part is the narrower breadth of leadership. In our view, though, history shows pretty plainly this is a repeat feature of bull markets that can last for years. To us, also, 2013 wasn’t that unusual. Consider: the period December 1994 – July 1996 saw no corrections, big positive returns and no breaks below the 200-day moving average. After a brief blip under the 200-day moving average, it surged anew all the way through August 1998’s correction. Breadth fell for much of this period. The bull market didn’t end until March 24, 2000, amid euphoria we don’t see today. Enjoy this chart.

By , The New York Times, 10/15/2014

MarketMinder's View: This is exactly the type of analysis investors should avoid. It looks at recent price movements, sees them through a purely geopolitical lens and draws conclusions there is no actual evidence to support. Syria, noted here as an oil producer, produced 400,000 barrels of oil per day in 2010 (before the civil war). That represents about 4.5% of US daily production. It is down to basically zero now. But the other nations cited here aren’t. Libya is coming back on line of late, adding to supply, not restricting it. Nigeria likewise has increased production. The Saudis ramped up production earlier to offset the crimp from these nations. They just haven’t brought it back down yet. Moreover, this presumes the Saudis are also intentionally targeting many of the other members of OPEC, considering places like Venezuela have little ability to actual ramp output up. We just don’t think it is wise to draw speculative conclusions about market manipulation targeting foreign regimes when in fact the answer may just be the fact is that oil companies and nations take time to alter production. Volatility in oil prices happens on a moment by moment basis. The author is clearly correct that this isn’t good for petrodictators like Venezuela’s Maduro and Russia’s Putin, but frankly, we didn’t need all the speculation about oil tanker foreign policy (foreign policy being enforced at the end of an oil barrel?) to get there.

By , Bloomberg, 10/15/2014

MarketMinder's View: Tell us if you’ve heard this one before: A Greek government that just emerged from a confidence vote is at loggerheads with the EU over plans involving the troika’s bailout of the formerly Ottoman nation, and yields are rising as a result. This situation has recurred a host of times over the past few years, none threatening the bull market. By the way, the notion Greek fears have thus far driven up peripheral 10-year yields recently is based on a 10 basis point move in Italian  yields and a five basis point move in Spanish yields. Both those are currently at 2.39% and 2.10% respectively. Spain’s low yields are eight basis points above their record low. Fears over Greece seem even more feckless in this, their umpteenth time taking headlines.

By , MarketWatch, 10/15/2014

MarketMinder's View: These supposed signals—the 200-day moving average, an odd breadth measure, CAPE, Tobin’s Q, the so-called Warren Buffett Indicator (market cap to GDP), and falling interest rates—are of questionable value. As is the buy recommendation at the end, which is based on calendar cycles. All in all, we’d suggest merely staying cool amid what appears to either be an official correction or merely some uncomfortable volatility.

By , Bloomberg, 10/15/2014

MarketMinder's View: If Prime Minister Narendra Modi’s BJP party manages to wrest power from the Congress party at the state level, that could bode well for the implementation of broader reforms. India’s decentralized government structure often stymies government attempts at reform. This aside, Modi has taken some positive steps of late, particularly announcing a plan to grant the Reserve Bank of India further independence and a price-stability mandate. If enacted, that would represent a solidly positive step. Should the state elections go Modi’s way, the backdrop would be set up well for further reforms.

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Global Market Update

Market Wrap-Up, Mon Oct 20 2014

Below is a market summary (as of market close Monday, 10/20/2014):

  • Global Equities: MSCI World (+0.8%)
  • US Equities: S&P 500 (+0.9%)
  • UK Equities: MSCI UK (0.5%)
  • Best Country: Japan (+3.8%)
  • Worst Country: Norway (-1.7%)
  • Best Sector: Consumer Discretionary (+1.4%)
  • Worst Sector: Energy (0.0%)
  • Bond Yields: 10-year US Treasurys fell by .04 to 2.19%

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.