According to data from Envestnet, many American’s used their stimulus checks to trade stocks. As reported by CNBC, Envestnet estimated that those earning between $35,000 and $75,000 increased stock trades by 90% in the week after they received their stimulus check. Checks went out beginning the April 13. Since April 13, the S&P 500 is […] Read the full article…
Stock market uncertainty is as high as I can ever recall. The pandemic, economic shut-down and civil unrest have all hit at the same time. Still, the US stock market is within 5% of it’s all-time high from February. How can this be possible? Puzzling. Let’s break it down. Below I outline the top 3 […] Read the full article…
• We estimate the fair value for the US stock market (S&P 500) using a discounted cash flow model • We assume a negative earnings shock of 20 – 30% in 2020, followed by a 3-year recovery • Using this model, the fair value for the S&P 500 falls in a range 2,542 – 2,905 […] Read the full article…
Q3 earnings season is nearly complete with 90% of the S&P companies having reported. For Q3, 75% have beaten their earnings forecast. Sales forecasts were exceeded in roughly 60% of the reports. Operating margins have been under some pressure. QTD, operating margins stand at 11.34% vs. last years 12.13%. Still, the Q3 2018 margin was […] Read the full article…
Share buybacks are a controversial topic, in part because they are not well understood. This article will explain stock buybacks and summarize key finding from recent research by Two Sigma: Share Buybacks: A brief Investigation. Q: What is a share buyback? A share buyback occurs when a company buys back their own shares in the […] Read the full article…
• The Federal Reserve is expected to cut rates .25% on Wednesday • The US economy showed better than expected growth in Q2 at 2.1% • Still, the Federal Reserve is concerned about slow global growth and trade tensions and will likely make a preemptive cut to keep the economy on track. The Federal Reserve […] Read the full article…
The ^VIX (also known as the fear gauge) is up over 15 today at 17.42. Tension with China over the trade negotiations continues to dominate financial news. I think the dispute could last for some time and there is no question that increased tariffs could impact equity returns. Year to date the market is up […] Read the full article…
• Morgan Stanley’s Michael Wilson, chief US equity strategist, sees further downward revisions in earnings for 2019 • Jurrien Timmer, Fidelity Director of Global Macro, is more bullish based on looking at the context for the earnings revisions • We find the weight of the arguments in favor of glass half full and continue to […] Read the full article…
As mere mortals it is easy to get caught up in emotions and recent price action and become fearful. Arguably the best way to avoid investment mistakes is to set aside emotions and focus on facts. I’m not saying it’s easy to do. The S&P 500 is down about 8.8% so far this month. Technology […] Read the full article…
In Part 1 I introduced the real earnings yield model (REY) for stocks. The real earnings yield is simply the earnings of the stock(s) divided by the price in real terms (after inflation). As we showed in the last article, 1) the future return for the S&P 500 is significantly related to the current real […] Read the full article…
Today I would like to discuss my favorite ‘simple’ model for determining if the stock market is over- or under- priced, the real earnings yield or REY. If I could only have one piece of information to gauge the market value, this would be it! This model is also favored by a number of well […] Read the full article…
Jeremy Siegel, Wharton finance professor, likes to use the analogy of a ‘tug of war’ when it comes to the impact earnings and interest rates have on stock prices. He tells his students that the numerator (earnings) and the denominator (interest rates) are in a ‘tug of war’. The analogy is playing out in a […] Read the full article…
Stock market returns for US stocks, international developed stocks and emerging market stocks through November are all above 20%. Now is a good time to update our relative value analysis for various equity asset classes and US vs. international markets. In this review, I am going to introduce a new relative value analysis model that […] Read the full article…
We are underweighted in developed country international stocks vs. US stocks. There are a number of factors that have led to this underweighting. In this article I’d like to discuss the relative value of US stocks to international stocks. The focus here is on developed country stocks which excludes emerging markets. Relative Value Analysis Our focus […] Read the full article…
For the S&P 500 companies, sales per share grew 1.1% in Q2 over the prior year. Earnings fell by 1.1%. Meanwhile, the S&P 500 index total return for Q2 was up 2.46%. (Numbers are based on actual Q2 earnings as reported by 95% of S&P 500 companies combined with forecasts for the remaining companies). Source: […] Read the full article…
Over the long run, stock market returns are highly correlated with GDP growth and corporate earnings. For the US S&P 500 stocks, earnings fell from $109.32 per share in 2014 to $92.24 per share in 2015. In this article, we will drill down on historical earnings, projections and discuss the impact this has on equity […] Read the full article…
The US stock market volatility continues. The S&P500 is down roughly 10% for the year before dividends. At the start of 2016 we modified our model portfolios to shift to a more defensive posture. We are currently market neutral on equity weighting relative to our benchmarks. We are overweight in the US and underweighted in […] Read the full article…