lunes, 16 de marzo de 2015

Six years in a row

 2015 Just Like 2011?

Taken from Steve Reitmeister, Executive Vice President of Zacks


This year continues to be a difficult one for stock investors as it dipped back into the red once again on Friday. Originally I assumed that 2015 would be just like last year. That being a volatile market with solid returns in the end.

The volatile part is certainly correct. However, I am getting a sneaking suspicion that the attractive year end gains will not be there which would harken back to the results in 2011.

S&P 500 Annual Returns

+26.5% in 2009

+15.1% in 2010

+2.1% in 2011…almost all gains just from dividends

+16.0% in 2012

+32.4% in 2013

+13.7% in 2014

What you will notice is that after the big runs in 2009 and 2010 stocks needed to rest for a while. What you might even call "a pause that refreshes" . This paved the way for ample gains the next three years. So perhaps another refreshing pause is in store.

Fret not. A sideways market only means lackluster gains if you just invest in Index funds. By focusing on a proven system stock picking system like the Zacks Rank, you can still chart a path to strong results.

lunes, 9 de marzo de 2015

Market trends

It's Complicated 

Taken from Zacks, 3/9/2015
Steve Reitmeister, Executive Vice President

Stocks went -1.4% lower Friday based upon this equation:
Stronger employment #s = the sooner the Fed raises rates = higher bond rates = lower valuation for stocks.

Is it truly that simple? No it's a bit more complicated than that. Let me break it down for you.
Yes, the Fed is now more likely to start raising rates this year. This should be considered as a merit badge for the US economy that it has rebounded well enough to not need so much accommodation. In fact, the stock market typically keeps rising for 2-3 years after the Fed starts raising rates.
Bond investors took notice and pushed up US 10 year Treasury rates from 2.11% to 2.24% Friday. That is a BIG one day move in the bond world. However, how much higher will bond rates go with Europe on the QE bandwagon where German 10 year rates are at 0.4% and sub-prime nations like Italy and Spain are both around 1.3%?
The spread between the US and Germany is much wider than historic norms. And most CERTAINLY rates for Italy and Spain should not be lower than the US given their anemic economic status. As such, I expect demand to markedly increase for US Treasuries. This should keep rates in check and would be surprised to see them venture that far north of 2.5% this year (which was the average in 2014).
To sum up, I am not fearful of a Fed rate hike as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. And I believe that worldwide government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Remember that rates moved up to 3% in 2013 and yet still the S&P rose 32% on the year.
My view of the investment world may not have been the same one adopted by other investors on Friday. Yet when level heads prevail I think that more people will come around to this same understanding. As such, I believe that this is a buyable dip with higher highs on the way this year.

Taken from Zacks,
Steve Reitmeister, Executive Vice President