“‘Never’ is a long time, Marian.”

– Shane, in the movie of the same name, 1953

November is in the rearview mirror. With 11 months down and one to go, 2022 so far has been an unusual year, to put it mildly. First and foremost, the prices of both stocks and bonds have moved together to the downside. Most investors never have experienced such a phenomenon and in fact have clung to the belief that such a phenomenon never could happen. Never is a long time, however. The historical data in the investment world can be overwhelming, and what the data say is that stock and bond prices can and do move to the downside together about 5% of the time. Two thousand twenty-two has been one of those 5% times. Two thousand twenty-three? At the macro level, we suspect that the more traditional relationship between the two markets will reemerge, and are encouraged by a number of factors. At the micro level, the Value style of investing has been the place to be this year by a wide margin, and we expect Value’s outperformance to continue for quite some time. Onward and upward.

Continue reading “5%” →

So sayeth the great Oliver Hardy to his equally talented sidekick, Stanley Laurel, in countless classic films. With only a few minor changes, the same could be said to those responsible for our macro-economic well-being. Sure, as we stated often, no playbook for the post-COVID economic recovery existed, so missteps were inevitable. But some were not. Washington’s massive and ongoing fiscal largesse in recent times and the Fed’s monetary spigot, now turned off but wide open for far too long, amounted to pouring unneeded fuel on the inflationary fires. The Fed now is responsible for putting out those fires, but when will the Fed get a handle on the problem and at what cost to the economy?

Continue reading ““Well, here’s another nice mess you’ve gotten me into.”” →

“History doesn’t repeat itself, but it often rhymes.”
– Mark Twain

What exactly is the best, or at least the most well-known, barometer of U.S. Large Company equity performance? The answer: Despite its many faults (more about those in a moment), most people who routinely traffic in such things would point to the S&P 500 Index. So, with the S&P currently hovering at or near bear market levels (a decline of 20% or more from the Index peak), the breathless anchors at CNBC and elsewhere would have us believe that the sky is falling in Chicken Little fashion. OK, the 2022 sledding has been a bit rough, and the reasons, e.g., inflation, rising interest rates, are not to be taken lightly. But, the math behind the S&P 500 suggests that the Index isn’t always the best indicator of what’s going on out there. In fact, there is another Large Company stock market in 2022, and so far the sky over that stock market has not been falling. Some background…

Continue reading “We’ve Seen this Movie Before” →

A challenging April finally is in the books, and, on top of that, here comes the Fed in May. The monetary spigot has been wide open for too long, and the last couple of COVID relief checks probably were gratuitous in most cases, all of that to go along with numerous supply chain disruptions. So, too many dollars chasing too few goods. In other words, classic inflation at an uncomfortably high rate and the sense, as we moved through April, that solving the problem will require more than a quick Fed fix with only a modest rise in interest rates.

Continue reading “April 2022 – That Was the Month That Was” →

February 25, 2022

So, they’ve gone and done it after all. The Russians have taken the next step in the re-establishment of the old Soviet empire, and invaded the rest of Ukraine. Worldwide equities, which already were facing interest rate headwinds, now have very real geopolitical problems with which to contend. In an investment sense, how should we react?

March 9, 2020. We clearly are not dealing with some sort of flu bug – in an effort to contain the spread of a lethal virus, economies everywhere are shutting down. The public health and financial implications are unknown, and U.S. equities are under considerable pressure. Then, as now, we confronted the “how should we react?” question by penning “S-O-Y-H,” and we once again submit the following portion of that earlier March 9, 2020, Perspective to your attention.

Continue reading ““S – O – Y – H” (II)” →

Once upon a time, if you recall, a then-unnamed virus supposedly emanating from Chinese live-animal markets was going to be a problem for three or four months before burning itself out. That was March 2020, and here we are, still dealing with COVID’s human tragedy and economic dislocations in December 2021. That’s 21 months, not three or four, and the specific virus form at this point is the so-called Omicron variant. More or less transmissible than the others? Vaccine-resistant, or vaccine-vulnerable? Back to masks and lockdowns, or never again? Who knows, but there’s no shortage of shrill commentary, even with a distinct scarcity of data. What do we know? We know for sure why “COVID fatigue,” which must be the expression of 2021, has become such a popular expression.

Continue reading “A Whimper or a Bang?” →

“dé•jà vu…1b: a feeling that one has seen or heard something before”
– Merriam-Webster

Even in the modern era, medical science is not what we could call an exact science, but, 15 months after the Wuhan outbreak, COVID-19 finally appears to be on the run. Economies everywhere are opening up, and levels of both production and employment are returning to the good old days of 2019. As a result, the more economy-sensitive stock market sectors, distinct laggards in 2020, have been marching right ahead, while the stay-at-home Growth/Tech superstars of 2020 have been struggling a bit. Not being trashed wholesale, mind you, but struggling just a bit. What now?

Continue reading “Déjà Vu All Over Again?” →

March 27, 2020

On Tuesday, March 24, U.S. equities had their best day since 1933. That +11% day was followed by the 9% advance of Wednesday-Thursday, so we’re talking a healthy, three- day 20% rally off the bottom. Unfortunately, given the disappointing New York City data,we’re not out of the COVID-19 woods yet, but how about the stock market woods?Frankly, given the severity of the current selloff, we’d call it a 50/50 ball (as they say in soccer), but some historical data suggest that the selloff’s end may be near.

Research is a big part of what we do, and lately, we’ve been spending a fair amount ofquality research time with the 2008-2009 archives. In that earlier period, of course, all the large company stock market indexes declined sharply in 2008, and then, as our jawsdropped, kept right on going. In fact, during the bear market’s last nine weeks, i.e., fromJanuary 1, 2009, until March 6, the large company Value indexes had a last gasp declineof 30% or so. That era’s 10-stock Yield Group, the backbone of our portfolios, declined about 33% during the same period (the more growth-oriented Momentum Group held up much better). Then, the work of the Grand Troika, i.e., Ben Bernanke, Tim Geithner, and Hank Paulson, and many others kicked in, and the S&P 500’s 666.79 of March 6, 2009, became the 3386.15 of February 19, 2020, which capped an exceptional 11-year run.

Continue reading “A Tale of Two Marches” →

March 19, 2020

The above title may be a bit melodramatic because we all are on the front line of this one, but what we really have in mind is the investment front line, i.e., watching that computer screen all day and listening to the accompanying chatter. In no particular order, here are a few tidbits:

The Far East

This is where COVID-19 began, of course, and there is a natural tendency to look at the Far East for indications of how it might play out. One very encouraging sign: The Asian stock markets, so far and on most days, have been holding up better than Europe and the U.S. Not a lot of data points, to be sure, but others and we have noted the pattern. If the virus itself moved from west to east, maybe the human and economic recovery will as well. Another encouraging sign: This morning, the Hormel CEO told CNBC that he had talked to his (China) team and that they are pretty much back to normal. Yet another: Starbucks has re-opened in Wuhan, COVID-19’s Ground Zero.

Continue reading “Notes from the Front Line” →

March 13, 2020

Geesh! Call it what you like: big-time hiccup, correction, bear market, whatever. We have seen several of these things over long careers, and “these things” never are fun. Anyone, male or female, young or old, beginner or professional investor, who dismisses it all with a wave of the hand, is kidding himself/herself and you. Still, you know and we know that staying the course with a well-conceived investment plan, even in (particularly in) the time of COVID-19, is essential if one is to deal effectively with the 1974s and the 2008s and the 2020s. The alternative, i.e., having an asset allocation strategy that responds to the 6 A.M. S&P futures or the pain of market volatility or the latest COVID-19 data is a prescription for mediocrity at the very least and, at worst, (dare we say it?) disaster. All of these years watching markets go up and down tell us that this is so.

Let’s see where we currently are and where we should go.

Continue reading “U.S. Equities in the Time of Covid-19 : Where Are We?” →