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The Best of What They Said and I Read Week Ending 11/10/2019

Short excerpts from articles I found interesting.   I may not agree with the author and the following material is not intended as investment advice

Barron’s – November 8, 2019 – Is it Time to Shop for Stocks in Europe and Japan? -  Nicholas Jasinski

  •  “The news has been largely market-friendly since the start of October, and investors have responded by bidding up U.S. indexes to records.  U.S.-China trade negotiations are progressing toward a phase-one deal that might include both sides rolling back some existing tariffs. Economic data have shown the U.S. consumer remaining healthy, even if the manufacturing sector continues to display signs of weakness. The Federal Reserve has stayed accommodative, lowering interest rates three times this year and helping to un-invert the yield curve.”

  • “…This past week, the S&P 500 index climbed 0.8%, to 3093.08; the Dow Jones Industrial Average rose 1.2%, to 27,681.24; and the Nasdaq Composite increased 1.1%, to 8475.31. All three are at their highest-ever closing values. The S&P 500 has risen for five consecutive weeks…A whole lot of good news appears to be already priced into the market, with stocks at nearly two-year-high valuation multiples. That suggests the next leg up for U.S. stocks might be harder to come by.”

  • “…Should investors start shopping abroad? Some strategists think so.  U.S. markets have outperformed the rest of the world by 25% over the past two years, and where U.S. stocks look expensive, many foreign ones look cheap…Mislav Matejka, J.P. Morgan’s head of global and European equity strategy, recently recommended overweighting both European and Japanese stocks. An investor exodus over the past two years has made those markets particularly underexposed, and he sees the same forces that have helped push U.S. stocks to their recent records lifting other developed markets next.”

Barron’s – November 8, 2019 – Stocks Keep Hitting Record Highs.   Where to Find Values Now. -   Randall W. Forsyth

  •  “There are many more important things happening in financial markets than the major stock market indexes simply hitting new highs.  That’s not to denigrate the $6 trillion in paper wealth created in the U.S. equity market this year, according to Wilshire Associates’ sums. Or the Dow Jones Industrial Average’s 18.7% ascent in 2019, topped by the S&P 500’s 23.4% advance and the Nasdaq Composite’s 27.7% gain.

  • “…In the bond markets, there has been a steep rise in long-term yields across the globe…The benchmark U.S. 10-year note’s yield has climbed to 1.94% from 1.47%…The most fundamental reason for the shift out of risk-off mode is summarized succinctly in a client note from Cornerstone Macro, headed by Nancy Lazar: No recession is coming, and the global slowdown is over. Capital spending on productivity-enhancing software is growing more than is appreciated. Rising productivity, along with increasing labor-force participation, is expanding the economy’s supply side. And, finally, the headwinds from trade tiffs are abating, just as the lagged effect of monetary easing over the past year is kicking in.”

  • “Against this favorable economic backdrop, value stocks have never been so cheap relative to momentum stocks, according to Bank of America Merrill Lynch’s equity and quant strategy group, led by Savita Subramanian. The last time value stocks were this inexpensive was in 2003 and 2008, years in which they went on to outperform momentum stocks by 22 and 69 percentage points, respectively.

  • “Given all this, if President Donald Trump succeeds in his goals of reducing the U.S. trade deficit and cheapening the dollar, while other policy officials lift bond yields and inflation, investors should buy foreign stocks and dump U.S. shares. That’s the provocative argument of Jim Paulsen, chief investment strategist at the Leuthold Group. The long underperformance of non-U.S. stocks “has made them unloved and underowned by most investors, and they now offer considerably cheaper relative valuations,” he writes.”

U.S. Global Investors - Investor Alert – November 8, 2019 – Frank Holmes 

  • “…De Beers, the world’s biggest diamond producer, cut diamond prices by 5 percent at its November sale, reports Bloomberg. The diamond industry is suffering from an oversupply of polished gems, which has hurt prices.”

  • “…The stock market rally, steady job and wage growth and keeping debt levels manageable are improving the financial situations of more Americans. Some 55 percent of respondents in the latest University of Michigan survey of consumers said their finances were in ‘better’ shape than last year, helping boost confidence for a third month in November. The share, which has been higher only four separate instances since 1978, indicates households are well positioned to continue spending and provide more fuel for the economy.”

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