Authored by Lance Roberts via RealInvestmentAdvice.com,
No! I am not talking about President Trump but rather the crash in both Technology stocks, and Oil prices, which are obstructing the continuation of the “bull market.”
As I discussed this past Tuesday, the mini “flash crash” in Technology certainly woke investors up.
“While there is certainly damage being wrought in the Technology and Discretionary sectors, the rotation to Financials, Energy, Small and Mid-Capitalization areas are offsetting the correctionary process. As shown below, the markets remain confined to the bullish trend currently while the overbought condition is being reduced.”
As shown in the updated chart below, despite all of the “angst” there has been relatively little price deterioration to date.
While the Nasdaq has primarily been under pressure from the unwinding of the excess in the main #FANMAG ($FB, $AAPL, $NFLX, $MSFT, $AMZN & $GOOG) stocks, as shown below, some performance pickup by small and mid-capitalization stocks, as well as emerging markets, limited portfolio damage over the last few days.
As money rotates wildly between sectors and markets, in a clear attempt to stay invested, the risk of a decoupling has risen in recent weeks. This is particularly the case if it either becomes clear Trump’s legislative agenda is not going to progress OR earnings begin to disappoint.
I believe BOTH of those outcomes are highly likely.
First, with Trump embroiled in investigations, allegations, and general revolt, the ability to progress on legislative agendas has become markedly more difficult. However, the bigger issue is the potential disappointment in earnings expectations as sliding oil prices feed through in the next quarter. With the recent break below $45/bbl, there is a real possibility that a test of $40 is coming.
With revenues and CapEx already suppressed, the negative feedback into earnings, expectations, and outlooks is increasing. I would expect to start seeing earnings expectations through the end of the year get trimmed back in the next couple of months. The problem, of course, is that makes the current valuation arguments that much more difficult to justify.
That could weigh on investor’s portfolios sooner rather than later.
In the meantime, here is what I am reading this weekend.
Politics/Fed/Economy
- Housing In America: Movin’ On Up by Danielle Dimartino-Booth via MoneyStrong
- Economic Predictor Moving Towards Recession Sign by Jonathan Garber via BI
- Stockman: Budget Projections A Fantasy by Craig Wilson via Daily Reckoning
- Fed’s Plan To Shrink Balance Sheet May Have A Problem by Pedro Da Costa via BI
- Business Say They’re Confident, Merger Numbers Disagree by Caroline Baum via MarketWatch
- Here Is The Fed’s Plan To Unwind Its Balance Sheet by Bob Bryan via Business Insider
- 93% Of Employment Gains Are “B.S.” by Morninghill Capital via RIA
- Fed Hikes Rates, Yields Drop by James Picerno via Capital Spectator
- If Jobless Rate So Low, Why Do Americans Feel Bad by Alia Dastagir via USA Today
- Fed’s Financial Stability Concerns by Edward Harrison via Credit Writedowns
- End Of Recovery Nearer Than Believed by Robert Johnson via MorningStar
- The Most Dangerous Part Of Killing Dodd-Frank by Matt Egan via CNN Money
- All Uncertainty From D.C. Not Created Equal by Ray Keating via Real Clear Markets
- Infrastructure Won’t Create More Jobs by Jeff Harding via An Independent Mind
Markets
- U.S. Oil Companies Face A Huge Problem by Tsvetana Paraskova via OilPrice.com
- BofA: Gray Days – I Watch But Nothing Moves by Tyler Durden via ZeroHedge
- The S&P Has Only Done This 8-Times by The Heisenberg via Talk Markets
- Ominous Pattern For Big Technology by Nigam Arora via MarketWatch
- Biggest Problems For Investors Today by David Merkel via The Aleph Blog
- Sometimes “Smart Money” Is Dumb Too by Jason Zweig via Intelligent Investor
- Some Indicators Are VERY Overvalued by John Mauldin via Mauldin Economics
- Are FANG Stocks Really Dead by Michael Kahn via Barron’s
- This Market Action Is About Machines by Doug Kass via Real Clear Markets
- Financial Markets Are Increasingly At Risk by Bill Gross via Janus Capital
- 5-Charts On Oil by James Heron via Bloomberg
- Patience Is The Way To Earn Alpha by Anora Mahmudova via MarketWatch
- Equity Valuations: It’s Different This Time by Jeffrey Snider via Alhambra Partners
Research / Interesting Reads
- What Happens When Machines Start Selling by Wolf Richter via Wolf Street
- The Fed Needs A New Theory by Scott Sumner via The Money Illusion
- Why Retirees Shouldn’t Shun Market by Anna-Louise Jackson via USA Today
- GOP Is Shredding Financial Protection by Katrina Vanden Heuvel via The Nation
- The Scariest Chart For Central Bankers by Tyler Durden via ZeroHedge
- Still Crazy After All These Years by Cliff Asness via AQR Capital Management
- The Limiting Qualities Of Black Box Algo’s by Gary Smith via MarketWatch
- Debt Limit Nightmares Coming True? by Brian Beutler via The New Republic
- Don’t Fear Robots, Fear Low Savings & Investment by Nathan Lewis via Forbes
- Fed Will Start Cutting Rates By End Of Year by John Crudele via NY Post
- A Speculation On How This Recovery Ends by Conor Sen via Bloomberg
- Fair Value And Bubbles: 2017 Edition by John Hussman via Hussman Funds
- Tech Panic Quickly Deflating by Dana Lyons via Tumblr
- Is This What A Blow-off Stage Looks Like by Jesse Felder via The Felder Report
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman
Obstruction? In Washington DC?
Who is Seth Rich
Tyler Durden of ZH was quoted in the Interesting Reading.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM
What crash???????
Big rally Monday?
my dog may have an obstruction in her bowels...thinking about calling the DOJ...
If I didn't know better, I'd swear every politician in Washington D.C. is suffering from "obstruction" caused by Hirschsprung disease.
http://www.hindustantimes.com/world-news/constipated-for-22-years-chines...
Standard Disclaimer: True Story!
Trump's agenda could move forward if our congress was not so divided. People act like politics is an actual sports team where Republicans cannot support a Democrat and visa versa. It is stiflling the growth of this country, and this problem is getting worse over time. The media spews lies to get ratings which angers people, then when the lies are revealed, the media doesn't correct their own lies just moves on to the next lie which keeps their ratings up.
www.escapeamazon.com
The problem is not that 'congress is so divided'.......the problem is that the Republican (RINO) Majority refuses to take charge and enact conservative and fiscally responsible legislation.
Okay... the "problem" is the whole "government" circus is THEATER. The only "majority" is The Sheeple vs all the Globalist's minions in DC acting their asses off to fool the loons living from sea to shining sea into believing there's a government instead of the tyrannical dictatorship actually in place. Combine the Patriot Act, the Military Commissions Act, the NDAA and all our imagined "rights", "freedoms" and the Constitution are effectively nullified. We're done; that game is over. Don't know what comes next but it appears there are only two ways to go...
Crash in tech stocks? 5% down is a crash? Talk to me when they're down 60%+ and maybe you got a point.
www.traderzoogold.blogspot.com
At least the fundamentals are there......
oh, wait a second....
Why waste time on this alligator when the swamp’s most critical economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying.
The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world.
It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option.
This is what I think it will take to save the world; and nobody gets hurt:
28th Amendment:
Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:
1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy;
2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and
3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.
And what about unions and their influence in government? By your logic, if corporations are not people, neither are unions.