Stock Market is Heading Down, Not Up

stocks

#1

This chart from the Economist shocked me:

In euro terms, the market peaked in February. In dollars term it’s going up partly because US dollar has been heading down big time. All this while I thought investors didn’t care about the Trumpster file, that they were cool with all the ill-fated promises Trump made in deregulation, infrastructure, health care reform, tax reform etc etc. But it seems investors did care, and have been driving the dollars to the ground.

This currency shift puts the stockmarket rally in context. In dollar terms, euro-zone equities have easily outperformed Wall Street this year. Or, to put it another way, in euro terms American equities have fallen (see chart).

American investors won’t mind about that; they are still enjoying strong gains. But some of those returns are the result of a weaker currency, which means that the foreign earnings of multinationals are worth more in dollars. And the strongest-performing sector of the year has been technology, which tends to benefit from global, rather than purely domestic, growth. The yield on the ten-year Treasury bond is lower than it was at the start of the year—a sign that hopes of faster growth have cooled. In short, the stockmarket may be up, but not for the reasons that investors had expected.


#2

Allow me to publicize something of what I do.

Last week, I met this guy. Own about 25 properties. He must know something or maybe I am making it a big thing but he said something about to be able to capitalize “on something” in the future. I am going to help him to sell I don’t know how many properties so he can defer the payment of the capital gains for 30 years and have lots of cash available for…I don’t know.

If the reason foreigners are coming to buy real estate in this country is the cheap dollar, imagine what’s going to happen if it gets stronger. With the incoming fight over the budget, the debt ceiling, corporate taxes and so on, I think the smart investor must be either capitalizing on the incapacity of this government to do anything promised, or as somebody with no sources to do anything he must be looking at the sky waiting for a divine intervention. I hope he is not taking the next eclipse as it.


#3

The yield on the ten-year Treasury bond is really a concern. More than Trump issues, the FED changes & Financial policy will impact economy. FED already hike four times rate took a pause, but rewinding QE. We have to wait at least six months to see the impact. We will come to know before this December. If it is not affected or there is no signs of impact, FED will continue to raise the rate in Dec 2018 and thereafter.


#4

Trump wants weaker dollars so US products would be competitive in the global market. So he is succeeding.
Stocks of companies that export a lot would appreciate since the companies would make more US$. Is happening.

Econ 101: Want more export, depreciate your currency. Want to tame imported inflation, strengthen your currency.

[quote=“Jil, post:3, topic:2922”]
The yield on the ten-year Treasury bond is really a concern.
[/quote]Why is lower yield bad? How author concludes it mean hopes of faster growth have cooled?


#5

That’s investors’ inflation expectations. Expectations are getting lower. Low inflation and low growth usually go together.

Weak dollar means investors are betting growth in US will be low. It doesn’t mean it will be that way but that’s what the market expects.


#6

Somehow it seems the economist article is slamming Trump instead of an objective view.


#7

Can you buy economist in Singapore? I remember they were banned at one one time.


#8

Can’t recall why it is banned. I think no banning of any magazines in Singapore… away from Singapore for 15+ years… not very au fait with what are happening in Singapore… all news I gathered are from the web :slight_smile:
Now that you mention it, vaguely remember some of my friends said economist is left-leaning. So is NYT. Forbes is bad reporting.
The neutral ones are Newsweek and Fortune.


#9

Don’t worry about currency devaluations and such. The stock market will correct itself. If you think Europe will do well then invest in European companies. I have a European ETF so it will do good in case Europe outperforms.


#10

You believe in those global diversification talk i.e. allocate some money for overseas investment? I thought about it for many years and decided that there is no point because mega US companies are global companies i.e. they do businesses with all nations in the world. They would benefit if any region booms. Of course, there are some exceptions such as Google opts not to operate in China. Investing in S&P 500 index fund means investing globally :grinning: IMHO, unless you have good reasons to believe that a certain region is likely to boom a lot more, separately investing in them though stocks and ETF is unnecessary :grinning: AAPL is a global business :grinning:


#11

It was part of my global strategy for ETFs:

25% US big caps
25% US small caps
25% Developed market (Europe)
25% Emerging (China)


#12

If you examine deeper, there are overlaps :slight_smile: Wonder why you didn’t choose to diversify using sectors?
For example, discretionary vs staples, tech, retail… vs defense, utilities…, global businesses e.g. AAPL, GE vs local businesses PCG and DPZ, growth vs value?

My allocation for stock portfolio is: Growth, Dividends, Index fund, Mad money (options trading, small cap, micro-cap). Other than index fund, those three don’t overlap.


#13

Overlap is fine. No need to be precise. Important thing is to participate. I invested in these funds over 10 years ago and everything has gone up already. So it is unlikely I’m going to sell anything and adjust. These funds are just like Apple. They give you real good dividends. So no need to do anything special. Cash cows. Sit back and enjoy the ride… :slight_smile:


#14

Economist is center-right. Newsweek and Fortune don’t have much analysis worth paying attention to.


#15

I read hardcopy version of all these magazines during Pre-U equivalent to junior/senior of high school because of the general paper course. After that, dropped reading them, find them too boring, have never interested in politics nor economy until stock investments :grinning: Have to read these boring stuffs :rofl:, boring as compared to comedies and MMA fights. Nowadays can selectively read using search or news apps or RSS, no need to subscribe to these magazines.


#16

Selectively reading and searching may add to your biases without you knowing. Economist is the only mag I would happily pay money for. I actually want to add some Chinese magazines to my reading diet. It’s helpful to think about China. But they either don’t have print editions in the States or too expensive.


#17

Economist is a good magazine to read and improve your English comprehension skills but if you are trying to derive any useful financial knowledge out of it you will be in for a big disappointment. It is also terrible at predicting the future. 25 years ago it posted a picture of Shenzhen and HK side by side. HK full of nice skyscrapers and SZ looked like a slum. It’s headline was something like “Shenzhen will never been quite the success that HK is”. Well guess what, why don’t you post the same pic of SZ and HK side by side right now. And revere at the difference that a quarter of a century can make.


#18

Well nobody has a crystal ball. Economist can be wrong in their predictions. After all they are written by reporters who are most likely not wealthy. We can read their facts and reasoning and draw our own conclusions.

I don’t think many people correctly predicted SZ will be so successful. I certainly did not. If we did we would all have bought properties there 20 years ago.


#19

The Econimist is a mixture of different liberalism, including that Google engineer’s classical liberalism.

What’s that radical centrism?

Political alignment
Classical liberalism[1]
Social liberalism[2]
Economic liberalism
Radical centrism[3][4]


#20

The 3 months yield is directly increased by FED rate hikes, it jumped from 0.02 (2015) to now (1.02), while 10 year stays same.

Higher 10 year yield means we have stronger growth/return, lower means weaker economy indication.

Ten year or 30 year yield is reduced means long term growth is not there as TBond is the lowest one can achieve.

There is a proven theory that spread between 10 year bond yield and 3 month Short term Yield narrows and goes negative, then recession kicks off in 3 to 6 months.