stock market

Stock Market Highs Main Street Lows?

by
stock market highs catching falling knife

The stock market is hitting new highs. These market highs erase all previous coronavirus lows. Many are wondering how can the stock market be doing great while many Americans are still out of work, and experts worry about the potentially large numbers of evictions that may be coming. The Stock Market Looks Forward Many people forget, or don’t understand, that the stock market is a leading indicator. That means that the markets don’t really care about today per se. Rather, the markets look to the future. Knowing what IBM is trading at today, for example, is worthless to an investor. Knowing , or predicting, what the price of IBM stock will be in a month, or a year, is what allows investors to profit. So, why is the stock market racing to new highs? There are several reasons the stock market is rising. First, the return on non-market investments is abysmal. Every article you read about the mortgage rates falling to new lows, also means that U.S. Treasuries are also falling. The rate on a current 10-year treasury bond is around 1/2%. Would you be willing to lock up your money for 10-years in exchange for half a percent? Neither …

Read More

The Not Quite Goldilocks Economy

by
The Not Quite Goldilocks Economy 1

Everybody loves the idea of the Goldilocks Economy. Not too hot. Not too cold. Just right. The Fed is leaving interest rates unchanged, and telegraphing that is currently isn’t planning on making any changes next year either. Stock market pundits have given up on calling the impeding doom of a stock market crash (at least for this month). Job reports show job growth, but not too fast of job growth. And while wage are growing, they are doing so slowly. Not Goldilocks However, you won’t see a lot of articles on a Goldilocks Economy happening. While things are definitely not too hot and not too cold, there is a connotation with Goldilocks that things are inherently good. This economy seems more like the negative version of a Goldilocks situation. As in things aren’t too bad, as opposed to things are too good. In a way, this is better for investors and the economy in general. Too much optimism can turn a mild-mannered, almost Goldilocks economy into a runaway bubble and no one wants that. The next year will be very interesting. Once the holidays are past and the country stops paying attention to impeachment in Washington, the reality of just …

Read More

Stock Market Is a Leading Indicator

by
leading indicator dashboard

Remember, the stock market is a leading indicator. What Is a Leading Indicator? This should probably get its own post, along with what is a lagging indicator, but that isn’t the point of this article, so let’s hit the highlights. At the most basic level there are leading indicators and lagging indicators. A leading indicator is a measurement of what is to come. A lagging indicator is a measurement of what has already happened. At a metaphorical level, the display on your car that says you have 80% of the life of your oil left is a leading indicator. It is measuring the future. Note that it does NOT predict the future. It’s a best guess effort based on available data. Contrast that with a lagging indicator, which measures something in the past. Metaphorically, this might be the sticker on the windshield that says the mileage of the last oil change, or your maintenance log. In the world of economics, most lagging indicators are big data compiled by the government. You may have noticed that the June Labor Report comes out in July. That’s because you have to wait until the end of June for all the data to even …

Read More

Trump, Iran, and the Markets

by

The stock markets aren’t sure what to do anymore about Donald Trump. As it turns out, many of the things the market thought would be devastating (trade war with China) weren’t as big of deal as originally thought. Add to that the fact that Trump changes his mind on a regular basis for no particular reason, and you have a stock market that just sort of guesses. Big news today is that the Trump administration is pulling the waivers for countries over the Iran oil sanctions. Say what? So, Trump decided he had some sort of goal with Iran that involved oil sanctions against Iran. Typically, this is what American Presidents do when they are upset with Iran. Rather than bombing them, you cut off their ability to sell oil The catch is that the world oil market is really one big pool of suppliers and cutting any of the supply into that pool raises oil prices. Most countries, especially America, aren’t real fond of higher oil prices, so the sanction thing is sort of a double-edged sword. Enter waivers. When the Trump administration put its sanctions on Iran, they made sure to tell everyone, because that is how you …

Read More

Wrong Stock Market Predictions

by
Wrong Stock Market Predictions 2

I read a lot of finance stuff. Most of the time, it’s a lot of the usual advice and tips wrapped up in new clothing. Finance and investing don’t really change that much. The exception is taxes, which change at least a little bit every year due to new tax court decisions, and the adjustments made to many tax numbers automatically each year due inflation. I keep reading about finance and investing both to keep my skills and knowledge sharp, and unfortunately, also to have some knowledge of whatever the latest finance and investing fads are. Investing for the long-term with a well diversified portfolio is the “eat less calories, burn more calories,” of finance. Everything else is a gimmick to achieve the same, while making is sound better (and easier). Tony Robbins Merchants of Doom I’m currently reading Tony Robbins’ Unshakeable. I like Robbins’ finance books. They repeat a lot of the sound financial advice that has been around for a while, often with a little more flair, and a lot more Tony. That is, Tony likes to name drop, which is fine, because he interviews some of the great minds for his books, but it’s always funny just …

Read More

Financial Planning 2019

by
Financial Planning 2019 3

Stock Market 2019 Look Ahead 2019 is here, and it’s time for Finance Gourmet to take a look forward at what is going to happen with the market in 2019, the economy in 2019, and how you and your personal finances should be setup to weather the storm, and take advantage of the opportunities. 2019 Economy Let’s start with an easy one (Hah!). The 2019 economy looks to be a transition year. This is either the year, that the the economy and the markets consolidate their success and move forward into another expansionary period, or the year that the recession starts. Under normal circumstances we might have a pretty good idea of where things were heading, but these are not normal circumstances. The Trump Presidency alone adds a measure of volatility and uncertainty that just can’t be predicted. That being said, we do have several things to look at to help get an idea of where the economy is heading in 2019. First up is the Federal Reserve, which, at long last, appears to have finally noticed that the economy is slowing and shaking, and that inflation is nowhere to be found other than the always volatile fuel prices. That …

Read More

Wild Wall Streets Computer Trading

by
computer trading market moves

In the past few days, the stock markets have whipsawed up and down by as much as 800 points, sometimes during the same day! It can be hard to put a finger on what is driving the stock market when the behavior seems so irrational, but the reality is actually pretty easy to understand. The computer programs have been tightened, and they keep firing off, sometimes together, sometimes opposed, and each movement they create triggers another program, which triggers another program, and so on. Program Trading Once upon a time, computer trading was nothing more that the pre-placed buy and sell orders entered by traders. A stop order to sell if the price dropped below a certain amount. A buy order if the price trended up. Those trades have been replaced by more sophisticated programs run by everyone from big Wall Street banks and brokers, to hedge funds, to so-called quant mutual funds. These programs fire off hundreds, or even thousands of orders in response to pre-defined market triggers. Is there a Credit Karma scam? Get the markets leaning too far, and they start kicking in, often triggering other programs in the process. The result is seemingly bizarre trading patterns, …

Read More

Market Falls, But… No Panic… yet?

by
stock market price down facebook

So, interesting phenomenon happening in the stock market these last few days with the S&P 500 dropping over 5% (around 1,400 points) and even dipping below its 200-day moving average. In the right circumstances, this might be the trigger of a full-on rout in the stock markets. Here is what is missing though: panic. Markets Down – Does Anyone Care? I’ve been subtly (and not so subtly) hinting for about a year now that I think the Federal Reserve is too set in stone on its course to raise interest rates in the face of little to no inflationary pressure. To me, this recovery, as long as it is, doesn’t seem that strong. As such, one rate hike too many, could spell disaster. With this week’s market reacting poorly to rising interest rates in the bond markets, I was dusting off my “I Told You So,” posts. But, it looks like I’ll have to wait a bit longer. My Digit reviews. Despite the fairly big numbers in the Wall Street sell off as late, there isn’t much fear associated with it. When it comes to the economy, nothing matters more than how people FEEL about it. That’s why they try …

Read More

Stocks Have Hard Day – Just Volatility, or the Recession Knocking?

by
crystal ball stock market economy

Stocks had a pretty big selloff today in response to a big drop in the bond markets. For those of you keeping score (the baseball kind, not just the points scored), here is the way the game looks so far. Check out my review of Credit Karma. US economy is still expanding, making it one of the longest economic expansions The economy itself is cyclical. It ALWAYS goes up AND down. So, if it has been going up for a very long time, sooner or later, there will need to be a correction, or recession. How hard the recession ends up being is a function of how it hits. A “pop” leads to a hard (potentially shorter) recession. A “soft landing” means markets can regroup and reprice (usually with a lot of sideways movement) without shocking the system. The Fed keeps raising interest rates because… well, because they want to be “hawks” and not “doves” and just for the barest of moments, the supposed “target” of 2% inflation was touched, so here comes the Fed. The Fed not only keeps raising interest rates, it keeps saying it is going to raise interest rates more. One more hike this year, in …

Read More

Are These The Tariffs You’re Looking For?

by
tariffs imports markets

OK, so that isn’t a very search engine friendly title for this article, and I don’t really care. The tariffs in Trump’s trade war are starting to make real impacts on certain Americans, and the rest of us may start feeling the effects soon. The most noticeable, immediate impact, is that after a decade as an experienced, professional freelance financial writer, it is now necessary for me to be able to spell the word ‘tariff,’ which up until now never really came up except in examples and edge cases. Generally speaking, tariffs (one r, two f-s) have never been the kind of thing that impacted the middle of Main Street America. Now, I guess we are going big, or going home. In a lot of cases, Trump is shutting the barn door after the horse got out. There used to be real, U.S. manufacturers of solar panels, for example. Not anymore. The companies getting “protection” from Trump’s solar panel tariffs (one r, two f-s) are American, only in the legal sense of subsidies and corporations.  In other cases, maybe something like the steel tariffs could save the few remaining stell companies and mills. The second big impact is now dropping …

Read More