Equities start the day lower as all the grumpy people come back to work. Up 16pts yesterday on no real news? Awesome. People come back from a day off and we fall 16 pts overnight? Not so awesome. So I swore to myself I’d never write another recap until lie chester city won the Premier League (I pronounced it this way for the longest time. Lie chester square used to get me too) and Jon Snow came back to life so I guess here we are. Jon Snow is alive? I love that show so much, right when you think everything has settled down they smack you in the face and say “WAKE UP”. Speaking of getting smacked in the face, why does the market keep grinding lower lately? Weren’t we supposed to be out of the woods? Well my friends we aren’t out of the woods, in fact we are right where we belong walking along the same trail we’ve been on for years. Mediocare economic data? Check. Mediocare earnings? Check. Central banks doing everything they can? Check. Sentiment swinging from “get out the canned beans Margaret, the Recession is upon us” to “Margaret, I think we need one of those Tesla Model 3 things they just announced”? Check. Guys Guys Guys. Nothing has changed. Mid to low 50s PMI, 250k jobless claims, weak Q1 GDP, minimal wage growth, companies buying stock hand over fist, the Fed “monitoring the situation carefully”, and a stock market that runs out of steam near 2,100. ZZZZZ. Wake me up when 1) Earnings growth stops going down 2) The market breaks 2,150 3) Jon Snow puts a dagger in Ramsay Bolton’s nether regions and 4) Trump debates Clinton (I swear this draw Superbowl type ratings). WE ARE IN THE MIDDLE. Not the bottom and not the top. THE MIDDLE.
After the open they did this to stocks. The story of April was rotation, rotation away from safety and into risk and now that trade seems to have reversed. Which makes sense right? If you piled into risky stuff thinking new highs were imminent you are bound to unwind a bit of it when things stall out. That doesn’t mean that the market is a raging sell it just means that things have become a bit less “chasey”. Earnings basically wind down this week so let’s check out the latest summary from @Factset. Now I’m not one of those “what’s the earnings beat rate” hipsters so I’m going to skip over that data point, instead let’s look at guidance shall we? “At this point in time, 54 companies in the index have issued EPS guidance for Q2 2016. Of these 54 companies, 36 have issued negative EPS guidance and 18 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance is 67% (36 out of 54), which is below the 5-year average of 73%.” Ok, so that’s not extremely informative but it’s definitely in the “less bad” category right? Anyway, if you are an earnings nut make sure you read thru that link, it’s awesome. We bottomed around 1130am ET when Europe went home (I guess they were grumpy) and proceeded to rally all the way thru lunch. We didn’t quite make it back to green numbers but our first test of the 2,050 area was a success. Winners: FMC, FIS, MNK, ENDP, and MYL. Losers: FCX, PBI, CHK, SWN, and MRO. How fun does this look btw? Sign me up!
The rest of the day was a sideways mess with little to chance to spread our wings. We closed at 2,063 down 87bps as the market continues to pullback from its recent highs. So like I said in the opening paragraph welcome back to “the middle”, in fact if I were to compare this tape to a song lyric it would be “you can checkout anytime you want but you can never leave”. I mean look at this madness…just look! How many headlines and market comments and predictions have we seen over that time frame…2.8 million? At least? Yet in the end it’s just one giant sideways grind? I don’t know, I guess we continue to plumb these levels until something real happens. Maybe those really goofy aliens from Mars Attacks will show up and vaporize a few factories and robo advisers, make us have to rebuild from scratch.
Final Score: Dow -78bps, S&P500 -87bps, Nasdaq -113bps, Rus2k -168bps.
- Succinct Summation of the Day’s Events: Basically the market is running on fumes. We are succumbing to the fact that nothing has meaningfully changed in 18 months so we’re right back to the grind.
- Buffett Indicator….still frothy: “In a CNBC interview in 2014, Warren Buffett expressed his view that stocks aren't "too frothy". However, both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market remains at lofty valuations — still above the housing-bubble peak in 2007, although off its interim high in Q1 of 2015. One final comment: While this indicator is a general gauge of market valuation, it it's not useful for short-term market timing, as this overlay with the S&P 500 makes clear”
- Tech is a wreck…and the market will struggle while this happens. “When America’s largest and most important sector is crashing relative to it’s peers, is that a bullish development for the stock market? I would argue that it is not.”
- The Tetons. So sweet…much grand.
- Austria ain’t no slouch either
- One thing I love during earnings season is commentary from CEOs and such. Always good nuggets like this one from the CEO of RHI: “In prior cycles, late stage has been indicated by this white-hot hyper demand where permanent placement grows at very high double-digit rates. That hasn’t happened. . . . We still don’t see that type of hyper demand that we would typically see late cycle, but instead we continue to slug it out in this relatively sluggish macro environment.”
- Value…still hard. “It’s a well-known fact that value stocks have, over the long-term, outperformed the overall stock market. But how long is long-term? As it turns out, it can be pretty long. We’re coming up on ten years of value underperforming. The last value cycle peaked on August 8, 2006. (I’m using the Russell 3000 Value and Russell 3000 indexes.)”
- My current Millennial analysis: doing the same stuff we all did in college.
- Let’s see how your home has done since 2004! Click here and enter your zip code! Mine? Up 15%. Ugh.
- Hey let’s ski near death shall we?
- My one and only “should we sell in May” link. The answer is and always will be “no” The “sell in May” theory ignores some historically good months in the heart of summer. According to Bespoke Investment Group (in their “2015 Market Calendar,”) July is the best-performing month in the last century (+1.51% average gains), while August is the #5 best month, at +0.91%. This makes “sell in mid-August and go on vacation” more sensible than “sell in May and go away.”
- I can’t even hold my breath for 30 seconds!
Ok, I decided I’m going to try tonight’s end link and report back to you fine people. I just have to wait for corn to be in season and my neighbor to come home so I can borrow his drill