No Man's Land
Equities start the day higher as we continue to explore no man’s land. We’re just kinda stuck in an area between “things are getting a lot better” and “things are rapidly deteriorating”. Given the lack of fresh news we’re supernaturally focused on this “Trade War” thing (is supernaturally the right word there? Probably not. Whatever, I like it and I don’t have an editor). The problem with being this myopic is that we will consistently overreact to every single perceived change in tone. Huawei, a company that 99% of American’s don’t even know exists, has suddenly become the thermometer for how things are going. Are they banned from the United States? Sell stocks. Is the ban temporarily lifted? Buy stocks. What a joke. I said it in my last blog but economic tension between China and the US is probably the new normal (unless a market event changes that). That being said, can we briefly circle back on another topic? Earnings for Q1 actually beat, in fact they grew nearly 2%, and LPL points out that full year estimates are actually back on the rise. Now could tariffs change their course? Absolutely, and it’ll be imperative to read conference calls in Q2 to see what companies are doing to prepare for them. But you know what? Even in this time of heightened trade tensions there are companies out there executing on their business plans to the best of their abilities. All of the following are within 2% of a new 52wk high: CMG, LULU, V, PYPL, MCD, COST, and PEP. I could keep going but what I’m trying to say is this: doom and gloom about China / US relations isn’t going anywhere anytime soon but neither is the insatiable desire by U.S companies to succeed regardless of the macro environment.
We spent most of the morning trading higher because, like I’ve said in the past, markets trade on “better or worse” in the short run and the Huawei news was accepted as being slightly positive (though this story strikes me as being slightly negative so *shrug*). I actually feel bad for my business journalist friends right now. When the market is down they have to write “stocks are concerned about an escalation in the Trade War” yet when the market is up they write “stocks gained as fears of a worsening Trade War eased” and often times those two headlines are on BACK TO BACK days. Brutal. Maybe we should all stop obsessing over day to day headlines? Is that too much to ask? Hey, I have a question for you, has there ever been a single person who heard the sound of their own voice and said “oh yea, I love how I sound.” No right? Why do we all hate our voice so much? This really bothers me as I debate launching a podcast for Baird. Anyway, by lunch we trading up around 0.8% led by Materials, Tech, and Energy.
We saw a small selloff late in the session and a close at 2,864 +0.85%. So I asked my esteemed colleague Willie Delwiche what he’s looking at right now for a couple of reasons. 1) He’s a heck of a technician and 2) He tends to look at different things from me so hey, teamwork. First and foremost he pointed out the Valueline Geometric index which basically represents the median stock price in universe of roughly 1,700 names. It’s at its lowest level since January so more damage is being done under the surface than we might think if we only looked at SPX. Second, he pointed out the weakness in Semiconductors which is a pretty good leading indicator. Finally, he noted that breadth has really lagged in the S&P over the past few months and if that continues to deteriorate it might be troublesome for the bigger picture. Now he doesn’t strike me as outright bearish but one of the things I like about him is that he’s always on the lookout for things people might miss which could point to a broader weakening in the tape. I guess we’ll see how things evolve over the next few months but one thing’s for sure, trade tensions are not getting better so let’s see how the market adapts to that.
- What phase of investing are you in right now? As Josh notes, even the last phase can be really hard: “What ends up happening is that the person realizes they’ve gotten very good at saving and investing, but they’re not equipped emotionally to learn how to become good spenders. Believe it or not, this is one of the most significant challenges we run into with high net worth households we work with.”
- If you wanted to spend 10 minutes becoming a better investor / understanding how markets work you could do no better than reading every word of this article. Every word. How about this Q: “What’s the magic formula to investing?” A: “Diversification + Time + Luck”. So elegant in its simplicity.
- Look, I don’t do a lot of clothing recommendations because 1) I’m 45 and 2) I’m not exactly on the cutting edge of fashion but these might be the best work pants I’ve ever bought. Highly recommend (I imagine they are amazing for travel too). Shoutout to @jeffmacke for putting me into this trade
- This is crucial…CRUCIAL: The difference between good advice and effective advice. Good advice is everywhere. You don’t have to look very hard. People generally know what they have to do to improve their health, finances, or lifestyle. But knowledge alone is never enough to change behavior. Good advice tells you how to succeed at something while effective advice shows you how to succeed. Good advice is about tactics while effective advice helps you build systems.
- I say this every time I speak to our clients but STOP CHECKING YOUR STATEMENTS: If you’re checking performance of the stock market daily, chances are that you’ll see a loss about 50% of the time. If you check on it just once a year, that chance drops to about 25%. At seven years, the chance of seeing a loss drops to 1%.
- This has to be one of the most amazing things I’ve seen
- It’s like a Keurig…for soap. Seriously what the heck is this thing and who would buy it
- Eddie breaks it down like no other: “I want you to consider a hypothetical scenario. Let’s say you’re given two bits of information on a company from the future. First, you’re told that the company is about to release a product that will become a big hit. The technology is superior to what’s out there and the price is much cheaper. The public will love it. Secondly, the company operates in a country whose currency is about to appreciate against the US dollar. My question is, knowing just those two bits of information, is the stock a buy? (Bear in mind, this is just a thought exercise.)”
- Kids are now going to Youtube Summer Camp. “Wait, why am I suddenly talking like a YouTuber? Because today I’m going to tell you about YouTube summer camps for kids. No, not camps where kids watch YouTube all day. (What children watch on YouTube is another column entirely.) These are day camps where kids as young as 5 learn how to shoot videos, edit sound and create a personal brand to get them on their way to YouTube stardom. Anton here: you know what…. I don’t hate this. If it teaches kids to be creative and comfortable in their own skins then I’m all for it. Heck maybe it even doubles as a good way to teach public speaking?
- Mac and Masala. This could be legit
Tonight we’ll end with People being awesome! I love people, especially you because you invite me into your inbox and let me rant about markets / show you educational links and funny videos. I love you so much *SOBS*
Have a good night