There is a more than an even chance that the Federal Reserve Bank hikes interest rates at least 25 basis points by the end of March 2022. Several analysts expect another three hikes by the end of the year. As an equity investor, this should concern you. This week, both the Consumer Price Index (CPI), and the Producer Price Index (PPI) came in as expected. But “expected” does not mean anything like good on the inflation front. On a year-over-year basis, CPI was up 7%, while PPI hit 9.7% for all of 2021. And while economists debate whether inflation and…
Insights & Advice
Tag: NASDAQ
Is the stock market too high?
At the end of the first trading week for November 2021, four stock market indices closed higher than two standard deviations above their 50-Day Moving Average (DMA; a moving average is a technical analysis indicator that smooths out daily price fluctuations). The S&P 500, the NASDAQ, the Dow Jones Industrial Average (the Dow), and the Russell 2000 simultaneously closed above those extreme overbought levels for the first time in 455 trading days (since January 16, 2020). This is where I tell you to batten down the hatches and get ready for a pullback, right? Not necessarily. Historically, when this has…
The higher stocks climb, the cheaper they get
As stocks hit record high after record high, it might be normal to expect that equities will just get too expensive and collapse under their own weight. Not necessarily. One of the investor’s favorite valuation metrics is called the forward price/earnings (P/E) ratio. The concept is quite simple: compute the market value of any stock and divide it by what the company is projected to earn over the next 12 months. If the ratio is higher than the long-term average, consider it expensive. It is considered cheap (generally) when the stock trades below that average. The P/E ratio you can…
Stocks make new highs
It has been the best quarterly earnings season in a long time. More than 87% of companies that have reported thus far have beat earnings estimates. That is a record, and investors celebrated. Last week, I mentioned that this earnings season has been a classic example of a sell-on-the-news. It has been especially so for companies in the technology sector, but not so much for investments in other areas. What, you might ask, does this say about the overall markets? The most bullish interpretation is that we will continue to move higher, making new highs after new highs. The Dow…
Market’s correct imbalances
It always happens. Sometimes it takes longer than one would like, but sanity returns to the stock market when you least expect it. The only word that accurately described the stock market at the beginning of this week was “parabolic.” On Tuesday, believe or not, the total worth of just one stock, Apple, was larger than the entire value of the Russell 2000 small cap index. It was also much greater than the entire value of the U.K. stock exchange. Story stocks like Tesla were rising along with the technology-heavy NASDAQ index. Stay-at-home stocks were logging daily gains that in…
Vaccine-driven markets
Investors are caught in a tug of war. On one side are the growing cases of COVID-19 throughout the country. On the other, the expectations that a virus cure, or at least a vaccine, is just around the corner. The market remains in the middle. That’s all you need to know to understand what happened to stocks this week. Two different announcements concerning vaccine progress had traders bid up stocks. The daily toll of deaths and cases, the slowing of the re-opening process, and the controversy over the coming school plans, all had a dampening effect on markets as well….