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Eurozone

Formally established in 1993, the eurozone, often referred to as the “European Union,” is a political and economic union established after the ratification of the Maastricht Treaty by members of the European Community. It has since expanded to include some Central and Eastern European nations. The establishment of the eurozone provided for the creation of a central European bank and the adoption of a common currency: the euro. The idea behind the eurozone is to create a single geographical market where goods, services, and money can be exchanged freely.

Strategies for Investing in These Chaotic Markets

By for Profit Confidential

Strategies for Investing

Here we go again. Just when the stock market is moving lower and forecasting a potential correction, we see buying emerging, driving the bears back to the woods.

The reality is that I was looking for the S&P 500 to potentially correct 10%, down to around 1,792, something that has not materialized in about two years. It would, in my view, represent a good buying opportunity to accumulate shares at a discount. Yet despite declining as much as seven percent, the S&P 500 just couldn’t give up, staging a bounce-back.

So here we are with the S&P 500 breaking back above its key 200-day moving average (MA) of around 1,906. This appears to be encouraging the market, making it somewhat optimistic.

The way I see it is the recovery of the 200-day MA by the S&P 500 was key, but I would be more impressed if the S&P 500 could retrace the 50-day MA of around 1,966. Of course, this move could easily occur, as the S&P 500 was a mere 20 points away on Wednesday.

What’s also interesting is the comeback in both the technology and small-cap areas.

Technology has been strong over the past several sessions with the NASDAQ bouncing back to above its 200-day MA and coming within 1.49% of its recent high. If technology can regain its luster and offer some leadership to the broader stock market, we could see the S&P 500 move back to above 1,700 in the best-case scenario; albeit, it will take some work for this to happen.

Small-caps have fared the best in October, largely due to some technically oversold buying … Read More

Why Stock Prices Will Continue to Fall

By for Profit Confidential

Stock Prices Will Continue to FallNow that the Dow Jones Industrial Average has fallen 1,035 points (six percent) from its mid-September peak, the question investors are asking is “how far will she go?” For small-cap investors, the drama is greater, as the Russell 2000 Index has fallen 12.5% from its July peak.

Since 2009, every market pullback presented investors with an opportunity to get back into stocks at discounted prices. Even some editors here at Lombardi Publishing Corporation see the recent pullback in stocks as an opportunity.

But what happens if it is different this time? How about if stocks just keep falling?

If you have been a long-term follower of my column, you know I have been adamant about an economic slowdown in the global economy.

And let’s face it: the American stock markets have been addicted to the easy money policies of the Federal Reserve, namely money printing and record-low interest rates. But that is all coming to an end now. The Fed will be out of the money printing business soon and it has warned us on several occasions that interest rates will need to rise.

The International Monetary Fund (IMF) is now (or should I say, is finally) warning about an economic slowdown in the global economy. In its most recent global growth forecast, the IMF said, “With weaker-than-expected global growth for the first half of 2014 and increased downside risks, the projected pickup in growth may again fail to materialize or fall short of expectation.” The IMF also said the global economy may never see the kind of expansion it experienced prior to the financial crisis. (Source: “IMF says economic … Read More

Top Growth Areas Heading into 2015

By for Profit Confidential

Growth Areas Heading into 2015The stock market is clearly struggling to stay afloat at this juncture, balancing the domestic economic renewal with the global risk coming from ISIS, Russia, the eurozone, and economic stalling in China.

A major catalyst or a reason to buy is what investors are searching for. The focus later next week will shift to the third-quarter earnings season, which is carefully monitored by investors.

The start of the third-quarter earnings season will officially begin with Alcoa Inc. (NYSE/AA) reporting next Wednesday. Alcoa is a decent barometer of the global economy. The company reported an excellent second-quarter earnings season, albeit the quarter was relatively average.

All eyes will focus not only on the ability of CEOs to control the expense side to drive revenues, but also on the actual revenue growth. The strong second-quarter gross domestic product (GDP) growth will help.

For the third-quarter earnings season, the earnings growth is estimated at 4.7%, well down from a much higher 8.9% as of June 30, according to a report from FactSet. (Source: “Earnings Insight: S&P 500,” FactSet web site, September 26, 2014.)

Worse yet, the report suggests that nine of the 10 sectors have reduced their earnings season expectations. This is not supportive of the recent record moves by the DOW and S&P 500.

Only the healthcare sector appears to have increased its expected earnings growth, bumping it up to 10.6% for the third-quarter earnings season, up from 9.4% as of June 30. Investors could consider buying an exchange-traded fund (ETF) to benefit, such as the SPDR S&P Health Care Equipment ETF (NYSEArca/XHE). On the small-cap stocks side, a healthcare ETF to … Read More

Where the U.S. Dollar Is Headed and What It Means to You

By for Profit Confidential

U.S. Dollar Is HeadedFor the U.S. federal government’s fiscal year, which ends this Tuesday, the Congressional Budget Office (CBO) predicts a budget deficit of $506 billion. (Source: Congressional Budget Office web site, September 26, 2014.)

But just because our annual deficit is declining, that doesn’t mean our national debt is rising by an equal amount.

In fact, between September 20, 2013 and September 20, 2014, the U.S. national debt increased by $1.0 trillion. (Source: Treasury Direct, last accessed September 23, 2014.)

And the government is expected to post budget deficits until at least 2024.

According to a report released by the CBO, the U.S. government’s budget deficits will amount to $7.19 trillion between 2015 and 2024. (Source: Congressional Budget Office, August 27, 2014.) That’s roughly $780 billion a year on average.

Each year the government incurs a budget deficit, it has to borrow money to pay for its expenses and as a result, the national debt increases.

With the national debt now at $17.7 trillion, adding another $7.19 trillion takes the total to $24.89 trillion within 10 years. But as I showed you earlier in this story, government debt is rising at a much faster pace than national debt.

My prediction: a national debt of $34.0 trillion within 10 years.

For the current fiscal year, the U.S. government is estimated to pay $430 billion in interest on the national debt. The Federal Reserve has stated it plans to raise interest rates starting in 2015 and will continue to do so right through to 2017.

According to the CBO, interest payments on the government’s debt will triple within 10 years.

While I’m sure traders … Read More

A Rational Look at Gold

By for Profit Confidential

Rational Look at GoldThe fundamentals that drive gold prices higher are in full force and improving. Central banks are buying more of the precious metal (to add to their reserves), while countries that are known to be big consumers of gold bullion post increased demand.

According to the India Bullion & Jewellers’ Association, India’s monthly gold bullion imports are expected to rise by as much as 50% in the coming few months—in the range of 70 tonnes to 75 tonnes per month compared to an average of 50 tonnes to 60 tonnes now. (Source: Reuters, September 18, 2014.) This is mainly due to the festival/wedding season fast approaching in India.

If India continues to import 70 tonnes of gold bullion each month, then the total imports just to India will be 31% of all world gold mine production (based on 2,700 tons in annual mine production).

India used to be the biggest importer of gold bullion until China took over as the biggest importer of the precious metal two years ago. And demand for gold in China remains strong as well.

But while demand for the precious metal is rising, production is declining.

In the first five months of 2014, U.S. mine production was 85,400 kilograms (kg), down four percent from the 89,200 kg of gold bullion produced in the first five months of 2013. (Source: U.S. Geological Survey, last accessed September 22, 2014.) As I have written before, lower gold prices have caused gold companies to close mines where production made sense at $1,600 an ounce gold, but not at $1,200 an ounce gold.

While I won’t delve into all the talk … Read More

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