The U.S. stock markets have experienced two strong years of back-to-back gains; the S&P 500 soared approximately 30% in 2013 and a solid 13% in 2014; and the Dow Jones Industrial Average recently topped 18,000 for the first time ever. With the Federal Reserve expected to barely increase interest rates in the second half of 2015, the stock market looks to be the investment of choice for income-starved investors this year—and technology stocks in 2015 may be your best bet…. Read More
The thought of an economic crisis in 2015 is all too distant for too many. With the S&P 500 advancing 200% since its bottom in 2009, it’s worth taking some time to pause and reflect. As is often the case, the most devastating risks are those that we don’t see coming. Few recognized the dangerous consequences of the overvalued housing market or loose financial regulations before the recession hit. This time around, it wouldn’t be surprising if investors are blindsided again…. Read More
The S&P 500 and many other key stock indices are overpriced when measured by historical stock market valuation tools.
Share Buybacks Still Prevail on S&P 500
In the fourth quarter of 2014, the S&P 500 companies purchased over $125 billion worth of their own shares. In the trailing 12 months, they spent more than half a trillion dollars on buybacks. (Source: FactSet, March 16, 2015.) In the fourth quarter of 2014, 72% of S&P 500 companies were involved in buying back their own shares!… Read More
There are issues brewing in the stock market with interest rates fears and the strengthening greenback that could drive the S&P 500 lower by five percent or more.
When Will the Fed Increase Interest Rates?
First, we have the fears surrounding rising interest rates after the strong improvement in the unemployment rate to a pre-recession low of 5.5%. This is well below the target, previously set by former Federal Reserve chairman Ben Bernanke, as the level at which the central bank would begin raising interest rates…. Read More
There is a significant amount of evidence that suggests stock market valuations are stretched to the extreme. Even the Fed thinks the market is expensive.
Federal Reserve Concerned About Stock Market Valuation… Read More
On February 24, 2015, the Federal Reserve issued its semi-annual monetary policy report. In this report regarding the stock market, word-for-word, it said, “Overall equity valuations by some conventional measures are somewhat higher than their historical average levels, and valuation metrics in some sectors continue to appear stretched relative to historical norms.” (Source: Board of Governors of the Federal Reserve System, February 24, 2015.) This is the second time the Federal Reserve has said something like this.
When I look at the stock market, I am worried. I see investors behaving like they do when markets are at their peaks or forming a top. I see irrationality, extreme valuations, and too much optimism among investors.
Investors Buying Everything and Anything?
Do investors really care about what they are buying these days when it comes to stocks? In just the last few months, I have seen companies do initial public offerings (IPOs) without any earnings in sight…. Read More
The idea of an impending stock market crash may seem pretty untenable right now. After all, compared to the rest of the world, the United States had the most encouraging economic, business, and financial outlook in 2014, and the same goes for 2015. But there are several key factors painting a not-so-rosy picture for the global economy and your retirement could be on the line if you’re not cautious. (More on how to protect your 401(k) from the coming stock market crash in a bit…)
U.S…. Read More
February appears to be setting up to be a month of romance with the stock market after the DOW blasted up 521 points in the first two sessions of the month.
Now, you must be wondering about how the stock market is playing, given the turmoil and volatility we witnessed in January that drove the key stock market indices to below their respective 50-day moving averages (MAs). The only thing that has really changed from the end of January has been the rally in oil prices with the West Texas Intermediate breaking $53.00 on Tuesday, prior to giving up some gains on Wednesday morning…. Read More
In 2014, I was able to travel to Europe on six different occasions. I just came back from England. These trips to Europe enable me to see how the countries there are faring economically. And I can tell you first-hand—take England and Germany out of the picture, and most European countries are in an outright depression. (Not good news for the U.S. economy, but more on why it will impact America and you, an American investor, in a moment.)
For Italy, Spain, and Portugal, despite the European Central Bank (ECB) imposing negative interest rates on deposits and the lowering of its benchmark interest rate, nothing much has changed for these countries economically…and the social picture is now deteriorating…. Read More
When you take all the fluff out of the markets, like artificially low interest rates and other easy monetary support from the Federal Reserve, we need to realize (at the end of the day) that stocks trade on a fundamental called corporate earnings. And going into 2015, as I’ll detail below, corporate earnings are weak at best…. Read More