I think it's wise to listen to the bank group speak, in cases like this. Like any data, this is not in a vacuum but within the context of an 8 year bull run.
Wall Street Banks Warn Downturn Is Coming We are seeing some serious moves in August in many different currencies, commodities and in different equity market segments. This falls in line with my belief that we are in the period where rebalancing of portfolios starts to take place for the new year (2018). Often, the first moves are the head fakes, either taking out new highs and seeing distribution selling or new lows, little to no volume, and stealth buying in advance of (more obvious) trend changes.
There are less stocks on the NYSE and the NASDAQ then there were 15 years ago, by a fairly substantial %. Using Les' table, in 2001:
| Market/Sector Breadth Journal: May 4, 2001 (3395 stocks) |
and currently we see 80% less:
Market/Sector Breadth Journal: August 25, 2017 (2729 stocks) So, in the US stock market, (more or less) we have a lot more money chasing fewer options. This is one of the reasons why the ETN/ETF markets have exploded.
When you add in the fact that analysts are sounding warning signals like this:
Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday.
His bank’s model shows assets across the world are the least correlated in almost a decade,
This is not exactly comforting. At the same time, if we take a close look at many charts over the past decade, many look like they've been going straight up. For all the corrections along the way, many companies and indexes have gone "through the roof", so to speak.
But I think it's important to consider that even though we may be in the late cycle process, I'm not 100% convinced this longer term cycle is completely over. If there's another year of gains to be had, do you want to be on the sidelines...waiting, convinced this cycle is coming to end? If you've made outsized gains over the past 8 to 10 years, then yeah! Why not?
I suppose this is one of the reasons why so many "hedges" haven't worked as well lately...but that may not be accurate (simply my view and not based on empirical data).
Maybe it's just me but with all the QE that's taken place and "borrowing for zero or a fraction under 1%", is it any wonder that analysts see this outcome:
Oxford Economics Ltd. macro strategist Gaurav Saroliya points to another red flag for U.S. equity bulls. The gross value-added of non-financial companies after inflation -- a measure of the value of goods after adjusting for the costs of production -- is now negative on a year-on-year basis.
Why wouldn't financial outperform in this environment? (well, I suppose if you run your company poorly, it doesn't matter how generous the "economic environment" is to a lousy manager!! <g>)
One note that was not surprising to me but might be to others who don't follow the semi industry all that closely, is that in 2001, Les' semi subsector has 149 companies and currently it has 66. Between attrition and mergers/acquisitions, we seen the number of companies reduced by over 40%. Probably one of the reasons why the SOX index has been stellar the past couple of years!
jmo
TO |
