Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : World Outlook -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (20368)	3/14/2019 10:41:27 AM
From: Les H	Respond to of 48800

Between 2009 and the first quarter of 2019, corporations bought back almost five trillion dollars of their own stock, with almost one fifth of it in the last year and a half (source: dealer research)! Bond yields rose globally in the middle of last year, but the Fed pivot and the continuation of quantitative easing in Europe and Japan brought yields down by 50 basis points in a matter of weeks (source: Bloomberg). By all estimates, corporates are the marginal price setters for the stock market as a whole, and central banks are the marginal price setters for the bond market. These two biggest sources of asset price appreciation are obviously correlated. The stock market saw a significant and sharp (almost 20%) pull-back in the fourth quarter of 2018, but to the amazement of many investors, has bounced almost 20% from the lows, even as traditional asset holders including pensions, have reduced their equity exposures (source: Bloomberg). So we can hypothesize that: (1) corporate stock buybacks have been the proximate cause of the rebound, (2) the Fed’s astonishing 180 degree flip from their now ancient “two-tightenings in 2019” to “patience” has turbo-charged the buyback bid to both bonds and stocks (as corporate yield spreads and perceived risk have both receded) (3) these two events have mutually reinforced each other and reduced perception of risk, which is no wonder why the VIX has plummeted from 35 in December to below 14 now (source for all market data quoted: Bloomberg). forbes.com