The Long Term Investor

Here is what we ALL already know.

Stock market live updates: Stocks sink after Powell's hawkish Jackson Hole message

https://finance.yahoo.com/news/stock-market-news-live-updates-august-26-2022-113623725.html

(BOLD is my opinion OR what I consider important content)

"Stocks fell sharply Friday as Federal Reserve Chair Jerome Powell reiterated the U.S. central bank's commitment to fight inflation in a hawkish speech at the Jackson Hole economic symposium.

Near 11:10 a.m. ET, the Nasdaq was leading markets lower, falling some 2.4%, while the S&P 500 was off 2%, and the Dow down 1.6%.

"Restoring price stability will likely require maintaining a restrictive policy stance for some time," Powell said in his remarks at the gathering in Wyoming. "The historical record cautions strongly against prematurely loosening policy.”

In a note to clients following Friday's speech, Ian Shepherdson at Pantheon Macro wrote, "In one line: Nothing for doves."

"Chair Powell’s speech forcefully reiterated the Fed’s intention to tighten policy enough to bring inflation down to target and then keep it here," Shepherdson wrote.

Investors had been bracing for hawkish messaging from the U.S. central bank chief on the Fed's ambitions to tighten monetary conditions and restore price stability as inflation holds near a four-decade high.

Federal Reserve officials have asserted that imminent policy decisions will be guided by economic data on a meeting-by-meeting basis – and so far, many readings on economic activity have affirmed the central bank is likely to proceed with further tightening of monetary conditions.

On Friday, data from the Bureau of Economic Analysis showed consumer prices fell slightly last month. Headline PCE dropped 0.1% between June and July with a 4.8% decline in energy prices driving the index lower. On a year-over-year basis, headline PCE rose 6.3% in July.

Core PCE, the Fed's preferred measure of inflation, rose 0.1% month-on-month in July and 4.6% from the prior year, marking the lowest annual increase since October 2021. Economists had expected core PCE would rise 4.7% against the same month last year.

On Wednesday, Federal Reserve Bank of Kansas City President Esther George told Yahoo Finance in a sit-down interview that policymakers have “more work to do” on interest rate hikes, and the sharpest impacts from its recent moves have not yet been felt.

“We are trying to get back to 2% inflation as quickly as we can, without doing damage to the economy,” George said in Jackson Hole.

"So July looked like there was some easing in those price pressures, but certainly not enough that you would say, we're in the right direction," she added. "So I think we have more data to see. And I think we have more work to do, to begin to see that trend move down.""

MY COMMENT

NEVER underestimate the ability of government and the FED to screw up the markets and the economy. Two percent inflation is just simply RIDICULOUS......this is borderline DEFLATION. On a historic basis the FED should be looking at an inflation rate of about 3-4% for a healthy, growing, economy.

 

Hey EMMETT.....you need to stop spending all your time boosting the fundamentals of you company......and.....do something to help the markets.

But......your employer is kicking ass.

 

Today.....simply IDIOCY. The FED does nothing more than a speech....and the markets tank. No they did not raise rates.....in fact they did nothing. Everything they said has been the norm for the past many months. Nothing new in the speech. Simply STUPIDITY on the part of the media, and those that somehow stupidly thought the FED might pull back.

There was absolutely NO justification for what the markets did today.

BUT.....that is what happens over the short term and why us long term investors simply shake our heads and say....WHATEVER.

I was RED today.....DUH. I got beat by the SP500 by 1.07%. Many companies that JUST put up great earnings got hammered today.........for absolutely no reason. Of course....the short term markets are DUMB AS A POST.

SO.....I continue to be fully invested for the LONG TERM as usual.

 

Between this Monday and today......we have now gone back in time about 6-7 weeks.

DOW year to date (-11.16%)
DOW for the week (-4.22%)

SP500 year to date (-14.87%)
SP500 for the week (-4.04%)

NASDAQ 100 year to date (-22.76%)
NASDAQ 100 for the week (-4.82%)

NASDAQ year to date (-22.39%)
NASDAQ for the week (-4.44%)

RUSSELL year to date (-15.39%)
RUSSELL for the week (-2.94%)

Good riddance to this low volume, trader driven week. We move on from here.

 

You are so right ZUKODANY......there are many, many bargains out there right now. If I had money to invest.....which I dont......I would load up the truck right now.

 

An age old question. There is NO wrong answer....as long as what you do is in line with your risk tolerance, age, and is RATIONAL.

How much cash should investors be holding? Experts weigh in

https://finance.yahoo.com/news/how-...rs-be-holding-experts-weigh-in-153906209.html

(BOLD is my opinion OR what I consider important content)

"Stocks took a nosedive on Friday after Federal Reserve Chair Jerome Powell gave every indication that the central bank would continue raising interest rates to combat inflation.

Investors with a weak stomach for volatility may be wondering if its better to stay in cash during these volatile markets. In continuation of our series, "What to do in a bear market," Yahoo Finance asked the experts if holding cash is wise given how inflation eats away at savings.

Do you recommend holding cash during these volatile markets, even with levels of high inflation?

“Even with these volatile markets coupled with high inflation, we believe investors should stay invested. Cash is difficult to perfectly time, since the market is difficult to perfectly time," Greg Bassuk, CEO of AXS Investments in New York, told Yahoo Finance. "Put another way, if the market nosedives, investors may wish they held more cash, whereas if the market catapults higher, they regret holding cash."

Bassuk pointed to the July rally as an example of the cash-holding dilemma. With U.S. stocks rising 9% in July, one of the all-time best months for equities, "cash allocations were a source of investor remorse. Solution? Stay invested."

Some strategists highlight the continuation of a higher interest rates are poised to send the markets lower in the months to come. So cash on the sidelines could be used for a lower entry point.

“We’re continuing to stay very defensive, with a lot of cash. We want to see what direction they’re [The Fed} go in,” Eddie Ghabour, managing partner at KeyAdvisors Group, recently told Yahoo Finance Live. “Our money is betting that they tighten higher and longer than what the market is actually positioned for. And then we’ll have a better entry point in the 4th quarter to dip back into the equity side."

At the end of the day, one expert stressed, investors should hold a portfolio well matched to their financial objectives and personal tolerance for market volatility.

“For investors with relatively short time horizons, such as retirees, some level of cash holdings can make sense," said James Solloway, Chief Market Strategist at SEI. "The same might be true for investors with relatively low tolerance for market volatility, but that comes at a cost given that cash tends to be the lowest-returning class of financial asset over any meaningful period of time."

Solloway add that any decision to exit the market "has to be relatively well-timed and requires a subsequent and similarly well-timed decision to reenter the market. And once you take into consideration that actual market peaks and troughs are only identifiable well after the fact, it should become apparent that attempts at market timing are far more likely to impose a net cost on an investor’s portfolio over the long run."

If holding cash is recommended, how much of a portfolio?

“While we don’t recommend cash holdings for investment purposes, it is prudent for investors to maintain modest cash positions of about 5% of their portfolios for the ability to quickly put 'dry powder' to work in these volatile times," Bassuk of AXS Investments said.

One expert says "cash should only be held for known expenditures that will occur within the next 3-6 months."

"We would prefer to own short duration investment grade fixed income today over cash for anything longer than near-term liabilities," Alex Chaloff, Co-Head of Investment Strategy at Bernstein Private Wealth Management, told Yahoo Finance. "While short duration instruments earn more than cash today by a substantial margin, neither keep up with the current elevated levels of inflation."

Keeping in mind a timeline of retirement is also important.

"For those who have a long ways until retirement and taking into account the current economic environment, typically an emergency fund of 6-12 months reserves is sufficient," Rachelle Tubongbanua, private wealth advisor at U.S. Bank Private Wealth Management, told Yahoo Finance. "For those closer to retirement or in retirement, an emergency fund of 12 – 24 months reserve is typically ideal, especially during volatile times like what we are experiencing today."

Is there a better alternative to holding cash?

Depending on your time horizon and risk tolerance, there are investment options available aside from holding cash.

"If you are seeking an option for non-emergency funds that is relatively short term and low risk, a laddered treasury portfolio (bonds that mature at different dates) can provide for that," Tubongbanua said. "Treasuries are backed by the full faith of the government, and there’s also a tax benefit, as the income is exempt from state and local taxes."

Tubongbanua noted that treasury yields have drastically increased the past few months and provide a better return as compared to savings or money-market accounts.

Furthermore, liquid alternatives are also a way to stay exposed to equities during upside movements while also offering hedging.

"Liquid alternatives represent the best-of-both-worlds: A way to stay invested for upward equity market participation with imbedded risk mitigation needed to weather the volatile and high inflationary storm,” Bassuk said."

MY COMMENT

OBVIOUSLY......I stay fully invested all the time. I do not keep any amount of cash out of the markets. I BELIEVE the academic research that shows that being fully invested......and.....investing all in all at once when you have funds.....gives the best return over the long term.

For those that are retired and funding their own retirement.....most people other than government workers.....my opinion is THREE YEARS of cash for living purposes......at the MINIMUM. I found that to be a good standard over the 20 years that I funded my early retirement from age 49 to age 70....when my income annuities kicked in.

The KEY THING.....is to match your risk tolerance with your cash level......but......not hold excessive cash. Cash is a return killer.....especially since market timing does NOT work. My opinion is that anyone with at least FIFTEEN or more years to retirement should be ALL IN with stocks or funds. I dont believe in anyone under age 45....holding any level of bonds. I think it is ridiculous the level of bonds that many target date funds and other investment services push on young people.

 

Saw that earlier in the day....Road. That owner made a great investment.....in hindsight. One of my FEW rules for collectors.......buy the finest quality of whatever it is that you can afford. And......another one of my collecting rules.......quality trumps quantity. And another of my BIG rules for collectors.......only buy DEAD artists......or in this case baseball players........when they are dead it is the legitimate markets that is establishing the price.

 

This past week seemed to me to be substantially the work of traders........shorts. They are masters of rumor, and.....legal...... manipulation.

Shorts Are Strong After Summer Stock Market Rally Fizzles

https://www.newsmax.com/newsfront/stockmarket-investors-rally/2022/08/28/id/1084973/

(BOLD is my opinion OR what I consider important content)

"Investors are stepping up bets on a market downturn, an indication of waning sentiment that analysts say could mean a return to the volatile trading from the first half of the year, The Wall Street Journal reported on Sunday.

Net short positions against S&P 500 futures have risen in the past few months, attaining levels not seen in two years, which indicates that traders are increasing their bets that the index will go down, or at least hedging against that risk.

In another sign that a strong summer rally is coming to an end, short interest has picked up in popular technology stocks, according to the Journal.

This had led many traders and portfolio managers to question if the boost in stocks from the year's lows in mid-June marks the beginning of a new bull market or a temporary bear market rally. The S&P 500 has gone up 11% since June 16 but is still down 15% in 2022.

"There's so much skepticism, so we're still in the sell-the-rally mentality," Nationwide chief of investment research Mark Hackett told the Journal. "If everybody feels we're in a bear market rally, it will almost become a self-fulfilling prophecy."

In the coming week, investors will attempt to determine how well the economy is doing by analyzing the latest monthly jobs report, consumer confidence survey and manufacturing index.

Although inflation cooled a bit in July, leading investors to think at first that the Fed could soon slow the pace of its rate increases, Federal Reserve Chair Jerome Powell put a dent in that thinking by saying that those price readings were "welcome" but fell "far short" of what the Fed is seeking.

Overall, investors again pulled money from U.S. stock funds in the latest week, with the funds logging $1.2 billion in net outflows in the period that ended Wednesday, according to Refinitiv Lipper data.

"The mood went from sour, to less sour, to now more sour," said Neuberger Berman Long Short Fund senior portfolio manager Charles Kantor. "That's a very dangerous game in this environment."

Investors are also increasing their bets against some of the large-cap technology stocks that have helped lead the market's summer rebound. It is unclear if they are placing an outright bet that stocks will fall or aiming to protect portfolios against downside risk, the Journal reported.

Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas, explained that "positioning doesn't necessarily drive the direction of the market. But once the market trades in a certain direction, positioning often impacts how it trades.""

MY COMMENT

I dont subscribe to the WSJ so I am using this little article as a secondary source for their article. I would not be surprised if the data and this little article are part of the GAME that the shorts and traders use to legally manipulate the markets.

Unfortunately we are in a dangerous market.....even though I believe we hit a soft bottom as I said before. At least I now have a nice cushion for future losses as we wait and see what will happen......short term.

One of the most dangerous conditions that is part of the mix right now is...........the erratic and disoriented government that we are seeing.

I agree that we are in a time where the danger of ending up with a.......SELF FULFILLING PROPHESY......is a big one right now.

 

About what you would expect at the open today. Markets down....but not substantially. After Friday....there is a lot of......"wait and see"......going on at the open today.

A big factor today.....seems to be the bump up above 3% on the ten year treasury

 

We are now EIGHT months into this little negative year. So.....four months from now....whatever the return is.....we will be done with 2022. How we end is totally up in the air.....as the short term always is. No doubt....the FED and other events are not in favor of a positive close to the year. The counterbalance to the negative factors......all of which are, and have been, totally known for many months.....is EARNINGS.

As usual lately.....it will be a battle between facts and reality.....fundamentals......and drama, fear mongering, rumor, click bait, etc, etc, etc.

Over the short term....totally opaque.....over the long term.....we know what ALWAYS wins out.

 

I like this little article.

Don’t Overthink the Summertime Rally
Trying to time the market is always a fool’s errand, in our view.

https://www.fisherinvestments.com/en-us/marketminder/dont-overthink-the-summertime-rally

(BOLD is my opinion OR what I consider important content)

"Is the stock market rally since mid-June the real deal? That question has been on many minds lately, particularly amid this week’s renewed negativity (Thursday’s positivity notwithstanding). In an effort to deliver the answer, many analysts are comparing how the past two and a half months stack up with past rebounds. That is an understandable impulse, but we think it stems from a flawed place. Inflection points are only ever clear in hindsight, and stressing over them can lead to myopic behavior.

That logic doesn’t stop the financial community from trying, though. Analysts are busy drawing myriad conclusions about the summertime rally. One found “bear market rallies rarely claw back more than 50pc of the previous loss. When they go beyond this point, it is usually a sign that the rally is the real deal.” Some are less optimistic, arguing technical indicators don’t support more gains.[ii] Others have tallied up similar two-month jumps over the past 65 years to glean something about today’s upturn, though their takeaways are inconclusive.[iii]

We agree looking to history is a useful practice. Past rebounds can provide a sense of what is probable and help investors set expectations. From June 16 to August 16, the S&P 500 rose 17.4% in price returns—in line with the postwar average two months into past new bull markets.[iv] (Exhibit 1)

Exhibit 1: Returns Two Months Into New S&P 500 Bull Markets


Source: Global Financial Data, as of 7/28/2022 and FactSet, as of 8/22/2022. S&P 500 Price Index, 5/29/1946 – 8/19/2022. Price returns used due to data availability.

But historical averages and models simply tell you what happened. That is just the starting place, and if you are going to employ historical analysis, we think it is vital to explore the why behind the what. Namely, what were the general conditions during those rallies? What did they have in common in terms of sentiment and economic drivers? We also think it is important to review false dawns, as some bear market rallies also top the 16% milestone. What did conditions look like then? What were people saying about the rally? Were there still strong signs the economy had much further to drop than expected?

Generally, recoveries start when dour sentiment dominates and a phenomenon Fisher Investments founder and Executive Chairman Ken Fisher calls the “Pessimism of Disbelief” is prevalent. When the Pessimism of Disbelief is widespread, investors see all news as negative. They ignore positive developments or couch them as potential sources of trouble. In this environment, economic fundamentals don’t have to be stellar. According to our research, many bull markets have begun amid weak growth or even contraction. But these tepid fundamentals are still better than what most anticipate—providing upside surprise and fuel for a recovery. When everyone projects disaster, and reality is only mildly bad, that can be enough to foment a genuine rebound.

Bear market rallies, by contrast, look like the inverse, as investor sentiment generally isn’t as dour. Moreover, during most bear markets, stocks usually decline gradually at first, lulling investors into complacency. In this environment, few notice deteriorating fundamentals. Instead of debating reasons to avoid stocks, investors treat any decline as an opportunity to buy—and a bear market rally can fool them into thinking the rebound is real and the bull market still has life.

Now, employing this method today won’t give you surefire answers. Yes, the Pessimism of Disbelief seems to be in place and economic data are mixed but generally better than projections for a deep recession—ingredients consistent with recovery. But we are also cognizant this bear market was mostly sentiment-driven, and feelings can flip on a dime. It is possible the recent rally fizzles out as ghost stories from this year gain renewed strength and weigh on investors’ moods—or if the recent weakening in economic data turns much deeper and broader than expected. It is also possible new fears arise, knocking sentiment—and stocks—further. However, the silver lining here is that you don’t need to nail inflection points. We understand the appeal of trying, but focusing on inflection points is myopic—and timing them is impossible, in our view, as stocks’ short-term moves are sentiment-driven, subject to wild, unpredictable swings.

Moreover, zeroing in on the super short term can tempt investors to try timing the market. That mindset encourages attempts to find the “perfect” moment to jump in—or to look for excuses to jump out. It can also cause investors to see daily market volatility as the start of a longer-term updraft or downturn—a mistake, in our view. Treating negative volatility as indicative of the future is a big risk since it may cause investors to miss out on a recovery.

Instead of trying to call a bottom, look to the foreseeable future. Identifying whether this is a temporary rally or not won’t make or break your portfolio, but not participating in bull markets can be a big setback since early gains compound throughout the generally rising period for stocks. We acknowledge more negative volatility is always possible, and the recovery won’t be smooth or easy. But nothing about long-term investing is.

MY COMMENT

I like that term "ghost stories from the year". that is a good description of the current markets. Everyone walking around scared, looking over their shoulder for the next big scary ghost.....or....a return of the ghosts that everyone has been afraid of all year.

We seem to be ramping up the negativity right now.......the "pessimism of disbelief".....on steroids. Of course....the media is the number one cheerleader of the negativity as they seek clicks and eyeballs.

I feel sorry for younger investors that have no idea what to believe or how to invest. BUT....over time they will get to live through the experiences that will give them the education in the school of hard knocks.....as to how to invest.

I still see young and new investors....talking about how easy it is to market time.....just sell when stocks are high....and buy back later when they are lower. EASY AS PIE. Of course.....in hindsight......they will not be able to make it work and will SEVERELY under-perform the unmanaged averages......as always.

 

I see that the markets are trying to make somewhat of a come-back. Still negative but not as much as the open.

 

HERE......as declared by the financial media.....are the important events this week.

Jobs in focus after hawkish Powell speech: What to know this week

https://finance.yahoo.com/news/stock-market-week-ahead-retail-preview-august-28-203253255.html

(BOLD is my opinion OR what I consider important content)

"The latest monthly jobs report is this week’s main attraction as investors barrel into September.

August employment data from the Labor Department is set for release at 8:30 a.m. ET Friday morning, and is expected to show another strong month for the U.S. labor market. Economists expect nonfarm payrolls rose by 300,000 in August, according to data from Bloomberg.

The figure is likely to serve a key role in dictating the Federal Reserve’s next rate decision at its policy-setting meeting later this month. Investors will keep a close eye on jobs data after Fed Chair Jerome Powell asserted in a hawkish speech at the Jackson Hole symposium Friday he is willing to accept a softening labor market in exchange for mitigating inflation.

“If there is a conflict in the Fed’s two mandates as they work to slow inflation, Chair Powell ranks price stability head and shoulders above maximum employment,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management said in a note on Friday.

Powell’s remarks sent markets tumbling, with all three major averages settling at four-week lows on Friday.

The Nasdaq plunged 3.9%, and the S&P 500 shed 3.3%, with both indexes logging their biggest one-day drops since June 13. The Dow Jones Industrial Average erased 1,000 points, or roughly 3% on Friday.

“There will very likely be some softening of labor market conditions,” Powell said in his speech.

“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell added. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Up until Friday, some market participants had expected the U.S. central bank may pivot in its monetary tightening plans, but Powell and other officials have pushed back on the possibility of notching down rate hikes this year.

Inflation has shown signs of moderating, but continues to run sharply higher than the Federal Reserve’s target of 2%. Data from the Bureau of Economic Analysis on Friday showed consumer prices fell slightly last month, with headline PCE falling 0.1% between June and July, driven primarily by a 4.8% decline in energy prices. On a year-over-year basis, headline PCE rose 6.3% in July.

And core PCE, the Fed's preferred measure of inflation, rose 0.1% month-on-month in July and 4.6% from the prior year, marking the lowest annual increase since October 2021.

Still, Powell indicated another “unusually large” rate hike was possible in September after the central bank raised rates by 75 basis points in June and July.

"Restoring price stability will likely require maintaining a restrictive policy stance for some time," Powell said. "The historical record cautions strongly against prematurely loosening policy.”

Elsewhere in labor market data, ADP will resume its private payrolls report with new a methodology on Wednesday after a temporary pause in June and July. Economists surveyed by Bloomberg expect the release to show 300,000 private payrolls were added in August.

ADP's monthly private jobs report comes two days before the Labor Department releases its official jobs report. While the company’s print is an imperfect precursor to the government’s release, it offers a snapshot of job growth during the period.

The Job Openings and Labor Turnover Survey (JOLTS), Challenger Job Cuts, and initial weekly jobless claims are also on the docket of employment data set for release this week.

On the earnings front, the reporting season has largely wound down, but a few potentially market-moving results are still on tap. Traders will get figures from headliners including Best Buy (BBY), HP (HPQ), Big Lots (BIG), Chewy (CHWY), Lululemon Athletica (LULU), and Broadcom (AVGO)."

MY COMMENT

IT was just IDIOCY....that anyone was expecting or thinking we would get a lower rate increase in September. I think a lot of this stuff is simply FLOATED by the shorts and traders.....knowing that it is not true........in order to profit from their short term strategies, when the markets FREAK OUT. I NEVER saw any indication that the FED would cut by less than 0.75% in September.

The article above is ......doing it again....starting the little game that the media has been playing all year.....by speculating what the FED "might do"......."if"......the jobs number is this or that. NO.......the FED is locked in for September and probably the rest of the year. They are NOT going to pull back on their rate increases.