The Long Term Investor

Of course as a long term....fully invested all the time investor....I agree with this little article.

‘Don’t Be Fooled by the Bears’: Billionaire Ken Fisher Advises Investors to Stay Put — Here Are 2 Stocks He’s Heavily Invested In

https://finance.yahoo.com/news/don-t-fooled-bears-billionaire-141005540.html

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

"The bulls took hold of the stock market narrative at the start of the year, and charged ahead all the way into mid-summer, but since then the bears have been rather noisy. On the back of rising oil prices, fears of interest rates staying high for longer than hoped for, and the possible prospect of a recession still looming, the markets have been shaky and have been handing back prior gains.

However, against a backdrop of a ‘Goldilocks economy,’ i.e., “not too hot, not too cold… just right,” billionaire investor Ken Fisher thinks it’s all just a repeat of a scenario that played out earlier in the year.

“Recall how at the start of the year dire bearishness, with expectations of a recession, was in vogue,” says the Fisher Investments founder. “Since spring 2022, bears swore Fed hikes, with a list of other worries – Ukraine and Silicon Valley Bank among them – would kneecap GDP which they believed necessary to slow inflation.”

But Fisher notes inflation has meaningfully retreated from June 2022’s high of 9.1% (it is now at 3.67%), while GDP growth has exceeded expectations and claims most of the negativity is “hyperbole – multiple bouts of hand-wringing for every actual market break of short-term, downside volatility.”

These pullbacks are just a common feature of “young bull markets,” and the fact Goldilocks showed up is a sign people can “envision a better future.”

“Rather than getting too wrapped up in it,” Fisher concludes, “I’d advise you to stay put and keep eating your own porridge.”

That is exactly what Fisher is doing. Befitting someone who thinks the bearish noises only offer an unpleasant distraction to the ongoing bull market, Fisher, who has a net worth of ~$7.1 billion, remains heavily invested in certain equities. We ran pair of his picks through the TipRanks database to see what the Street experts make of their chances. Here are the details."

MY COMMENT

I have omitted the discussion of the two stocks......Oracle and Lam Research......so if you are interested in those click on the link and read the rest of the article. I just dont want to push particular stocks.

I totally agree that the BULL MARKET is still alive and well. Lately we have been seeing stocks move up....although in somewhat of a stealth mode. Although the market direction has been somewhat to the up side.....it is not a broad based move. Sooner or later this bull market will break out into a nice rally.

Till than.....ignore the noise.

 

This looks like a relevant article for today.

Do Rising Yields Trouble Tech?

https://www.fisherinvestments.com/en-us/insights/market-commentary/do-rising-yields-trouble-tech

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

Why higher interest rates aren’t an automatic negative for the Tech sector.

"Over the past month or two, weak Tech stocks coincided with rising 10-year US Treasury yields. It all fuels a long-running narrative that Tech is allergic to high and rising rates, spurring worries a further rise from here—or rates just remaining higher than the last decade’s—threatens the leading sector in this bull market since October. But in our view, coincidence doesn’t mean causation, and a review of the data shows (short-term sentiment wiggles aside) higher rates don’t threaten Tech.

The notion Tech hates rising rates hinges on the theory future profits for the growth-oriented sector are worth less relative to Treasurys when interest rates are high or rising. Recently, that may seem right: Global Tech stocks have fallen -8.1% month to date and -11.0% since July 18’s year-to-date high, trailing global stocks. And since mid-July, 10-year Treasury yields have jumped from 3.79% to 4.55%.[ii] Some experts argue supply and demand dynamics in the Treasury market (namely, increased Treasury issuance and shrinking investor appetite) as well as sticky inflation will keep yields elevated—and this “higher for longer” interest rate environment will weigh on Tech stocks in particular.

But to understand the actual relationship between Tech and rates, look longer than just a couple months. Focusing on what just happened seems like cherry-picked recency bias to us. Go back a few months, to the 10-year Treasury yield’s year-to-date low of 3.29% on April 6.[iii] From there it rose fairly consistently, crossing the 4.0% threshold on July 6.[iv] Over those three months, Tech stocks rose 14.8%, nearly tripling global stocks’ 5.3%.[v] Did Tech suddenly realize in mid-July Treasury yields were rising and needed to fall in response? Considering stocks are efficient discounters of widely known information, we don’t think so.

Recent history shows extended stretches where rising 10-year yields weren’t an automatic negative for Tech stocks. During the 2009 – 2020 bull market, when Treasury yields climbed from 1.39% to 3.00% from July 2012 – January 2014, Tech stocks rose 34.1%—trailing global markets’ 40.9% but still nicely positive.[vi] From July 2016 – November 2018, Tech returned 69.7%—more than doubling global stocks’ 30.8% despite Treasury yields’ also more than doubling (1.37% to 3.23%).[vii]

Even during the 2002 – 2007 bull market—when Tech lagged global stocks overall—the sector still delivered positive returns and occasionally outperformed when Treasury yields rose. In 2003, 10-year yields jumped from 3.13% to 4.60% between June and September—yet Tech was up 16.1% to global stocks’ 4.4%.[viii] From October 2004 – March 2005, Tech was up 3.0% (to global stocks’ 10.3%) as long-term interest rates rose more than 60 basis points, from 3.99% to 4.63%.[ix] The lesson here: Sometimes Tech lags the broader market when Treasury yields rise and sometimes it outperforms. Conclusion: Rising interest rates don’t automatically poison Tech returns in either an absolute or relative sense.

To see this another way, over the past 20 years, the weekly correlation coefficient between Tech returns and Treasury yield moves is 0.23.[x] A correlation coefficient of 1.00 means identical movement while -1.00 is exactly opposite. So the 0.23 reading shows they tend to rise and fall together more often than not, but the figure is far too low to be statistically significant. In lay terms, it is a nothingburger. So while it may or may not be true that rising rates have hurt sentiment towards Tech over the past month, extrapolating that movement from here looks like a dodgy forecast.

Beyond data, we don’t think the theory underpinning why rising rates are supposedly anathema for Tech holds water, either. The logic sounds sensible: Investors value growthy Tech firms based on the expectation of big, far-future profits. When interest rates are low, those prospective future earnings look like a good value. But when interest rates are rising, the present value of those future profits is worth less since investors can purportedly find better use for their money in the near term.

The issue with this, in our view, is the extrapolation of present conditions indefinitely. It presumes yields will stay high perpetually and that Tech returns are only far-future. Yet neither of those are correct. Yields, obviously, aren’t static. And Tech companies can and do deliver earnings in the here and now. Rather than taking the conventional wisdom to the bank, we think investors should look at upcoming economic conditions and assess the likelihood Tech will generate attractive earnings and sales over the next 3 – 30 months. That appears to be the case right now, given the robust demand for certain semiconductors and cloud services. For example, on the chips front, though demand for some memory chips has cooled, it remains hot for artificial intelligence-related chips (particularly graphics processing units, or GPUs). Growth at cloud services companies appears to be solid, too, as a wave of spending cuts seems to be subsiding.[xi]

Moreover, Tech has a history of eking out earnings growth in a slow-growing global economy, as the growth-oriented sector tends to invest profits back into the business to expand over time—so their profits are relatively less sensitive to economic growth rates. We think this explains much of the above-referenced Tech outperformance in the 2010s. And, moreover, Tech companies’ costs also aren’t that interest rate sensitive today—a critical point to grasp. In addition to locking in low borrowing costs in recent years, the biggest Tech and Tech-like companies boast balance sheets flush with cash along with fat gross profit margins, allowing them to fund growth internally. So it isn’t like today’s high rates are going to cut hugely into future margins. On the contrary—rising short rates may actually boost the return on their large cash coffers while they wait to deploy it otherwise.

Stock and bond markets are similarly liquid and are aware of the same information. Those opinions that 10-year yields will remain elevated? Stocks are familiar with those viewpoints and the underlying information. The argument bond market developments impact Tech stocks implies the former is more knowledgeable than the other, which isn’t true, in our view—the two just have different drivers. That said, the many takes Tech stocks are due to pull back (i.e., the hot streak couldn’t last) and can’t do well amid higher yields indicates skepticism remains prevalent. Doubts persist about this near-one-year-old bull market, suggesting a high wall of worry remains."

MY COMMENT

As I have said many times on here......this tech and interest rate stuff is simply a foolish myth. How it got started I have no idea.

At the same time if you want to take rate hikes and bumps as an indication of economic issues.....fine....but in that case I want to be invested in the largest and strongest companies in the world......and....that means the BIG CAP TECH companies.

In the old days in times of rate turmoil and other economic issues....investors that were long term stock investors...wanted to hold the largest and strongest companies. Nothing has changed in that regard other than the foolish thinking that is now accepted as fact by many in the financial media and the investing world.

 

Today is all about interest rates....especially the Ten Year Treasury. The current yield is 4.692%.

The media is going crazy that this is the highest rate in 16 years........WOW....who cares. What about the years before that?

Well if you look at a historic Ten Year yield chart you will see that the last time we had rates at this level was in 2007. If you look at the chart in this link you will see that prior to that time.....over a span of.....40 years.....rates were higher than they are now.

https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

During the BOOMING stock market and BOOMING economy years from 1987 to 2000 the rates ranged from a low of 5% to a high of 8.76%. The vast majority of that time the rates were in the 6% to 8% range.

Guess what.....back than....when the now big cap tech companies were young and in their initial growth phase.......and as young new companies had a lot more need to borrow to fund growth than they do now.....the much higher Ten Year rates than we have now did not matter to them at all.

The obsession with rates on the BIG CAP tech world now is simply irrational delusion. Of course if the media.......in concert all push a narrative.......the truth does not matter.

In addition we are seeing much of this bond stuff being driven by bond traders legally manipulating the markets for their own profit. Nothing wrong with that....that is how short term trading works.

But.....media idiocy and short term bond traders.....are really DUMB reason for long term investors to be concerned. AND....in reality I dont think many long term investors are concerned or doing anything. They are simply being ignored.

 

The market today.....not really a mystery.

Stocks sink at the open as bond yields surge: Stock market news today

https://finance.yahoo.com/news/stoc...-surge-stock-market-news-today-111046604.html

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

"Wall Street stocks fell at the open on Tuesday, as rising Treasury yields piled on pressure and investors got a reminder not to expect a Federal Reserve interest-rate cut any time soon.

The S&P 500 (^GSPC) dropped almost 0.7%, while the Dow Jones Industrial Average (^DJI) about 0.6%. The tech-heavy Nasdaq Composite (^IXIC) was down over 0.8%, after closing with a gain on Monday.

Hawkish comments by Fed policymakers reminded investors that resilience in the US economy likely means borrowing costs will stay higher for longer. Traders are now pricing in odds of 29% that policymakers will hike rates at their November meeting, compared with 16% a week ago, according to the CME's FedWatch tool.

That prospect helped 10-year (^TNX) and 30-year Treasury yields (^TYX) rise to 16-year highs on Tuesday — a selloff in bonds that, combined with surges in oil prices and the dollar, has dampened appetite for stocks. The Russell 2000 index of small-caps turned negative for the year on Monday.

Given that, the focus has turned to upcoming economic readings and the start of earnings season next week that could prove positive catalysts. Tuesday brings the latest read on job openings in the JOLTS report for August, a lead-in to the highly anticipated September US jobs report on Friday."

MY COMMENT

OK.....whatever.

 

At least the markets have made somewhat of an improvement since the open....but are still very much down for the day.

OMG.....the horror of it all....what are we going to do? Run....run for your life. The end of the world is near. We are doomed.....doomed I tell you.

Oh....wait a minute.....many of us have gains of 20% to 40% for the year in spite of today.....well.....NEVER MIND.

 

Here is the jobs info referenced above....not that it means anything or anyone really cares.

August job openings top 9.6 million, more than expected as labor market remains strong

https://www.cnbc.com/2023/10/03/aug...-expected-as-labor-market-remains-strong.html

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

"Employment vacancies at U.S. businesses unexpectedly surged in August, a sign that the labor market remains tight and robust despite the Federal Reserve’s efforts to slow the economy.

Job openings totaled 9.61 million for the month, a jump of nearly 700,000 from July and well above the Dow Jones estimate for 8.8 million, the Labor Department said Tuesday in its monthly Job Openings and Labor Turnover Survey.

Hires, however, rose only modestly, moving up to 5.857 million, an increase of just 35,000.

Much of the increase in openings came in professional and business services, which showed a burst of 509,000.

Stocks fell following the report as a tighter labor market could put more pressure on the Fed to keep interest rates elevated. The Dow Jones Industrial Average most recently was off more than 260 points on the session.

The Fed follows the JOLTS report closely for signs of labor slack.

Openings had been on the decline for the last several months, indicating that the central bank’s interest rates hikes were beginning to have an impact on a labor market that had been hit by a large supply-demand mismatch in which openings had outnumbered available workers 2 to 1. The ratio now is down to 1.5 to 1, following an increase of workers classified as unemployed in August.

The August JOLTS report comes just a few days ahead of the department’s nonfarm payrolls count for September. Economists surveyed by Dow Jones expect that report, due Friday, to show an increase of 170,000.

Quits, a measure of worker confidence in finding a new job after leaving a previous position, were little changed. That also was the case with total separations and layoffs."

MY COMMENT

This data is so often simply wrong and revised that is is nearly useless. In addition.....I am not sure these jobs even really exist. I suspect that most of them are continuous listings that sit there forever. I believe this is the reason for the low number of "hires" versus the jump in jobs.

We are also entering the seasonal time in the jobs markets and many employers may be trying to get a jump on the season.

On an anecdotal level.....I hear from many small business people that they can not keep workers. The turnover is constant and unrelenting.

 

LOL....you have got to love the short term fun.

What I gained yesterday.......is now lost today. Just about the same amount.....having looked at my account a minute ago.

 

Yeah it seems like we have one of these days about every week or two. The markets just SUCKED today. I had a clean sweep to the negative....every stock down today. I also got beat by the SP500 by 1.73%. I gave back what I made yesterday plus a small amount more.

BUMMER.

 

Of course in typical fashion....two of the FED morons come out today....to try to trash the markets even more. This happens too often to be random.

Two Fed officials warn rates to remain high for some time

https://finance.yahoo.com/news/two-...s-to-remain-high-for-some-time-131353962.html

 

The Ten Year Treasury sits at 4.80% right now. We will probably push to 5%.

 

I do like this little article.....the markets and "professionals" need to wake up to reality.

Something is breaking in financial markets — Here’s what’s behind the sell-off

https://www.cnbc.com/2023/10/03/som...-markets-heres-whats-behind-the-sell-off.html

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

"Key Points

• Rates are expected to stay higher for longer, an idea Fed officials have tried to get the market to accept and which investors are only now beginning to absorb.
• Getting used to a more typical rate structure doesn’t sound like such a terrible thing. But after 15 years of living in an unnaturally low rate regime, normal sounds, well, abnormal.
• “All of this has to be assimilated and digested by the market,” said Quincy Krosby of LPL Financial. “You can see that it’s troubling and it’s difficult.”

That cracking sound in financial markets isn’t the typical kind of break, where one asset class or another fractures and gives way. Instead, this is more a break in a narrative, one that has widespread repercussions.

The narrative in question is the one where the Federal Reserve holds interest rates low and everyone on Wall Street gets to enjoy the fruits.

That’s changing.

In its place comes a story in which rates are going to stay higher for longer, an idea Fed officials have tried to get the market to accept and which investors are only now beginning to absorb.

The pain of recognition was acute for Wall Street on Tuesday, with major averages down sharply across the board and Treasury yields surging to their highest levels in some 16 years.

“When you have an economy predicated on zero rates, this fast move [by the 10-year Treasury yield] towards 5%, the calculus has to change, because the ramifications are going to change,” said Quincy Krosby, chief global strategist at LPL Financial. “The cost of capital is going up, companies are going to have to refinance at a higher rate.”

The surge in rates is especially ominous as corporate America heads to third-quarter earnings reporting season, which is right around the corner.

“All of this has to be assimilated and digested by the market,” Krosby added. “You can see that it’s troubling and it’s difficult.”

Economic and inflation concerns

There were signs early Tuesday that it could be another tough day for a market just coming off a brutal September.

But the carnage really got going following the 10 a.m. ET release of a Labor Department report showing that job openings took a sudden swing higher in August, countering the prevailing wisdom that the employment picture was loosening and thus putting less upward pressure on wages.

In turn, traders grew worried that the Fed would be forced to keep monetary policy tight. That sentiment was buttressed this week, when at least four central bank officials either endorsed hikes or indicated that higher rates would be staying in place for an extended period.

Along with the slide in stocks, the yield on 10- and 30-year government debt instruments hit highs last seen as the economy was moving towards the financial crisis.

“So much of the economy has evolved because of low rates and negative rates,” Krosby said. “Now it’s adjusting to what would be considered a historically more normal rate regime.”

Getting used to a more typical rate structure doesn’t sound like such a terrible thing. After all, prior to the financial crisis, the 10-year Treasury yield had averaged around 7%, though that also was skewed by the historic rate increases in the early 1980s.

But after 15 years of living in an unnaturally low rate regime, normal sounds, well, abnormal.

Trouble for financials

Multiple parts of the economy face substantial interest rate risk, but none more so than banks. The sector was jolted earlier this year by the high-profile failure of a few banks that had built up too much long-duration government debt, then had to sell at a loss following deposit runs.

In the second quarter, unrealized losses on bank balance sheets totaled $558.4 billion, an 8.3% jump from the prior period, according to the FDIC. Of that total, held-to-maturity Treasurys, which caused much of the turmoil this year, totaled $309.6 billion.

That number is expected to climb, said Wall Street veteran Larry McDonald, founder of The Bear Traps Report.

“The problem is, when your core capital is weak, any weakness on the other side is exponentially worse,” he said. “But if Treasurys go up to 6, 7 [percent on yields], then the leverage goes up exponentially, right? That’s your core capital. That’s the money when you go to the casino you have to put up at the table.”

Should banks have to cover their losses, they may be forced to issue equity, McDonald said. That, in turn, would be dilutive to share price, a situation that likely factored into a loss Tuesday of more than 2% in bank stocks as measured by the SPDR S&P Bank ETF.

There are other ramifications as well.

Consumers, for one, are feeling the squeeze of higher rates on everything from mortgages to credit cards to personal loans. More than 36% of banks reported tightening lending standards in the third quarter, a level that in the past has been consistent with recessions.

At the same time, Washington dysfunction has bond buyers worried about the U.S. fiscal house, with public debt at nearly 120% of GDP and net financing costs running, according to the Congressional Budget Office, toward $745 billion in 2024 after totaling $663 billion this year. Foreign buyers have been stepping away from U.S. government bonds, with China’s holdings down about 17%, or $175 billion, over the past year, according to the Treasury Department.

The Fed itself has been stepping away from the bond market, reducing its Treasury holdings by more than $800 billion since it stopped reinvesting the proceeds from maturing securities in June 2022.

Potential peak for rates

For some in the market, it’s all about to come to a head soon. Rapid moves in market instruments — like this run in yields right now — have in the past sometimes caused problems at hedge funds caught on the other side of the trade.

And there’s this realization that unless something changes quickly, a recession is all but inevitable.

“They can’t hike another basis point,” McDonald said of the Fed. “It’s just too much pain. This type of action is bringing out the pain, and the Fed is now more aware of the bodies that are buried.”

Indeed, former White House economist Joseph LaVorgna thinks the rise in yields is probably pretty close to being over. Potential fallout includes a recession and the Fed having to go back to buying bonds.

“The selling is not explained by fundamental factors,” said LaVorgna, who was chief economist for the National Economic Council under former President Donald Trump and is now holds the same title at SMBC Nikko Securities. “Now, at some point, my guess is that markets will eventually get to cheap enough levels where you’ll bring buyers in. Given the fact that we’re multiple standard deviations away from where rates should be suggests to me that we’re closer to that point.”

A weak labor market or some other signs of cracks in the economy could dissuade the Fed from further hikes and set the stage for lower rates.

“The patient, meaning the financial markets, is not particularly healthy,” LaVorgna said. “The Fed, as I’ve argued many times, for maybe too long a time, has moved too far, too fast. They’ll eventually reverse.”"

MY COMMENT

I hate to see the talk of the FED lowering rates at the end of this article. People thinking that they are going to start to cut rates are CRAZY. I doubt that we see the FED cut rates for at the minimum.....a year.

On the other hand if I was the FED.......I might be freaking out a little bit right now......on the basis that I might have tanked the economy and created a big snowball rolling downhill that I can not stop short of a recession.

Personally I still dont see a recession happening.

I like normal rates....as long as people have rational expectations. Unfortunately we have been living from LOW RATES for way too long.

As the article notes....a more normal range would be......around 7% for the Ten Year.

In the current world....where many of the professionals are living in a fantasy world....I am happy to own what I own.....the greatest BIG CAP companies in the world.

I dont mind the markets going down and I dont mind them going up.....but....when I see the so called Wall Street experts and professionals living in a fantasy world.....it is not a good sign. When the people controlling the short term markets and much of our national economics are acting like they are MORONS.....with no grasp of history....it is a bad omen.

 

Well.....Jwalker....there is no rate that bonds would be attractive to me. By "no rate" I mean realistic based on what is happening now.

I dont think in terms of risk to bonds.....I simply think in terms of historic long term returns for stocks and funds. My stock market money is very long term and I see no reason ot NOT be in the markets.

I did buy some zero coupon 30 year Treasuries in the early to mid 1980's when rates got into the 11% to 13% range. But I dont see that happening now. If rates did get into that range for the 30 year I would have to reconsider this answer.

 

I have been watching the markets since the open today.....as I read. I was a little surprised that the markets opened pretty well considering yesterday. I expected a more negative open today.

I consider that a good sign that yesterday was one of those days where events....AI trading programs.....and short term bond traders....simply drove the markets off the rails. In other words a single day event.

Of course....the current volatility and fear driven market will continue for the near future.

It is a positive sign that the SP500 and NASDAQ are positive now for the day.....so far.

 

Here is one view for consideration.

Investors find little reason to buy stocks as rates fears spread

https://finance.yahoo.com/news/bulls-run-reasons-buy-stocks-200708420.html

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

"(Bloomberg) — It’s getting bleak for equity bulls hoping for a reprieve from the US stock market’s “higher-for-longer” tantrum.

The S&P 500 Index plunged to the lowest level since June on Tuesday, as the Dow Jones Industrial Average wiped out its gain for the year and the Cboe Volatility Index, better known as the VIX, popped above the psychologically important 20 level for the first time in four months.

The turbulence was sparked by a surprising increase in US job openings, something Jerome Powell has been watching as the Federal Reserve tries to tame stubbornly high inflation. His lieutenants have been hammering the theme that interest rates will need to stay high for a long period — Cleveland Fed President Loretta Mester and Atlanta Fed chief Raphael Bostic reiterated it over in the past two days — sending long-term Treasury yields to 16-year highs.

The problem is simply too few buyers. Hedge funds that chased the first-half rally have turned risk-averse, according to Citigroup Inc. Sentiment among retail traders has also soured as they plow cash into money-market funds returning 5%. And Corporate America slowed the pace of buybacks in the third quarter, according to Bank of America.

“It doesn’t seem like stock investors want to get in front of the daily spike in rates,” said Dan Eye, chief investment officer at Fort Pitt Capital Group. “The interest-rate environment needs to calm down before investors can focus on earnings season being a potential catalyst for stocks to move either higher or lower.”

The rout Tuesday was the seventh loss of at least 1% since August, after just three in the second quarter. The stock market’s put-to-call ratio — a gauge of tracking the volume of bearish versus bullish options — has stayed above 1 for seven out of nine days.


Other signs of stress are mounting. The S&P 500 is less than 30 points above its average price over the past 200 days, and breaching that level could set off sharp declines. The index has been over it for 137 sessions, the longest run since the post-pandemic surge that started in June 2020.

Positioning is not likely to help. A measure of how discretionary and systematic investors are positioned tracked by Deutsche Bank AG dropped to underweight last week. The intensity of the move was similar to what happened during the March banking crisis and a June 2022 rout triggered by recession worries.

“Investors are worried that if rates stay higher for longer and we slow down the economy far enough to battle inflation, we’ll slide into a full-blown recession,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. “There is a lot of fear about what could go wrong.”

With stress mounting, the selling has turned indiscriminate. Even the Magnificent Seven megacap tech companies that carried the market for eight months have started to buckle. Since the S&P 500’s near-term peak in July, Apple Inc. is has plunged 12%, while Microsoft Corp. and Amazon.com Inc. are down around 7%.

Anyone seeking safer corners of the market is finding little help. Companies known for their defensive qualities — strong balance sheets or proprietors of products in demand during all economic cycles — are lower. Utilities, which typically do well in these periods, are in a deep slump as investors choose lofty bond yields over their dividends.

Goldman Sachs Group Inc. this week joined Morgan Stanley and JPMorgan Chase & Co. in warning that elevated rates could spark further declines in equities. They pointed to the divergence between the S&P 500 stock index and 10-year real rates approaching the steepest in almost two decades, with the exception of 2020.


Savita Subramanian, Bank of America Corp.’s head of US equity and quantitative strategy, is the outlier, seeing investors’ ultra gloomy mood as reason to buy. A contrarian sentiment indicator from the firm is at a level that’s been followed by positive 12-month forward returns 95% of the time.

“It seems like everything is piling on right at the wrong moment, so to speak, for markets,” Joseph Quinlan, head of CIO market strategy at Merrill and Bank of America Private Bank, said at the Greenwich Economic Forum. “There’s this piling on effect that’s weighing on the market and market sentiment.”

Still, stocks look expensive. A trailing earnings yield of 4.7% on the S&P 500 is virtually on par with the 10-year Treasury yield, putting equities prices at highest they’ve been relative to bonds since 2002, data compiled by Bloomberg Intelligence show. If earnings multiples continue to be held back by high borrowing costs, it may take the broad equities benchmark three years to eclipse its 2022 record, the BI data show.

Of course, none of this means dip-buyers won’t emerge. But it’s unlikely that third-quarter earnings season is going to provide much of a tonic. Yes, estimates for corporate profits have been rising in recent weeks, but investors are growing concerned that companies won’t be able to match the higher expectations with the average revision north of 5% and 10 of the 11 S&P 500 groups seeing improved forecasts.


Data from Jefferies back that up. The firm’s numbers show third-quarter earnings estimates for S&P 500 companies have been revised higher by 6.5% during the three-month period through September. That’s twice the average long-term level of 3.1% for this quarter. Normally, upwardly revised earnings bode well for the market. The S&P 500 tends to rise when revisions exceed the average. But sharp upward adjustments, higher than 5%, portend declines more often than not, the firm said. performance falls when revisions exceed 5%.

“S&P 500 revisions look hot, maybe too hot,” Jefferies strategists including Andrew Greenebaum wrote in a note to clients over the weekend. “That might mean the bar is too high.”"

MY COMMENT

What we saw yesterday was the recent split between the little retail investors that are doing their long term thing and the short term traders.....the professionals.

The short term markets are trash....certainly not a place for anyone with any sort of long term horizan to play around with.

If yesterday was driven by the jobs numbers.....so be it....but I dont really believe it. In my view yesterday had all the hallmarks of an AI COMPUTER TRADING bail out. When these computer programs latch onto a news item they simply destroy the markets on that day.

As to the jobs data the other day.......totally unreliable and inaccurate. This government data is so distorted now by the COVID hangover....that no one can rely on any of this data. it is all over the place and worthless.

 

Speaking of the distorted jobs data.....here is what we see only a day later.

Private payrolls rose 89,000 in September, far below expectations, ADP says

https://www.cnbc.com/2023/10/04/pri...tember-much-fewer-than-expected-adp-says.html

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

"Key Points

• ADP reported that private job growth totaled just 89,000 for the month, down from an upwardly revised 180,000 in August and below the 160,000 estimate from Dow Jones.
• Job gains came almost exclusively from services, which contributed 81,000 to the total.
• The report comes a day after the Labor Department said job openings unexpectedly rose sharply in August.

Private payrolls rose 89,000 in September, far below expectations, ADP says

Private payroll growth tailed off sharply in September, according to an ADP report Wednesday that provides a counterweight to other signs that the labor market is still running strong.

The payroll processing firm said job growth totaled just 89,000 for the month, down from an upwardly revised 180,000 in August and below the 160,000 estimate from economists polled by Dow Jones.

Perhaps more importantly, the report provides some sign that a historically tight labor market could be loosening and giving the Federal Reserve some incentive to stop raising interest rates. ADP also said annual wage growth slowed to 5.9%, the 12th consecutive monthly decline.

However, the ADP numbers can differ significantly from the government’s official count, which comes Friday. Economists estimate nonfarm payrolls increased by 170,000 in September, down from a 187,000 rise in August, according to Dow Jones.

Job gains, according to Wednesday’s report, came almost exclusively from services, which contributed a net 81,000 to the total. Of that total, virtually all came from leisure and hospitality, which added 92,000.

Other sectors posting gains included financial activities (17,000), construction (16,000), and education and health services (10,000). However, they were offset by losses of 32,000 in professional and business services, 13,000 in trade, transportation and utilities, and 12,000 in manufacturing.

“We are seeing a steepening decline in jobs this month,” said Nela Richardson, chief economist at ADP.
“Additionally, we are seeing a steady decline in wages in the past 12 months.”

The report comes a day after the Labor Department said job openings unexpectedly rose sharply in August. The Job Openings and Labor Turnover Survey results sent a jolt into financial markets, aggravating worries that the Fed will need to keep monetary policy restrictive to control inflation.

However, the ranks of those the department considers unemployed also rose considerably, taking down the ratio of job openings to available workers to 1.5 to 1, where it previously had been as high as 2 to 1.

ADP said job growth was strongest at companies with fewer than 50 employees, a sector that added 95,000 positions. Medium-sized companies contributed 72,000, while those with 500 or more employees lost 83,000."

MY COMMENT

I trust this private data way more than I trust the government data. This is showing a slowing economy and basically a flat hiring market. With falling wages.

The FED needs to be very careful right now and sit and do nothing for at least six months or more. Otherwise then are going to outrun the data and simply be operating based on unproven guesswork.......sounds about how they operate....unfortunately.

 

Actually.....I do expect the markets to close negative today.....but that is simply a guess based on yesterday.

It usually takes a day or two to get past a big drop day.

BUT.....I continue to be fully invested for the long term as usual.

 

I have a nice gain in my account so far today. Only a single stock is down......HD. With the gain today and the big gain on Monday......I am ahead for the week......in spite of the big market freak out yesterday. Of course I can not count on this early gain today.

Actually I dont consider what happened yesterday as a "freak out"......it was more like a day traders trashing of the markets....but I doubt it involved many retail investors. That is just the split market......short term traders and professionals with their Trading Programs....versus....the little retail investor.....that we have now and for the foreseeable future..