The Long Term Investor

BUT.......we all know.

One Year Returns Don’t Matter

https://awealthofcommonsense.com/2023/07/one-year-returns-dont-matter/

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

"One of the hard parts about trying to focus on the long-term as an investor is the short-term toys with your emotions.

In years like 2022 when everything is going down, you’ll always wish you would’ve taken less risk.

In years like 2023 when everything is going up, you’ll always wish you would’ve taken more risk.

Long-term returns are the only ones that matter but you have to get through a series of short-term emotions to get there.

Short-run returns can play tricks on you.

Look at the year-to-date returns for a handful of big tech stocks and the tech-heavy Nasdaq 100 this year:


Lights out.

This could be an AI bubble or a return of speculation in the market after a brief pause but it’s also possible investors overestimated the chance for a recession and overly punished these stocks in 2022:


When you combine 2022 and 2023 things don’t look nearly as crazy:


Some of the stocks going nuts this year are still down since the start of 2022 (Nvidia is the obvious outlier here).

Ben’s rule of returns is you can win almost any argument about the markets by changing your start and end dates for performance purposes but it’s important to put the numbers into context.

Sometimes the reason the stock market goes up a lot is because it was down a lot and vice versa.

Another way to think about this is through the lens of how short-run returns impact long-run returns.

Take a look at the rolling 30 year returns1 on the S&P 500 since 1950 (the blue line) compared to the latest one year returns (the orange bars) for each 30 year period:


Returns in a given year are all over the map but 30 year returns don’t change all that much from year-to-year.

One year returns can make you feel wonderful or terrible but they’re not going to have a ton of bearing on your long-term results (assuming you don’t blow up your portfolio).

There will be good years and bad years.

Sometimes everything works. Sometimes nothing works. Other times there will be a wide dispersion in returns depending on the asset class, style, strategy or geography.

And there will always be something to worry about no matter what the markets are doing. Last year it was easy to worry the market would fall even further. This year the worry is we’ve risen too quickly and are due for a pullback.

It’s only human nature to pay attention to short-term results but investment enlightenment is only achieved once you realize long-run is the only time horizon that matters.

Successful investing is for patient people."

MY COMMENT

YES.....successful investing is for patient people. Successful investing is for simple people. Successful investing is for reasonable and rational people.

It is also for people that follow the FUNDAMENTALS of business.......and.......the PROBABILITIES of investing.

 

The open today.

Stocks waver in run-up to tech results, jobs report

https://finance.yahoo.com/news/stoc...report-stock-market-news-today-105316071.html

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

"Stocks wavered at the open on Monday, as investors prepared for earnings from two more megacap techs and for the July jobs report to land later this week.

The S&P 500 (^GSPC) edged up above the flatline, while the Dow Jones Industrial Average (^DJI) was roughly. The tech-heavy Nasdaq Composite (^IXIC) added 0.1%.

Second-quarter results from Apple (AAPL) and Amazon (AMZN) take center stage, after Meta's (META) and Alphabet's (GOOG, GOOGL) releases wowed Wall Street last week. Eyes are on what the iPhone maker says about its Vision Pro headset and what the Facebook parent reveals about its cloud business.

The countdown is also on to the monthly nonfarm-payrolls report due Friday, which is expected to show jobs growth is still moderating, but still resilient. That's raising optimism the Fed can bring inflation down to its target without triggering a recession."

MY COMMENT

Thats it......a couple of big earnings and an economic report that no one will really care much about. Sounds good to me. Market simplicity.

 

A soft market today now that we are past the open. We are now slightly RED across the board on the averages.

Not that it means anything. The markets are still searching for direction today. At least the Ten Year yield is down so far today......and......below 4%.

I am not saying it means anything....but I notice that gold and silver have been strong lately.

 

We seem to be seeing this NOW.

Bumper earnings will broaden a narrow tech-led stocks rally, analysts say

https://finance.yahoo.com/news/bumper-earnings-broaden-narrow-tech-122757107.html

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

"(Reuters) - A handful of technology firms and last year’s laggards have so far driven the heady rise in U.S. and global stock markets this year, but bumper earnings surprises could now lift more sectors and stocks and broaden the rally, analysts say.

Analysts point to receding recession concerns and the prospect of a less aggressive policy stance from the U.S. Federal Reserve as factors fuelling hopes for a broader market rally.

According to a Reuters analysis, just 10% of the biggest gainers in the MSCI World index constituents have accounted for around 72% of the rally this year.

That compares with a much broader rally in past years, when the top 10% winners only made up 14% of the overall market upside from March 2020 to early 2022.

The tailwind for a broader rally could be earnings.

The second quarter earnings season has started positively for cyclical sectors, with over a quarter of the global companies announcing their results so far, Refinitiv Eikon data showed.

About 67% of consumer discretionary sector firms exceeded consensus net income expectations, primarily due to robust consumer spending. Meanwhile, 64% of industrial firms surpassed analyst projections for net profits.

U.S. banks have also posted solid second-quarter profits, thanks to a rise in interest margins. Moreover, analysts expect robust deal-making activity in the second half, which could boost investment banking revenues.

"The upcoming earnings season has the potential to broaden the rally for sure. Earnings surprises - to the upside – from a wider breadth of stocks is likely to make investors consider names outside the cohort (of tech stocks)," said Puneet Singh, director of quantitative research at Societe Generale, based in Singapore.

ATTRACTIVE VALUATIONS

U.S. tech stocks have driven the bulk of the narrow rally so far, alongside some industrial sector firms such as Builders FirstSource, Carnival Corp and Airbnb benefiting from pent-up demand post COVID-19.

"Equity markets have been cheering the disinflationary trend with a bull market accelerating in Q2 on initially very narrow market breadth triggered by AI optimism," Massud Ghaussy, a senior analyst at Nasdaq IR Intelligence, said.

"A fear-of-missing-out (FOMO) trade took hold towards the latter half of Q2 with hedge funds unwinding shorts pushing the markets even higher."

In Asia, Japanese stocks have surged, helped by their cyclical recovery and cheaper valuations, while in Europe, robust travel demand has boosted firms such as aero engineer Rolls-Royce and the region's biggest hotel group Accor.

However, there are plenty of laggards especially in cyclical sectors such as financials and consumer discretionary, which are available at attractive valuations, analysts say.

"If the risk appetite remains healthy, inflation remains in check, economic growth remains moderate, and the Fed doesn’t come out with strong statements with a large hike, then we do have the foundation for a broader rally," Singh said.

Over the past month, the communication services, mining and financial sectors have all posted about 5% gains, outpacing the tech sector's modest 2% rise. However, the tech sector has surged 34.5% this year, leading all other sectors.

"We still think tech leadership can continue as the AI theme drives significant earnings upside, but we do think other areas of the cyclical market look cheap," said Alastair Pinder, head of emerging markets and global equity strategist at HSBC Research, who is overweight on tech, energy, consumer discretionary and financials stocks.

Defensive sectors and international stocks are better places to invest, said Derek Izuel, chief investment officer at Shelton Capital Management, based in California.

"While inflation fears have subsided, all economic indicators are pointing to a slowing economy, yet high-quality stocks are not overpriced," he said.

"Also, the big effect of the inflation reversal is a more dovish stance at the Fed, and thus fewer rate hikes. This will lead to a weaker dollar, and thus improved international equity returns."

MY COMMENT

As I often say it is all about FUNDAMENTALS and EARNINGS. We are seeing very nice BEATS across all segments of the business economy. Consumer companies seem to be especially strong. Companies like PG, KO, and PEP are recent examples.

We are seeing a TOTAL NORMALIZATION of the business and economic world right now. The distortions, disruptions and supply chain issues of the pandemic are now OVER......the FED is OVER. Stocks and business will now be driven by REAL BUSINESS RESULTS.

We are in a sweet spot for stock investors right now and have been all this year. If we can avoid mistakes by the FED and some ugly black swan......we have a pretty good chance to enjoy another 1-2 years of the current BULL MARKET.
If this happens it will be a GOLDEN time for long term investors in terms of COMPOUNDING. ALL those dividends, capital gains, and additions to accounts that occurred over 2022 and up to now will nicely multiply.

 

My start....mid morning.

I have a moderate gain so far in my account. Seven stocks UP and three DOWN. The down list is.....COST, HON, and MSFT.

Most of my gains today are mild to moderate in the various UP stocks......the best gainers so far are.....NKE and AMZN.

Speaking of AMZN....I think this set of earnings this week will be very instructive. This is the start of business normalization.....post-pandemic..... for this company. These earnings along with the next four quarters will give investors a very accurate picture of where this company is right now......and....where they are headed. The next year will be make-or-break for the current management to prove they can drive the company successfully.

 

OMG.....TireSmoke lost 90%.....in one day.

I am nominating......"still not bad"......for understatement of the year. Make that.......decade.

AND......yes.....a little reward would be a good way to diversify some of those gains.

DISCLOSURE:

I will note for any new readers.....TireSmoke is taking lots of risk with his three chip stock portfolio.....and.....it is extremely volatile.....not for the average person.. He knows that......so he keeps his retirement money in much safer investments......the SP500 Index (I believe).

 

AND......resounding NO.......I never feel guilty about making money. ALL of us are EARNING what we make.....through our hard work, diligence, life habits, and saving....... and we deserve it.

 

We are about to end the SUPERB month of July today at the close. We are about to end up with the averages.....SP500 +2.9%, MASDAQ +3.8%, DOW +3%......ALL up nicely for the month. It is the 5th month in a row UP for the SP500.

"Second-quarter earnings also continue to tickle in better than expected.

“Earnings coming in not as bad as feared, clearly that’s a good thing for the market,” said Independent Advisor Alliance’s Chris Zaccarelli. “Part of the reason the market’s rallied this whole month is that in addition to the good news to the economy that we’ve seen all year, we’re also seeing that corporate earnings really seem to have not been impacted as much as people have been concerned about.”

While earnings season is more than halfway through, the chief investment officer is keeping an eye on Thursday’s reports from Amazon and Apple, which could “set the tone” for the rest of the market.

“If they give really good guidance, we could see this bull market really continue to pick up speed and even see some momentum heading into the fall,” he said."

Stocks are flat as Wall Street looks to cap off a winning month

https://www.cnbc.com/2023/07/30/stock-market-today-live-updates.html

 

I had a nice....but small gain today. Five of nine stocks UP for me......NKE, AMZN, HD, AAPL, and GOOGL. The rest were down.

NKE was my best performer today being UP by +1.63%.

I got beat by the SP500 today by a minuscule.....0.01%.

ONWARD AND UPWARD.

 

The markets definately had a nice little bump up toward the close. I was expecting a slight DOWN day today before I just looked.

It seems that the bump up occurred in the last ten minutes.......and....was sudden and extreme. I will have to see if I can find out why.

 

YES.....people are starting to believe in the BULL MARKET......after over a year.

Wharton professor Jeremy Siegel says the stock market is headed to new all-time highs thanks to a strong economy and resilient corporate earnings

https://finance.yahoo.com/news/wharton-professor-jeremy-siegel-says-001505901.html

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

"Stocks are headed for new all-time-highs as the US economy and corporate earnings remain strong, according to Wharton professor Jeremy Siegel.

"This is such a strong market," the top economist said in an interview with CNBC on Friday. "Lower inflation and stronger economy and good guidance and good profits, what's to stop this market now?"

Stocks could be on the path to a new record, Siegel added, with the S&P 500 just 4% away from its all-time-high of 4,796, which it notched in January 2022.

Siegel has turned more optimistic on stocks in recent months, despite previously warning of a recession that could upend the current rally. That's thanks to a cocktail of bullish factors driving the market, including strong corporate profits and the broadening rally in stocks, Siegel said, meaning that a larger percentage of stocks are participating in the market's surge.

Of the 51% of S&P 500 companies that reported financials so far for the second quarter, 80% have surpassed analysts' earnings expectations, according to data from FactSet. Meanwhile, around 70% of S&P 500 firms are trading above their 200-day moving average, Refinitiv data shows.

The strength of the US economy has also bucked expectations of a downturn, and Wall Street forecasters have dialed back their expectations for a recession. US GDP grew 2.4% in the second quarter and 2% in the first quarter.

The Employment Cost Index also came in below economists' expectations for the second quarter, with wages and salaries increasing just 1% from March, the Bureau of Labor Statistics reported. That's another promising sign inflation is cooling and the US is in a "Goldilocks economy," Siegel suggested, meaning macro conditions are just right for growth.

Siegel also dismissed fears from market bears that the hype over artificial intelligence is creating a bubble in stocks. The S&P 500 is trading around 20 times its 12-month forecasted earnings, which is close to the historical average.

That compares to the dot-com bubble of the early 2000s, when the benchmark index was selling at 30 times its 12-month forecasted earnings. Meanwhile, interest rates were higher back then, with the effective fed funds rate topping out at 6.51% in 2000.

"That was scary," Siegel said of the internet stock craze. "I don't regard today's valuations as scary."

Other Wall Street commentators have turned more bullish on the stock market as inflation continues to ease and markets expect the Fed to soon pause interest rate hikes, which weighed heavily on stocks in 2022.

Fundstrat's Tom Lee similarly predicted the S&P 500 was set for a new record in 2023, estimating the index would notch 4,825 by year-end if stocks clear three key hurdles."

MY COMMENT

Welcome to the party....where have you been for the past 12 months?

WELL.....as noted above we are now up to 80% EARNINGS BEATS with just over 50% of companies having reported.

We are now seeing the University Economic Professor types and other economic professionals......finally......jumping on the bandwagon. Better late than never.

Of course NONE of these people give investing advice........they are economists. All theory and no reality.