The Long Term Investor

I ended up losing about half the gain that I had earlier in the day....but....I am happy to have still closed out the day with a really nice gain. I also got a good beat on the SP500 by 1.32% today. That makes up a little bit for the rest of the week.

My gain today was produced by five of my eight stocks.....the down stocks today.....GOOGL, HD, and COST.

 

Here is the week that is now in the rear view mirror.

DOW year to date (-2.20%)
DOW for the week (-2.14%)

SP500 year to date +7.24%
SP500 for the week (-3.75%)

NASDAQ 100 year to date +29.72%
NASDAQ for the week (-2.59%)

NASDAQ year to date +20.80%
NASDAQ for the week (-2.62%)

RUSSELL year to date (-7.06%)
RUSSELL for the week (-3.36%)

I am happy to have ended the week with my YTD for my entire portfolio at +24.27%. Last Friday it was at +27.32%. A difference in one week of.......(-3.05). I am eating into some of my gains for the year....but am still very happy to be solidly beating the SP500 YTD.

 

HAVE A GREAT WEEKEND EVERYONE. WE START FRESH NEXT WEEK.....THE FIRST WEEK OF NOVEMBER.

 

The end of another very negative week.....in spite of great earnings.

Stock market news today: Dow sheds over 350 points as S&P 500 enters correction territory

https://finance.yahoo.com/news/stoc...00-enters-correction-territory-200201948.html

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

"Stocks closed mixed on Friday as the S&P 500 (^GSPC) officially entered correction territory to cap off a tough week for markets.

The S&P 500 closed down about 0.5% despite notching gains earlier in the session, while the Dow Jones Industrial Average (^DJI) dropped about 1.2%, or more than 350 points.

The Nasdaq Composite (^IXIC) held onto gains, closing up about 0.4%, as earnings from Amazon (AMZN) and Intel (INTC) eased some concerns around Big Tech. The index entered into a correction earlier this week amid a sell-off fueled by mixed earnings from megacap techs.

On Friday, the Federal Reserve's preferred inflation metric showed prices over the prior month jumped by the most since May while annual price increases continued to cool in September, sharpening the prospects for the central bank to keep interest rates "higher for longer."

"Core" Personal Consumption Expenditures (PCE) Index, which excludes the volatile food and energy categories, showed prices rose 0.3% in September and 3.7% from the prior year, data released by the Commerce Department on Thursday showed. The 0.3% increase in core PCE was driven by categories like cars, prescription drugs, and travel.

On a headline basis, which includes all categories, PCE rose 3.4% over last year and 0.4% month-over-month. September's annual rise in "core" PCE was the smallest since May 2021 and marks the third-straight month prices have increased at a slower annual rate."

MY COMMENT

The economic news today.......core PCE was actually good....but no doubt...it will be spun as bad.

Earnings are showing BEATS of at least 80% of reporting companies. This is in the high end of the typical range in a good year. SO....earnings....which represent business fundamentals......and stock fundamentals....are strong.

Unfortunately this is being overshadowed by extremely negative sentiment in the markets due to an obsessive focus on short term issues.

 

I doubt that many on this board will qualify for this government benefit......but....it is worth a look.

The Federal Government Will Match Your Retirement Plan Savings By 50%. Here's Who Qualifies.

https://finance.yahoo.com/news/federal-government-match-retirement-plan-110000901.html

MY COMMENT

A typical government....means tested...program. I doubt that many in the qualified income levels will take advantage of this program. They will probably not have the money or the will to save in an IRA or 401K.

 

We have finally been getting some good rain for the last three days. It is supposed to continue for the next couple of days. We are finally seeing the end of our historic summer drought and heat wave.

The best news.....much of this rain is falling on the Hill Country side of the Highland Lakes. The lake near us, Lake Travis, is only about 35% full right now. This rain will not come close to filling it up....but it will be a start.

 

Looks like GOOGLE is going all in.......riding the AI train.

Google commits to invest $2 billion in OpenAI competitor Anthropic

https://www.cnbc.com/2023/10/27/goo...2-billion-in-openai-competitor-anthropic.html

 

I just got done watching "The Big Short"......again...... on Netflix. Every investor should watch that movie about every five years....for life.

So....here is an unrelated little article.

More Americans face 'persistent debt' as interest rates and fees rise, report shows

https://finance.yahoo.com/news/more...tes-and-fees-rise-report-shows-114424148.html

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

"American cardholders paid a record $130 billion in interest and fees in 2022, according to a new government report.

The study released Tuesday by the Consumer Financial Protection Bureau (CFPB) was part of the government watchdog’s biennial report to Congress. The breakdown: Credit card companies charged consumers more than $105 billion in interest and some $25 billion in fees last year. Overall, it was the "highest amount" recorded in the CFPB’s data history.

The CFPB report comes at a time when outstanding credit card debt has surpassed a record $1 trillion — and pressure from the Federal Reserve’s fight on inflation has continued to push interest rates higher.

For many Americans, the combination of rising debt and interest rates has been hard to manage.

"Credit card debt is more expensive than years past," Rohit Chopra, CFPB director, said in a statement. "It’s clear that Americans need more ways to switch cards to ones with lower rates."

As interest rates and fees increased in 2022, more Americans had a harder time paying down their credit card debts.

According to the report, the average cardholder carried $5,288 in total credit card debt at the end of 2022, up 24% from 2021 lows and marking a return to late 2019 levels. Cardholders with prime credit scores between 660 and 719shouldered the highest debt, with average balances reaching $9,135 at the end of 2022.

Among major credit card issuers, 82% of total debt was revolving — meaning that consumers were carrying a balance into the next month in 2022. Only 18% of consumers surveyed said they were able to pay off their full balances by their due date, the CFPB noted.

In 2020, by contrast, only 51.3% of consumers carried a balance into the next month, and 48% of respondents said were able to pay balances in full by the due date.

"Pandemic relief programs in 2020 and 2021 enabled some card holders to pay down credit card balances, but the number of people facing persistent debt could climb if interest rates remain elevated," the CFPB said in a statement.

And interest rates rose quite a bit during 2022, due to the Fed’s moves to curb inflation.

The average APR on private cards — used for select vendors, similar to retail cards — was 27.7% by the end of 2022, an increase of more than 2 percentage points from the year prior, according to the CFPB. Meanwhile, interest rates on general-purpose cards — used across wide networks such as Visa and Mastercard — jumped from 18.8% in mid-2020 to 22.7% in 2022.

Between March and December 2022, the prime rate most commercial banks use to set cardholders' APRs had risen by 4 percentage points.

"All in all, the data show more cardholders are being charged late fees, falling behind on payments, and facing higher costs on growing debt," CFPB researchers noted.

More borrowers face 'persistent debt'

A greater share of Americans slipped into more than 180 days' delinquency as they faced higher fees and interest, the CFPB found, and those with the lowest credit scores at times weren’t able to pay anything at all.

Nearly 10% of credit card users found themselves in "persistent debt," the CFPB said in the release, meaning they were charged more in interest and fees each year than what they paid toward their principal.

One of the hurdles consumers faced were higher minimum payments.

The minimum payment for revolving accounts increased to $102 for general purposes cards, up from $95 the year prior. Meanwhile, folks with private-label cards faced a minimum payment of $69, up from $66 in 2021.

Those most vulnerable to falling behind on payments and facing higher minimum payments were borrowers with deep subprime credit scores (below 580), or those with prime scores (between 660 and 719), the CFPB found.

For instance, for private-label cards, the average minimum payment due for consumers with a credit score under 580 was $43 higher than those who had a credit score of 660. Folks in the deep prime scoring category also paid $54 more than consumers with credit scores above 720.

CFPB researchers noted it was "a pattern that could become increasingly difficult for some consumers to escape."

Reducing junk fees

To reduce consumers' financial burden, the CFPB has also been taking aim to reduce junk fees and promote a fairer marketplace.

Earlier this year, the government watchdog proposed a rule to reign in excessive credit card late fees, which they say companies “exploited” as they hiked fees with inflation. The measure is part of the CFPB’s campaign to eliminate or reduce junk fees.

Companies currently charge up to $41 for each missed payment. Under the proposed rule, late fees would be lowered to $8 and the automatic annual inflation adjustment would be eliminated. The proposed rule would also ban late fees above 25% of the consumer's required payment.

The CFPB also proposed another rule this month to allow consumers to change banks with more ease, in hopes to encourage a competitive marketplace and help folks transfer their transaction data without hurdles.

"Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee," Chopra said in a statement. "[The] proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.""

MY COMMENT

This is the dirty little impact of what the FED is doing. They are intentionally trashing the stock markets and the housing markets. They are also trashing the credit card....."customers".

I will call them "customers" but they are actually victims.

All of this "trashing" is being put on the backs of the regular people in the country.....the little 401K investor.....the regular person trying to afford a house.....and people using credit cards to try to get by each month.

SHAME....SHAME.....SHAME.

Personally I carry ZERO debt. I have no mortgage. I have no car or other loans. I finance nothing. I do have a couple of credit cards that I use monthly......an AM EX card that we use for gas and food and get 3% and 6% cash back....it is paid off monthly with no fees or interest. I also have a CITI card that is 2% cash back that we use for various purchases. We rack up between $1500 and $2500 per year in free cash on that card. It is paid off each month with no fees and no interest.

One financial GOAL for anyone....should be to get to the point where you have no dependency on anyone......however you wish to define that. BUT....just my personal opinion.

 

In the face of the constant and relentless soul sucking negativity that is currently the FAD.....here is a ray of sunshine.

The S&P 500 will rocket 18% by year-end as the economy stays strong and the Fed ends interest rate hikes, Oppenheimer investment chief says

https://finance.yahoo.com/news/p-500-rocket-18-end-232429942.html

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

• "The S&P 500 could soar another 18% by year-end, according to Oppenheimer.
• That's because the economy is strong and the Fed is likely to end its rate hike cycle.
• While 5% Treasury yields have sparked concern among investors, that's normal compared to previous eras.

The S&P 500 is due for a monster rally by the end of the year, as the Federal Reserve looks poised to dial back its war on inflation, according to Oppenheimer's chief investment strategist John Stoltzfus.

In an interview with CNBC on Thursday, Stoltzfus reiterated his S&P 500 price target of 4,900 by the end of the year. That points to the benchmark index skyrocketing 18% in just over two months, a forecast that's predicated on the Fed likely ending its rate hike cycle.

"You've got to remember that when we raised that target, we were expecting that the Fed would continue be vigilant against inflation but would remain sensitive to the effects of its policy on the economy. And it has remained so," he said.

Central bankers have hiked interest rates aggressively since March 2022 to tame inflation, with the fed funds rate now at 5.25%-5.5%. That has sparked fears that the Fed could push the US into a recession with its aggressive policy, though the economy has stayed impressively resilient so far, with GDP growing 4.9% in the third quarter.

Corporate earnings also look to have held up, despite some disappointing results this week from the largest tech firms. Of the 17% of S&P 500 companies that reported third-quarter earnings last week, 73% have beaten analysts' estimates, according to FactSet data.

And though stocks have sold off in recent weeks, that's largely due to fears stemming from higher Treasury yields, with the 10-year US Treasury yield recently topping 5% for the first time since 2007. But yields around 5% are actually fairly normal relative to history, Stoltzfus said:


The 10-year yield hovering around 4%-5% is fairly normal by historical standards.Federal Reserve


"From a historical perspective, 4%-5% is really what the 10-year yield usually would be like during normal periods," he added, noting that interest rates were unusually low for the past 15 years.

The Fed has warned that rates could stay higher-for-longer as it continues to monitor inflation and the strength of the economy. Still, markets are expecting interest rate cuts by mid-next year, with investors pricing in an 80% chance that rates could be lower than their current level by July 2024, according to the CME FedWatch tool. That could be bullish for stocks, considering that rate hikes weighed the S&P 500 down heavily in 2022.

Stoltzfus has been one of Wall Street's most bullish forecasters, despite concerns brewing in markets over surging bond yields and the potential of a recession on the horizon. In 2022, he predicted the S&P 500 would surge to 5,330, but then slashed that target several times as the year went on."

MY COMMENT

Will this happen.....I dont know. I do agree with much of his reasoning.......although there is no guarantee that.....even if the arguments are true.....they will make any difference.

The markets....being currently hammered by negativity....seem to not care at all what the truth is....short term.

I have used that Treasury Chart (above) many times in my comments on here. In fact, it does show that even at 5% the Ten Year Treasury is not anywhere near being high on a historic basis. It is actually toward the historic low end of the chart at 5%. AND....if you omit the......extremely aberrational low rates of the past 15 years......5% is totally at the low end of the historic range.

In addition I believe there is little to nothing the FED will or can do from here on.....so they are simply irrelevant.

Oh yes.....the auto strike.....we now have two of the big three with agreements and will soon....in a matter of days....see the strike end.

Israel is in Gaza and will stay there till they achieve whatever they want......so regardless of your politics or opinions of the Middle East.....reality tells us that this is not going to be much of an issue either.

As to earnings....they are booming with BEATS.

As to inflation......yes.....it is perfectly normal to have inflation in the mid 3% range. The simple truth is that a target of 2% is LUNACY and unsupportable in a good economic environment.

So....I do agree with him in terms of what should happen by year end....the problem is whether humans will be able to break free from their genetic brain based delusions.....long enough to see the truth.

 

I have been talking about the extreme negativity lately in the markets.....looks like it is actually true.

New Lows for S&P and Sentiment

https://www.bespokepremium.com/interactive/posts/think-big-blog/new-lows-for-sp-and-sentiment

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

"The S&P 500 having made fresh lows in the past week has justified a continued decline in bullish sentiment per the latest AAII survey. As shown below, only 29.3% of respondents reported as bullish this week compared to 34.1% last week. Although sentiment has quickly reversed, the last week of September actually saw an even lower bullish reading of 27.8%.



Bearish sentiment, on the other hand, rose up to 43.2% which was the highest reading since the first week of May. Bearish sentiment rose 8.6 percentage points week over week which was the largest single-week increase since February.



Given the new high in bearish sentiment and drop in bulls, the bull-bear spread tipped deeper into negative territory. Bears now outnumber bulls by 13.9 percentage points. That is the widest margin since May.



While the AAII survey has shown an expressly negative turn, other sentiment surveys are more mixed. For starters, the NAAIM Exposure Index echoed the AAII results. The index tracking equity exposure of fund managers echoed the pessimistic tones of the AAII survey as it dropped to the lowest level since the week of October 12th last year. Meanwhile, the Investors Intelligence survey of newsletter writers has managed to hold onto a more bullish tone. That survey's bull-bear spread has been more steadily above its historical average over the course of the past couple of months.



MY COMMENT

This is about what you would expect. Investors have been hammered by negativity from the FED and elsewhere for the past six months and beyond that for the past 12 or more months. People are worn out and tired of the constant and unrelenting FED trashing of the markets and the economy.

This is also a function of the constant negativity of the financial media. Every story, every event, every market action or reaction....is spun to the negative side. I understand that it is not a good thing for the media to be market cheerleaders....either. But a little balance in the commentary would be nice to see once in a while.

The incompetence of government is also a huge weight on investors right now.

 

As long term investors we just ENDURE it all. That is our job. It is the long term investors that provide some market stability and a counter balance to the short term volatility and craziness. I would hate to see what the markets would be like if there was no 401K system and/or long term investors.

 

And to continue the above:

The Nasdaq's fallen into a correction – what investors should consider
Tech's biggest names have had a mix week, but don't cut bait yet with quality companieS

https://finance.yahoo.com/news/the-...what-investors-should-consider-123057423.html

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

"Last week, the Nasdaq fell into a correction, the 70th in its 52-year history.

The tech-heavy index, dominated by the Magnificent Seven and sensitive to interest rate movements, is down about 23% year-to-date. With heightened geopolitical risks and rising Treasury yields, investors are looking for results in stocks that once rode to new heights based on potential — and the Big Tech earnings haven't delivered.

Amazon (AMZN) came in with beats on the top and bottom lines and, while the company reported 12% year-over-year cloud growth, cloud revenue missed analysts' expectations. Similarly, Alphabet (GOOG, GOOGL) reported revenue and EPS beats – but the Google parent missed significantly on cloud revenues, coming in at $8.41 billion compared to analysts' expectations of $8.6 billion.

The exception was Microsoft (MSFT) which beat on the top and bottom lines, winning on cloud with its Azure business, topping expectations for both revenue and growth.

Meanwhile, Tesla (TSLA) badly missed Wall Street estimates. Apple (AAPL), which reports next week, has seen its device sales slow in 2023.

Social media giant Meta (META) beat estimates, but issued conservative Q4 guidance, citing geopolitical unrest — a sentiment that Snap (SNAP) echoed.

"I think the key factor was that we had come to rely on the continuing outperformance of a narrow list of mega-cap technology stocks," Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance. "The good thing about top-heavy market-cap weighted indices is that they perform excellently when their biggest components do well; the bad thing is that they perform very poorly when those stocks don’t."

It's not that these earnings were overall a disappointment, exactly, they were just a dose of reality for a market that had been overly optimistic about AI. Still, Amazon stock is up more than 50% year-to-date, while Microsoft stock is up nearly 40% in that time frame.

But the macroeconomic environment is getting tougher. Interest rates are high, raising capital costs while making sure bet investment like CDs increasingly appealing. The consumer's in a tenuous position, as student loan payments have resumed, gas costs are rising, mortgage rates are approaching 8%, and inflation hasproven to be sticky.

Additionally, AI, while an eventual tailwind, has not yet been fully monetized in any way, shape or form. That process is going to take time. Take Oracle (ORCL) — the SaaS heavyweight has no shortage of demand for its AI services, but can't get enough Nvidia (NVDA) chips to train and deploy those services.

The story is far from Oracle's alone. Alphabet, Microsoft and Amazon all do business with Nvidia. The e-commerce giant's CEO Andy Jassy said on its earnings call that the company is looking for ways its cloud service AWS can further monetize its services.

For investors, it depends if you're taking the long-term view or the nearer-term view.

"Long-term Investors shouldn’t pay much attention to these kinds of moves," GraniteShares CEO and founder Will Rhind told Yahoo Finance."Interest rates are most likely at the top of the cycle, and the economy is still in pretty good shape."

However, in times like these, "it is important for investors to be exposed to quality companies in the market, that are demonstrating growth and sustainability in earnings," said Rhind.

For those looking at the near to medium term, try to stave off instincts to follow the herd blindly.

"When you have a stock like Google go down 10%, it sets off a vicious deleveraging cycle where investors are forced to sell companies they have high conviction in to cover margin calls," Spear Invest founder and CIO Ivana Delevska told Yahoo Finance.

But not all moves are equal; quality companies like Google may be lumped in with the fire sales, but it doesn't mean there are issues with its fundamentals.

Historically, Nasdaq corrections have been tied to some key moments, from the bursting of the dot-com bubble in 2000 to the onset of the COVID-19 pandemic.

"There's a reason why we prefer broad market rallies to narrow ones. In the latter case, the market suffers unless the money rotates from the leaders to the laggards," said Sosnick. "When the money flows out of the leaders and out of the market entirely, then that is a problem. That's some of what we saw this week.""

MY COMMENT

The negativity early in this article especially about earnings is unjustified in my opinion and does not reflect....."my"....view of the big tech reports so far.

The second half of the article I tend to agree with.

For some reason we seem to be in a time period.....perhaps due to all the AI hype.....where the big cap tech companies are being disrespected and just cant seen to satisfy anyone. I dont believe any of this is justified. These are massive companies that continue to bring in HUGE piles of money....free cash flow. They are the leading businesses in the world and most of them have little competition. I really dont see much alternative out there for investors....you just about have to own these companies.

 

As to this comment in the above article......"The tech-heavy index, dominated by the Magnificent Seven and sensitive to interest rate movements, is down about 23% year-to-date".......I have no idea what they mean.

As of the close last Friday the NASDAQ was UP year to date by.....+20.80%.

Here is the recent data on the NASDAQ:

1 month (-4.23%)
3 month (-11.69%)
6 month +3.41%
YTD +20.80%
1 year +17.14%
3 year +6.29%
5 year +76.40%

 

YEP.....the short term content on here is just for....FUN. NOT....to be used as a basis to do anything as a long term investor.

My approach would be the same if I was NEVER reading any of the daily drama. I have an interest in business, economics and investing.......so I read the daily "stuff". I DO NOT read it for long term investing purposes....it is not relevant or important.

 

This next week we will have the FED meeting and usual media commentary and Q&A by Powell. We will also have AAPL earnings this week.

 

A very good open today. Good enough that it might actually last. OR....it might be driven by buyers of good companies at bargain prices......and fade as the day goes on and the buyers finish up with their purchases. Wee will see.

 

It is amazing that this story even needs to be written. BUT....there are many inexperienced investors out there.

Stock market futures rise after S&P 500 tips into a correction. What's the 401(k) impact?

https://www.usatoday.com/story/mone...ket-correction-territory-meaning/71349135007/

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

"If you're taking a nervous peek at your 401(k) following the stock market's recent plunge, you're not alone.

The S&P 500 ended last week down more than 10% from its most recent high in July, which put the stock index in correction territory, a worrying milestone for millions of Americans who invest in one of the many mutual funds that use the index as a benchmark, mirroring its performance.

The index, which includes 500 of the leading publicly traded companies in the U.S., ended at 4,117.37 on Friday, down 10.3% from its recent peak on July 31. The tech-heavy Nasdaq Composite index, which entered a correction earlier in the week, closed at 12,643.01.

Stocks have fallen the past three months as investors face the reality of higher interest rates, with Federal Reserve officials talking about keeping rates “higher for longer.”

While the plunge in the S&P 500 may have people fretting over their 401(k)’s performance, market experts say investors should keep in mind that dips are often short lived. Early Monday, in fact, investors appeared more optimistic, pushing up the futures market for major U.S. stock indexes.

“Although the last three months haven’t been fun for investors, it is important to remember that corrections are normal and they happen quite often,” said Ryan Detrick, chief market strategist at financial services firm Carson Group.

What is correction territory?

Corrections take place when a market experiences a drop of at least 10% from its most recent peak, a sign that investors are skeptical of what lies ahead for stocks.

It’s more severe than a pullback (typically a short-lived drop of less than 10%) but not quite a bear market (a drop of 20% or more, which can result in significant losses for investors.)

Corrections take place every couple of years, on average, including during the bull run between 2009 and 2020.

Why is the stock market falling?

The plunge comes as soaring Treasury yields make bonds more appealing for investors, who are getting out of stocks now that the 10-year bond recently exceeded 5% for the first time since 2007, and amid various economic and geopolitical concerns like the escalating tensions in the Middle East.

Detrick said that while the recent weakness has hurt stocks, investors should remember that between January and July, the S&P 500 notched its best first seven-month performance at the start of a new year since 1997. And that "some type of 'give back' wasn’t overly surprising."

What does a correction mean for me and my 401(k)?

Investors should remember how quickly the market tends to recover, according to Sam Stovall, chief investment strategist at investment research and analytics firm CFRA Research. He said pullbacks tend to take about a month and a half to get back to breakeven, corrections take four months and bear markets with a drop between 20% and 40% take 13 months.

How are stock market futures?

While not guaranteeing a recovery, investors turned positive early Monday, ahead of the opening of U.S. financial markets. The coming week includes a large number of important corporate earnings and the Federal Reserve’s decision on interest rates.

Futures for the S&P 500 and Dow Jones Industrial Average climbed 0.6% before the bell.

Will the stock market recover?

“The phrase that they should keep in mind is, ‘This too shall pass,’” he said. “If an investor does not have 13 months, they probably should not own stocks.”

If investors do take some sort of action while the stock market is down, Stovall suggested they should consider:

• Rebalancing their portfolio
• Buying high-quality stocks that have fallen in price with the market
• Tax loss harvesting, which means selling stocks that are losing money and using the loss to offset capital gains, or profits made from other holdings

But his final suggestion?

“Sit on your hands. Because the last thing you want to do is make an emotional decision," he said. "You want to make sure that you stop your emotions from becoming your portfolio's worst enemy.” "

MY COMMENT

This is very basic stuff.....but there are many, many people under age 40 that are not really focused investors. They are forced investors due to the 401K system. They may not know much about investing.

At least this major media source is doing something positive with this story.

YES....corrections are part of the normal market process. They happen in bear markets and they happen in bull markets. In and of them selves they mean NOTHING.

It is part of the basic learning process for any investor to sit through their first few corrections and see that the world did not end. Dont worry......as time goes by and you sit through a few of these the fear will tend to go down.

 

To continue with this theme.

Corrections Call for Calm

https://www.fisherinvestments.com/en-us/insights/market-commentary/corrections-call-for-calm

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

"In our view, the wisest action amid recent volatility is none at all.

Stay cool.

Yes, stocks’ decline that started July 31 has now extended nearly to Halloween.

Yes, those declines are presently flirting with officially becoming a correction—a short, sharp, mostly sentiment-driven down move of around -10% to -20% from a prior high—true for both the S&P 500 and MSCI World Index.

Yes, this comes before stocks regained pre-2022 highs, and as that awful year still stings many investors.

And yes, we realize scary headlines are splashed across most outlets—chiefly citing perceived negatives from the Israel conflict to 10-year Treasury yields reaching 5% in a swift rise this autumn. Nonetheless, our counsel remains: Stay cool. Despite the recent market swings, fundamental factors look little changed to us. We aren’t aware of anyone who can reliably time corrections and sentiment-driven swings. They don’t call for action, in our view. They call for calm.

There is little doubt recent market action has been difficult for many. Since July 31’s highs, global and US stocks entered Thursday down -9.2% and -8.4%, respectively. (Exhibit 1) Markets are lower Thursday morning Pacific Daylight Time as we type, too.

Exhibit 1: Market Action Since Pre-2022 Bear Market High


Source: FactSet, as of 10/26/2023. MSCI World Index with net dividends and S&P 500 total return, 12/31/2021 – 10/25/2023.

Sharp market moves like this can be trying. But as we have noted before, declines of greater than -8% are common in bull markets. Corrections, too. During 2009 – 2020’s bull market, history’s longest, we count nine S&P 500 declines exceeding that mark.[ii] The MSCI World had 10, adding one in September 2014 to the tally.[iii] All had scary stories associated with them: Then-derelict Greece’s deficit debacle in 2010; the broader eurozone debt crisis and regional recession; America’s 2011 debt-ceiling fight and subsequent credit-rating downgrade along with double-dip recession worries; China’s 2015 “devaluation.” Those are merely a curated selection. We could go on. One of those started less than a year into the bull market. While the 2002 – 2007 bull market had fewer corrections overall, it packed one early on in March 2003 as investors fretted the Iraq War’s implications.

The big fears today have some echoes to those, but there are differences. Most notably: interest rates. Over the last 10 days, an ocean of headlines have pondered the implications of 10-year US Treasury yields nearing 5% for the first time since July 2007—over 16 years ago. That is a long time and, since it was also the financial crisis’s eve, many see this as “high” rates destined to “break” something. Many in media point to bank issues then and even earlier, despite the fact we aren’t aware of anyone who really thinks the 5% 10-year Treasury yield caused the financial crisis. The occurrence was coincident.

Exhibit 2: A Long Time Since 5% 10-Year Rates


Source: FactSet, as of 10/26/2023. 10-Year US Constant Maturity Yield, 10/25/2003 – 10/25/2023.

Still others say those 5% yields are a hurdle for stocks. That may be true of some companies or industries. But it doesn’t hold historically at a broad level. Zoom out past the last two decades and you will see this.

Exhibit 3: … But 5% Is Common Historically


Source: FactSet, as of 10/26/2023. 10-year Treasury Constant Maturity Yield, 1/2/1962 (inception) – 10/25/2023.

Yields have topped 5% on more than half the trading days since daily 10-year constant maturity yield data start in 1962. They were above the mark for the entirety of the period June 14, 1967, through September 8, 1998. Over that span, US stocks merely rose a paltry 3,035.1%, cycling through several bull and bear markets, as well as myriad corrections and pullbacks.[iv] Interest rates weren’t much help in identifying the shifts. At a more granular level, rates were above 5% throughout the 1980s and most of the 1990s. Those were go-go periods overall for US stocks and the economy.

So there isn’t anything about a 5% 10-year rate that looks auto-problematic for stocks. Now, the speed of the recent rise may stoke uncertainty to an extent, as market volatility often does. But we don’t advise overthinking it. The general notion that “something” might break from rates’ rise, so common among pundits now, isn’t an investment thesis. It is a feeling … a fear … a guess, subject to all the biases that come amid volatility. Perhaps those rate fears and uncertainty are weighing on stocks for the time being. But we doubt it lasts.

The same could be said for Israel. As we noted recently, Hamas’s attack on Israel is an epic tragedy at a human level. But for markets, we don’t see it as a huge event. Most of the chatter around this is fear conflict could spread and interrupt important oil markets in the Middle East. But look at oil markets: Brent crude, the global benchmark price, is up just 2.6% from pre-attack levels and 8.9% year-to-date.[v] Those aren’t huge spikes—nor are present high-$80s to low-$90s prices per barrel alarming levels. We suspect the conflict is weighing on stocks over the past few weeks, but largely due to uncertainty over how Israel will respond and any downstream impacts. In our view, there is little sign today the Israeli response or regional blowback will be sufficient to interrupt global commerce materially. That is key for coldhearted stocks, which chiefly weigh events’ impact on expected earnings over the next 3 – 30 months.

The irony of this recent market move is it comes as data continue to confirm global economic resiliency. Just today, US Q3 GDP posted strong results, largely underpinned by healthy consumer spending. Earlier this week, preliminary October purchasing managers’ index data from S&P Global showed both US manufacturing and services were above 50—in expansion.[vi] Inflation is overall slowing globally. Chinese GDP, released last week, showed 4.9% y/y growth despite property market woes, suggesting the world’s second-largest economy isn’t tanking as so many fear.[vii] Meanwhile, politics in the US look gridlocked. Even with a new House Speaker now in place, we wouldn’t expect divisive legislation to start flowing through Congress. The absence of big bills—which normally create winners and losers, roiling sentiment—is a plus for stocks, in our view. But also, having a speaker is step one in avoiding a government shutdown. We don’t think shutdowns are meaningful for stocks, but some fear it nonetheless.

To us, this downturn has the hallmarks of an early bull market correction. Potentially jarring, yes. Unpleasant, too. But short-term, emotion-driven volatility like this is normal in even the best bull markets. Trying to time the swings is exceptionally risky if you need equity-like, long-term returns to finance your goals. We realize it can be challenging, but this is a time to be cool, calm and collected."

MY COMMENT

AMEN......on steroids. People need to....RELAX. Of course this is hard when you have the blaring headlines.

WOW.....there is my Ten Year yield chart again.....people in the real media are starting to say the same thing I have been saying for many months.....the current 5% rate is not extreme....if anything it is low on a historic basis.

Much of this fear is being driven by the FED and their constant trashing and fear mongering in their attempt to drive inflation down to an extremely low and unhealthy 2% level. What the FED should be doing is declaring victory with inflation about 3.5%....a perfect level for a good economy.