Shiller: Stocks Could Rise Higher Before They Fall

According to an article in Bloomberg, Nobel laureate Robert Shiller says “The stock market could get a lot higher before it comes own. It’s highly priced, but it could get much more highly priced. It’s a risky market now.” In an interview with Bloomberg Television, Shiller said that President Trump’s support for corporate America is driving both sentiment and market strength: “The U.S is just doing great right now in terms of the strength of… Read More

Analysts Bullish on Pricey Stocks

At a time when stock market volatility has “returned with a vengeance,” analyst optimism seems to be on the uptick. This according to a recent article in CNN Money. The article cites FactSet data showing that, of the more than 11,000 analyst ratings on S&P 500 stocks, 52% are “buy” ratings and only 5% are “sell” ratings. The number of buy ratings, it adds, has risen by 5% since the end of 2017, as the S&P… Read More

Share Valuations More Appealing After Market Dip

The stock market dip that occurred earlier this month had “something good to offer,” according to a recent article in The Wall Street Journal. The article underscores how, before the sell-off (on Friday the 9th), the market’s P/E ratio was high by historical standards, notwithstanding expectations that strong corporate earnings would continue. The correction, it says, “could alleviate some of those concerns.” Although the prospect of rising bond yields remains a concern for inflation-fearing investors,… Read More

Amidst Conflicting Signals, Keeping Cash May Be Prudent

In an environment where markets look expensive and are sending conflicting signals, keeping a store of cash might not be a bad idea. This according to a recent article in The Wall Street Journal. According to the article, lower bond yields and swollen equity markets are “sending conflicting signals; the former reflecting the lackluster picture for inflation; the latter hopes for growth.” Further, it says, the high level of global central-bank liquidity is “past its… Read More

Klarman Warns of Risks to Investors

Risk is the most important consideration when investing, and investors are being too trusting. This according to a recent Business Insider article reporting on a client letter from hedge fund manager Seth Klarman. The hedge fund manager (who oversees approximately $30 billion) shares his view that, when share prices are low (as they were in 2008 and early 2009), risk is “usually quite muted while perception of risk is high.” By contrast, however, he argues that… Read More

Zweig: Emerging Markets Look Good, But Don’t Rush In

Funds are pouring into emerging market funds, with one-twelfth of total holdings having come in over the past 90 days, writes Jason Zweig of The Wall Street Journal. Presumably, he says, the heavy inflow is in “hot pursuit of high recent returns” (the asset class is up 12.4% this year). While participating in these funds is a good idea, Zweig says, investors should be careful not to rush in. “These stocks aren’t so much absolutely… Read More

Sexy Companies Don’t Necessarily Make Good Investments

Snap Inc. (the maker of the popular social app, SnapChat) has been getting a lot of attention of late, according to a recent article in the Financial Times, and not just because of its imminent initial public offering at a time when such events are a rarity. The article states, “It’s a company reaching out to the public markets even as it loses money hand over fist,” citing data from Dealogic that says Snap is… Read More

Buyer Beware of Companies Carrying Heavy Debt Loads

A decade of historically low interest rates has encouraged businesses to increase leverage and this could prove dicey for investors, says a recent Barron’s article. According to Morningstar fund analyst Kevin McDevitt, companies have been refinancing or borrowing for share buybacks, not necessarily to invest in existing businesses. “The leverage,” he says, “is an added risk not only to the individual companies, but also to the funds that own them.” Morningstar research found that, in… Read More

Valuations Matter in Factor Strategies

It’s a familiar investment conundrum: when a strategy outperforms and more investors pile in, it can get more expensive and therefore be less likely to outperform going forward. This is discussed as it relates specifically to factor investing in a recent Morningstar article. Alex Bryan, CFA, director of passive strategies research (North America) for Morningstar, poses the question: “What if the apparent performance edge is not sustainable and investors are just relapsing into counterproductive performance-chasing?”… Read More

Jason Zweig on Why Interest Rates Matter

When shopping for sale items, it’s customary to look at the price tag and see how much an item has been “marked-down”. You’d rather browse the “30% off” rack than the racks with lower discounts. Why? Because it affects the item’s value. On a much more sophisticated level, stock values and interest rates have a similar relationship. In a recent Wall Street Journal article, Jason Zweig describes how interest rates are an important factor when… Read More