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Post by FD1000 on Dec 26, 2020 19:27:55 GMT
( link) In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed. While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the return attribution of the S&P 500. Attachments:
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Post by Deleted on Dec 26, 2020 20:40:42 GMT
The risk factors mentioned in the linked articles are widely known, but even with market momentum consolidating somewhat it is still TINA (There Is No Alternative) used as a justification to increase returns.
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Post by Norbert on Dec 27, 2020 7:11:37 GMT
No question that "if the Fed gets its wish for inflation", there will be challenges for the market. Good call. At present the 10-year Treasury yield has started to recover from mid-year lows.  Indeed, TINA won't be happy if rates soar. Tell me something that I don't already know. No surprise that easy money motivated debt issuance and stock buybacks; or that stock price increases have been driven by multiple expansion, not profit growth, during the year of Covid-19. Markets are forward looking. I totally understand that March 2020 was a buying opportunity, while now the markets are frothy and expensive. It would seem prudent to take some profits where prices seem unreasonable; to buy value stocks, play with multi-sector bonds, or to increase cash. I think the panic selloff in March justified an overweight in equities; and that today's prices justify an underweight. However, central banks continue to print and to essentially back the stock market. There's no sign of inflation. If we're lucky regarding vaccines and mutations, economic growth could soar. I have no idea where the markets will go next year. N. |
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Post by uncleharley on Dec 27, 2020 14:50:33 GMT
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Post by FD1000 on Dec 27, 2020 14:52:45 GMT
I have an idea about the market, it usually goes up. In the last 40 years the SP500 was positive about 80% of the time and US Total bond index was positive about 90% and with global central banks support stocks (and bonds) should be OK. Basically, same old stuff, stay the course and make minor changes for most.
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Post by Chahta on Dec 28, 2020 14:50:44 GMT
If I understand, it is somewhat disturbing to find out that net stock purchases were due only to buy backs. And high valuations are due to P/E expansion. But don’t we know this already? Is the point of this article to get out while you can? I realize my port is play money until I cash out. I think I’ll stay the course.
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Post by helmut on Dec 28, 2020 18:44:29 GMT
I am familiar with Lance Roberts. He is from Houston, has a local radio show which is as much political as it is financial. I read his blog every week and although he will deny it is a total bear. Regardless of his prediction he always leaves caveat to justify his position in case he is wrong. I like to read his stuff but find there is very little value in the timeliness of his prognostications.
helmut
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Post by FD1000 on Dec 29, 2020 0:43:50 GMT
I am familiar with Lance Roberts. He is from Houston, has a local radio show which is as much political as it is financial. I read his blog every week and although he will deny it is a total bear. Regardless of his prediction he always leaves caveat to justify his position in case he is wrong. I like to read his stuff but find there is very little value in the timeliness of his prognostications. helmut Sounds good. Almost all experts can't predict the near or even far future so the next best thing is to scare you and maybe you will let them manage your portfolio. There are only a limited number of managers that really shine at risk-adjusted returns + flexibility and good calls for years (think PRWCX). |
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