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What Now?
The market appears to be in a "wait-and-see" mode in advance of the elections, but looking beyond November 6th is important for investors. The election is only one piece of the puzzle, and certain aspects of the political landscape likely won't be much clearer after Election Day. Earnings season has been somewhat disappointing, even though there was a relatively low bar to hurdle. We see more signs that the slowdown in the United States may be ending, however, with strength in housing particularly noteworthy.
Teetering on the Edge?
Concerns about a possible US recession remain elevated in light of the pending "fiscal cliff," resulting in some lackluster stock market action. The fiscal cliff and uncertainty around tax and regulatory policy appear to be influencing business decisions to the detriment of economic growth. While worst-case scenarios for Europe may have been taken off the table by the ECB, Spain's reluctance to ask for aid is causing consternation. And although we see continued weak growth in China, signs indicate the global slowdown may be turning around.
Schwab Market Perspective: Disrespected RallyCan It Continue?
US equities are trading near five-year highs but numerous measures show investors remain skeptical. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus.
Central Banks Take Center Stage
Accommodative central banks have traditionally been good for equities and stocks have responded positively to recent action. However, each market reaction to US Fed action has been shorter in length and challenges persist. Although recent economic data has been beating relatively low expectations, it is still not meeting the Fed's hopes. We appreciate the sentiment of wanting to stimulate growth, but the Fed's power is limited. It's down the street in Washington where the real power to stimulate growth lies.
Schwab Sector Views: Cautiously Cautious
by Brad Sorensen of Charles Schwab,
We remain slightly defensive with our sector recommendations but admit that we're a bit concerned over doing so. While we certainly believe this is the appropriate positioning given the continued elevated uncertainty in the market, combined with sluggish economic data, we also acknowledge that some defensive areas appear extended and the possibility of a near-term cyclically-based rally exists.
Dog Days
We now appear to be firmly in the dog days of summer. Low volume and little conviction may dominate but investors need to stay vigilant and now is a good time to prepare for the fall. The recent Fed meeting yielded no new action, but policy makers reiterated that they will act if necessary. We are skeptical that more stimulus measures will have a lasting impact. A waiting game has ensued in Europe as investors look for action following hopeful comments from various officials. But despite concerns over corn prices, central banks will continue to ease, helping to support global growth.
Treading Water
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
Muddling Through, But for How Long?
Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.
Fat Tails
Stocks have moved modestly higher and may now be in a relatively large trading range. US economic growth remains sluggish and is drifting dangerously close to stall speed. Policymakers in Europe appeared to make some progress in the most recent summit, but much is left to be done and time is running out. Meanwhile, global growth is slowing and central banks are attempting to stem the decline.
Schwab Market Perspective: Time for Action
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
It's All Relative
Equities have pulled back and are flirting with correction (-10%) territory. We believed this was a needed process, and remain modestly optimistic that economic data will rebound and the market will eventually resume its move higher over the next several months. The Federal Reserve has made clear that it stands ready to act should the US economy deteriorate, or the European debt crisis escalate, but we remain skeptical. The more important issue in our view is how the coming "fiscal cliff" is addressed.
Here We Go Again....or Not?
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
Roller Coaster Returns
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
Ride the Wave of Crude?
by Brad Sorensen of Charles Schwab,
Crude-oil prices have moved steadily higher over the past several months, but the move may not be sustainable.
Geopolitical tensions are unpredictable, but the response in demand to rising prices has become more rapid, and we see other downside risks.
Investing directly in the energy sector may not be the best way to try to benefit from rising oil prices, given new investing options, along with companies' various costs and sources of revenue.
Schwab Market Perspective: Concern or Correction?
Economic data has softened a bit lately but still indicates growth in the US. After a long stretch of relative calm in the markets, we've seen the markets pull back, possibly fulfilling the correction that was overdue. We believe the longer-term trend is higher but near-term risks continue to be elevated and earnings season could bring more volatility. The minutes from the most recent meeting of the Fed seemed to solidify that another round of quantitative easing (QE3) is not in the offing. Although the stock and bond markets initially reacted negatively, we are heartened by the rhetoric.
Shifting Winds-Turbulence Ahead?
Treasury yields have moved somewhat higher, while stocks have largely continued to rise. Recent correlations appear to be breaking down, which could lead to increased volatility but we remain relatively confident in equities. Perception as to the next moves by the Fed appeared to be shifting, but Bernanke reiterated their easy monetary stance. Uncertainty is rising and the Feds goal of increased clarity through more transparent communication is under scrutiny. Liquidity concerns in Europe have eased but economic risks remain, while Spain and Italy face deal with their ongoing debt crises.
Market Fatigue?
Market action has been relatively muted, notwithstanding the first 1% down day of this year. After the strong run to start the year, another pause or pullback would not be surprising but we continue to believe the upward trend will largely stay intact. Uncertainty abounds as to whether the Fed will unleash a new round of easing but liquidity remains abundant. Rhetoric continues in Washington but any substantial fiscal or tax policy action this year seems unlikely, despite the many challenges that are looming.Europe has stabilized somewhat but risks remain elevated.
Schwab Market Perspective: Two Steps Forward...
US stocks and economic data appear to be moving at least two steps forward for every step back, which we believe leads to a strengthening trend for bothalthough there are inevitable bumps along the way. We believe the agreement in Washington to extend the payroll tax through 2012 may be the last substantial economic-related agreement before the election, but there are major issues looming. The Fed continues to believe another round of easing may be appropriate, which we think could be dangerous and that they should be looking to move in the other direction.
Missed Opportunities?
Investors eased back into stocks to start the year. This is the start of a sustainable trend, but equities rarely go up in a straight line and near-term caution may be warranted. Another deadline is approaching for Congress and the President to make a deal. Something will get done, but any hopes for substantial action remain dim. Markets appear to be more comfortable with the European debt crisis and the risks associated with it. Central banks around the world are easing, which could help support international stocks in the coming months.
Slow Road to 'Normal?'
Market volatility has fallen and tight correlations have loosened, indicating to us some calming of fears and increased attention on more traditional economic and earnings-related news. This is a good sign for stocks in the foreseeable future. The Fed unveiled its new communication strategy after its most recent meeting, reiterating that interest rates will likely remain extremely low for some time. The European picture is brightening slightly and there may be a glimmer of hope for stock market investors. After a soft patch, global growth may be turning around.
Time to Climb?
The US economy continues to expand and has recently picked up momentum. Investors have been focused on European and US debt problems, but that may set up an environment for stocks to move higher. Many challenges await Congress. We're not optimistic that much progress will be made, but the rhetoric will almost certainly heat up as late-year elections loom. Recent policy decisions in Europe provide some hope but the region's banks continue to struggle and are pulling back on lending, which likely impedes growth. In China, policymakers attempt to keep growth from dipping below healthy levels.
Remarkable Resilience
Despite a remarkable series of crises, the stock market was roughly flat on the year. Earnings increasing, inflation decreasing, and economic data improving, the environment for a renewed upward move may be in place to start 2012. There seems to be little hope from DC for any relief in the near term, but 2012 brings an election cycle that will likely have a major impact on the future of the US. A near-term implosion in Europe seems to have been avoided but real solutions remain absent and the risks for a greater economic pullback are growing, which would likely have global implications.
Early Santa Arrival?
Stocks have continued their seesaw pattern around developments in the European debt crisis. The major indices remain in the wide range we've been in for the last two years. Factors are setting up for a potential break above that range in the coming year. Expectations about progress in Washington are extremely low and near-term the biggest issues are the proposed extensions of the payroll tax cut and unemployment insurance. The increasing populist rhetoric is not helpful and any chance of major debt-reducing legislation occurring before the 2012 election seems remote.
Schwab Market Perspective: Short-term PainLong-term Gain?
Markets have been under pressure as the crisis in Europe has recently intensified, providing the impetus for more aggressive action and an eventual resolution, including this week's coordinated central bank actions. Economic data in the United States continues to be largely better than expected. The supercommittee failed to come to a deficit reduction agreement. While markets expressed initial disappointment, their failure may end up being beneficial as it forces spending restraint. As the euro crisis has deepened, some steps have been taken but mostly address liquidity, not solvency.
Supercommittee Update
by Brad Sorensen of Charles Schwab,
What is the supercommittee?; What is the committee's official task?; What happens to the budget if the committee can't reach an agreement?; Is the committee making any progress?; If the committee can't come to an agreement, what effect could this have on the stock market?; If the committee does come to an agreement, what effect could this have on the stock market?; Is there a chance that Moody's will downgrade US debt as a result of the committee's work?; Will the supercommittee deliberations affect the municipal bond market?
Fed Fights for Relevance
by Brad Sorensen of Charles Schwab,
The Federal Reserve made no changes to their current course of action, but continue to leave the door open for additional measures.
The statement noted stronger economic activity in the third quarter and increased household spending but continued weakness in employment and housing.
Increasingly, it appears that the Fed is being pushed to the background, frustrating their attempts to get the economy moving and reduce the unemployment rate.
Missing the Forest for the Trees?
Earnings season was good and economic data in the US has improved. Robust growth is unlikely in the near future, but the economy is improving. Investors appear to be unconvinced that the picture may be brightening. Inflation continues to run higher than we'd like to see but sustainable price gains are unlikely. The Fed continues to be extremely accommodating. Italy has the potential to be a much bigger problem than Greece. A tentative agreement has been reached for Europe, but hopes for a true long-term solution remain thin. China is likely to suffer no worse than a soft landing.
Will the Micro Matter?
Q3 earnings season is in full swing and it will be modestly positive after numerous reductions of expectations due largely to economic concerns. The US will avoid a dip into recession and, for now, the data seems to support that view. The yield curve has flattened since the announcement of Operation Twist but mortgage applications have yet to jump and companies continue to cite concern over governmental policies for their continued caution. The EU debt crisis has had some positive movement, providing some hope to the market, but concern is growing over the state of the Chinese economy.
Schwab Market Perspective: Perception vs. Reality
Economic data continues to reveal sluggish activity, and markets have been increasingly trading in a risk-on, risk-off mode. The Fed continues to try to stimulate greater economic growth, most recently with the announcement of operation twist. We have serious doubts this will engender any broad upturn. We continue to look toward Washington to move beyond short-term rhetoric and provide some serious long-term plans that allow businesses to have more confidence in the future. European policymakers continue to delay any real action, increasing the risks of an escalation of the debt crisis.
Schwab Market Perspective: What's Next?
The economic debate continues between the recession and slow growth camps. We lean toward the latter but the argument may be just splitting hairs. The more important issue is what this sideways movement may mean for the market and jobs growth. There seems to be more disagreement among Fed members than we've ever publicly seen. Theyve laid out potential further stimulus but we believe their effects are likely to be limited. The European crisis continues to fester and some hard choices may need to be made sooner rather than later. Slowing European economies however, could help emerging markets.
Confidence Counts
Most of the normally historically-telling leading indicators continue to point to the US avoiding a recession. However, risks are clearly heightened as continued erosion of confidence could push perception into reality. The Fed continues to be divided on whether to attempt further monetary stimulus. We question if any efforts will have the desired impact. The Obama Administration and Congress continue to scramble to be seen as doing something to help, but also have limited policy options. European policymakers seem oblivious to the erosion of confidence.
Volatility Continues: Are the Markets Overreacting?
Selling pressure was heavy today as European banking fears combined with soft economic data. Risks have grown, but not all is in the negative column and markets may be overreacting.
Interest rates are near record lows, indicating to us a growing concern about growth and a search for safety.
Investing can be nerve-wracking in environments such as this, but we believe sticking with a well-devised long-term plan continues to be the best course of action.
Breaking Commentary: Fed Gains Disappear
Stocks fell sharply again today, continuing the extreme volatility seen recently.
Concerns over the state of the financial industry in France drifted into the United States, contributing to the sell-off.
Confidence appears very fragile right now and investors should use this volatility to judge their level of risk tolerance and adjust long-term allocations as appropriate.
Shifting Focus
Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.
Earnings Heat Up
Earnings season is heating up and will provide a status update on the "soft patch" and where companies' confidence level lies. Stocks have been more volatile but are they telling us something about potential future direction? Debt ceiling talks continue in Washington, with a deal still likely to come in the final days before the supposed August 2 deadline. The make-up of spending cuts, tax changes, and any entitlement reform may be key to longer-term market reaction. Contagion fears are growing in Europe and solutions are difficult to come by.
Expert Roundtable on Interest Rates
by Mark W. Riepe, Liz Ann Sonders, Kathy A. Jones, Rande Spiegelman & Brad Sorensen of Charles Schwab,
US short-term interest rates have hovered near zero percent for a record period of time. The Fed has kept the funds rate extremely low, not only to boost economic growth, but also to ward off the threat of a deflationary spiral. Given the economy's recent soft patch, we don't expect the Fed to raise rates too soon. But, at some point rates will rise, it makes sense for clients to start planning now. With this in mind, Mark Riepe, led a roundtable discussion of investment and debt strategies for both the current low-interest rate environment and a future point when rates begin to tick up.
Schwab Market Perspective: Dealing with Debt
Global governments are dealing with rolling debt crises equaling shaky investor confidence. We are concerned that many of the solutions weigh on growth prospects, but are hopeful about short-term resolutions that restore business confidence and lead to more investment and hiring. The Fed continues to hold steady, keeping short rates near zero and likely reinvesting maturing Treasury securities after QE2 ends. Greece passed the austerity package required to get short-term funding but much more is needed. And while the focus has been on Europe, it may be time to focus on the Asian region.
Pause or Panic?
Economic data has deteriorated to the point that talk of a double dip recession has returned. The risk of another recession is low as most indicators remain well in expansion territory. Several factors are contributing to a soft patch, but a rebound is likely in the latter part of 2011. Along with talk of recession risk, chatter about the need for QE3 by the Fed has increased. The bar is quite high for QE3, but it is very likely the Fed will not let its balance sheet shrink in the near-term. Global growth is decelerating as well, with China tightening and Japan dealing with reconstruction.
Expert Roundtable on Risk
by Mark W. Riepe, Liz Ann Sonders, Randy Frederick, Rob Williams, & Brad Sorensen of Charles Schwab,
The word "risk" has a negative connotation-something to steer clear of whenever possible. However, in the investing world, risk and performance are intertwined. Market sentiment can shift quickly depending on economic or political news, geopolitical events and even natural disasters and these shifts can sometimes send investors fleeing for safety or taking on more risk as they seek higher returns. Mark Riepe, led a roundtable discussing the concept of risk in investing, strategies for reducing portfolio risk, and investment suggestions tailored to both risk-seeking and risk-averse investors.
Schwab Market Perspective: Shifting Sentiment
Economic headwinds are causing growth expectations to be reevaluated, resulting in choppier action in a majority of asset classes. The Fed is moving steadily closer to ending its purchases of Treasuries but we dont believe its a major event. Normalization of monetary policy still seems slow in coming, although we believe QE2 ending on schedule is nearly certain. Europe's debt crisis continues to plague the eurozone. Solutions appear to be limited and agreement is still anything but assured. Meanwhile, China's slowdown is also weighing on investors.
Market Turbulence Increasing
We are entering a traditionally tough period for the market and economic data has been raising questions about the sustainability of the recovery. While still optimistic on the longer-term outlook, there could be more choppiness in the near term as markets adjust to a changing environment. The Fed continues to buck the global trend by maintaining loose monetary policy, which contributed to a weaker dollar. But lately the dollar has gotten a lift as QE2 comes to an end, contributing to a rout in commodity prices.
Schwab Market Perspective: Making Sense of a Mixed Bag
Earnings season is winding down and is largely positive and CEO confidence is high. This points toward a continued improving labor outlook but could mean more grinding in the stock market. Housing remains moribund but the market seems to be largely dismissive. A ratings warning on US debt rattled the stock market but bond markets were relatively unmoved. Issues need to be addressed, but they are more likely to affect money flowing into the economy and highly unlikely to result in failure to pay obligations. Meanwhile, the Fed is striving to communicate more effectively-but about what?
Inside Information
Earnings season gives an 'insider' look at economic growth. Businesses see and react to changes in the economy before the broader macro data show a clear trend. The Fed has floated some trial balloons about reining in its extremely accommodative policies, the time for which is overdue. Budget issues remain a problem at all levels of government, but likely wont derail the recovery at this time. Despite ongoing debt problems in peripheral European nations, the ECB hiked interest rates. Europe still faces significant issues that make it more likely to underperform other areas of the world.
Concerned About Inflation?
by Brad Sorensen of Charles Schwab,
Inflation has become a bigger topic of discussion among investors and in the media as of late. While we have noted in numerous publications that we don?t believe inflation is a near-term concern due to a number of factors, investors are wondering how to position themselves should inflation start to take hold. First, despite common perception, gold has not historically been a very good hedge against inflation. Due to the possibility of gold prices being a bit extended after the recent run, we don't recommend gold as an investment for those concerned about inflation.
Expert Roundtable on Inflation: Should You Be Worried?
Inflation is a rise in the general level of prices of goods and services; your money buys less. With oil and other commodity prices rising, the Federal Reserve's current easy monetary policy and the economy picking up, many investors are worried about inflation. Mark Riepe, head of Financial Research and president of Charles Schwab Investment Advisory, led a roundtable discussing why Wall and Main Street may have different perspectives on inflation. The roundtable also covers our inflation outlook, ways to protect your investments and inflation-savvy investments you might want to consider.
Above the Fray
Attacks on Libya and recovery efforts in Japan have dominated the headlines, but behind the scenes US economic growth remains solid and we remain optimistic on the stock market. Commodity prices have backed off a bit and the Fed is likely to see QE2 through to its June 2011 end. Of particular concern is the unwillingness or inability for Congress to agree on a budget that addresses the growing deficit issues in the US. Japan has a significant debt burden with which to deal as it rebuilds, while Europe is struggling to come up with a comprehensive plan to deal with the eurozone debt crisis.
Tilting Toward Energy
by Brad Sorensen of Charles Schwab,
Despite dramatic current events impacting markets, tactical shifts to your energy-sector allocation could add a small performance boost over the next several months. Volatility will likely remain elevated as events unfold in the Middle East and recovery continues from the devastating disaster in Japan. For investors looking to make shorter-term, tactical adjustments to a portfolio.
Focus on Japan Overshadows Fed Decision
by Brad Sorensen of Charles Schwab,
To no one's surprise, the Fed kept interest rates at near zero and maintained its scheduled purchases of Treasury securities (also known as quantitative easing, or QE2). We're growing more concerned that the Fed is keeping interest rates low for too long, leading to potential problems down the road. With the market currently reacting to the tragedy in Japan and the ensuing market volatility, it's important to avoid acting hastily.
Volatility on the Rise
Geopolitical unrest and rising inflation concerns have conspired to increase market volatility. We remain bullish on US stocks and believe that this recent increase in consternation will ultimately be healthy for stocks. The US government keeps kicking the debt can down the road, while the Fed seems unconcerned about inflation and is intent on completing QE2. We believe changes are needed at both entities to foster sustainable economic growth. The European debt crisis is bubbling up again, while the ECB is talking interest-rate hikes. Future growth depends on the path of both issues.
Results 151–200
of 212 found.
