Whoa…where did that come from? This dull market of 2015 seemed to hark from when Bruce Banner became the Incredible Hulk, and a lot of experts started yelling, “Look out below!”
Yesterday, the Dow surged 250 points for its best session of the year, but the move barely moved the index back into the plus column for the year. Some people say this market is nuts, but I think it’s the exact opposite. It’s been indecisive because the data has been indecisive.
Moreover, while it seems to sway from jumpy, to serene, to carefree on the surface, it’s anything but beneath and that’s a great thing. How can the market be irrational with 20% of the biggest names in bear markets?
Stocks that hit 52-week highs this year and turned down more than 20% before today include:
- Whole Foods -30%
- American Airlines -28%
- Urban Outfitters -24%
- Hewlett Packard -21%
And stocks off from highs in the past year include:
- Chesapeake energy -58%
- Wynn Resorts -54%
- Michael Kors -49%
The great news is companies that fail, have been punished.
Valuations Too High
In addition, just because it’s higher doesn’t mean it’s overvalued or expensive. Take a look at history and the price to earnings ratio is right at the norm.
Here’s the deal, I always try to separate the notion of investing in great companies from the notion of investing in Wall Street (the psychical location) or the one that’s a metaphor for rich, exclusion and greed.
On that note, I will use the overused line…now more than ever it’s a stock-pickers market.
Strong Dollar Lie
Nobody ever says they want a weak dollar, not even chief executives of multinational companies who take major haircuts from currency exchange when the greenback is too strong. But in reality, a lot of folks desire the dollar to be weaker including investors and maybe the White House, too.
On Monday, there was scuttlebutt out of the G7 meeting that President Obama said, “the strong dollar is the problem.” Of course the White House denies this, but the dollar has been down since and looks vulnerable here.
Are bonds and oil telling us the economy is picking up steam? There are no doubt the slumping dollar influences bond yields and oil, but the spike in yields and breakout in crude hint at an economy that’s stronger than the data suggests and is gaining steam quickly.
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