Entries by Mark Maloney

Market Commentary July 2022

The S&P 500 has rebounded over 4% from its 2022 lows. But from a technical perspective, it is far too early to call the bottom. For this we need to see a huge improvement in the percentage of stocks trading above their 200-day averages. Unfortunately for investors seeking to call the bottom, that takes time. Price tends to run away from investors at a bottom, and often you will hear investors say that they will wait for the next pullback that never comes. The market does not let you in but rather just locks the door. News flow at the bottom tends to be terrible and those waiting for the all-clear sign on headlines will likely be disappointed as the market discounts better news in the future. Bad news is bought, which can be confusing to many – especially those that have not been through numerous bull/bear cycles. Generally, stock market lows are found when some type of bottom formation is seen, and the bullish breakout coincides with the break of the bear-market trendline. Quite simply, it’s a succession of higher highs and higher lows.

Market Commentary June 2022

After two years cooped up in their homes, consumers have been anxious to get back out and enjoy the travel and services they have been missing. In anticipation of a guest surge, airlines have added routes and flights, hotels have ramped up promotional packages, and restaurants have revitalised their menus for consumers anxious to put aside the home cooking. In a fully employed economy with rising wages, and with savings supplemented by past stimulus and reduced commuting costs, consumers should be more than ready to make up for missed time. But an unwelcome traveller, namely inflation, has booked passage. Many consumers are devoting much of their disposable income to food, fuel, and shelter, leaving scarce resources for discretionary goods and services such as travel and leisure.

Market Commentary May 2022

April was a brutal month for the stock market, with blue-chips suffering their worst month since March 2020, while the Nasdaq had its worst month since October 2008 when the ‘great recession’ was taking hold. Purely from an investment perspective, the drop has had the benefit of washing away significant portions of the over-valuation in stocks that existed at year-end. Indeed, the combination of continued earnings strength and a correcting market have helped ease concerns about stock-market valuations. At some point, bulls will wade back into the carnage in search of favourable entry points for stocks that investors loved when they were pricey and hate now that they are cheap.

Market Commentary April 2022

Investors study the yield curve for signs of pending economic softness; a key indicator is when short-term rates push above longer-term rates. That does not normally happen, given that investors expect to be paid a higher rate of return for committing money for a longer period. When rates push higher at the short end, that suggests that the long-term outlook is poor. Investors looking for recession indicators typically focus on the relation between yields on the two-year and 10-year Treasury notes, called the “two-10s spread.” This recently inverted. The last dozen times the two-10s spread inverted, the US subsequently experienced some degree of economic slowing, several times resulting in a recession.

Market Commentary March 2022

With stock markets already on edge, thanks to ongoing inflationary pressures and the impact of rising interest rates, the war in Ukraine has sent the markets into freefall. Running away at the first sign of difficult times, however, is not a good move. Shares have historically delivered a better return than cash in the bank and they tend to recover quickly during times of turmoil. Even though remaining invested can be uncomfortable, it’s important for investors to hold their nerve and wait out the market volatility. Just ask those who sat tight through the Covid sell-off in February 2020, global financial crisis in 2008, and countless other black swan events. Investing is all about patience and eventually the rewards will come.

Market Commentary February 2022

The City has no shortage of sayings. The one regarding the first month of the year is “As January goes, so goes the trading year”. Like most sayings, it was coined in a distant time when the stock market would be unrecognisable to most investors today. However, there is recent evidence to substantiate this claim. Good Januaries especially predict good stock years. For all years between 1984 and 2021, the FTSE 100 has finished the year higher 90% of the time when the market rose in January. In addition, Up Januaries are good for above-average returns. The FTSE 100 has averaged capital appreciation (before dividends) of 6.8%. In years in which both January and the full year were positive, the FTSE 100 saw average capital appreciation of 17.6%. The FTSE 100 rose 1.1% this January, a good sign for stock market investors.