Gibraltar Chronicle March 2023

Our latest article on the stock market, as published in the Gibraltar Chronicle.

Market Commentary March 2023

Bullish sentiment in the stock market can occur during both a bear market and a bull market. When we are in a bear market, sentiment gets bullish during counter-trend rallies, only to see new lows ahead. However, during the initial stages of a bull market, sentiment will also get bullish. To those who don’t analyse history, this is assumed to be a bad thing that is likely to doom the rally. One could argue though that we are at that point in the cycle right now. There are plenty of technical indications that stocks have transitioned into a bull market, whether it’s price action, the chart structures of certain major indices, or market breadth. At the initiation stage of a bull market, we need investors to turn more positive and start getting back into stocks. We have had some of that lately, yet we think part of the rally was short-covering as there was a lot of pessimism at the end of 2022. Now that the shorts have covered, that fuel is gone. If the market can hold on and grind higher, it would be a great sign that the stock market has indeed turned the corner.

Gibraltar Chronicle February 2023

Our latest article on the stock market, as published in the Gibraltar Chronicle.

Market Commentary February 2023

The stock market in 2023 is simply a different animal than it was in 2022. All the major indexes are up, risk-on is back, and growth stocks are leading the way. Happy days are here again, right? Not so fast. The market has had a strong January, but stocks also rose sharply in October and November 2022 – before face-planting in December. Recession risks are clearly present and may be rising, as evidenced by the GDP & corporate earnings figures. Stocks in January appear to have risen on a valuation bounce and on hopes, if not expectations, that central banks will begin to reverse course sometime in 2023. While year-to-date stock gains may prove to be a house of cards, for now investors are happy to see green on the screen.

Gibraltar Chronicle January 2023

Our latest article on the stock market, as published in the Gibraltar Chronicle.

Market Commentary January 2023

We wish all our clients and readers a very Happy New Year. The FTSE 100 has seen heightened volatility as of late – falling 5% in September, before rising 3% in October and a further 7% in November. Those monthly moves up and down are substantially larger than typical monthly changes in the 1%-2% or lower range, and signal a developing battle between bulls and bears. Bulls want to believe that the rise in inflation is moderating, and that central banks will take their foot off the gas as pricing pressures ease. Bears believe past central bank actions as well as inflation’s dampening effect on consumer discretionary spending will push the economy into recession in 2023. Our view is that the stock market should continue to grind higher over the course of the year. However, it could be a bumpy ride and investors need to get used to such volatility.

Gibraltar Chronicle December 2022

Our latest article on the stock market, as published in the Gibraltar Chronicle.

Market Commentary December 2022

Most investors will be happy to see the back of 2022. It has been a year where everything went against both the stock and bond markets. Much of the pain was self-inflicted – as too much liquidity led to out-of-control inflation and then central banks were far behind the curve (and have been playing catch up ever since). Too much liquidity led to bubbles in the mega-caps in 2021 and mega bubbles in tech stocks, most of which had scorching revenue growth but were not profitable. Some of these names went up 200%, 300%, and 400% – performance reminiscent of the late 1990s tech bubble. The biggest bubble was in crypto, as a generation of “20 somethings” took the financial world by storm, sending Bitcoin to $69,000 in late 2021 from $4,000 in early 2020 and then back to ~$17,000 today. All bubbles eventually pop – and then things get very ugly, as they have this year. We project that 2023 will not be nearly as  dramatic, as so much bad news has already been reflected in stock and bond prices.

Gibraltar Chronicle November 2022

Our latest article on the stock market, as published in the Gibraltar Chronicle.

Market Commentary November 2022

This year is turning into one of the worst for the S&P 500. The year-to-date return excluding dividends is an abysmal -21%. Over the past 30 years, this loss was exceeded only in 2008, when the “500” collapsed 39% during the financial crisis, and 2002 when it declined 23%. Previously, the worst years for the S&P 500 were in 1974 (-30%), 1937 (-39%), 1931 (-47%), and in 1930 (-29%). Going back to 1929, there are only a few times when the index got walloped in consecutive years. Those include the bear markets of 1929 to 1932, 1939 to 1941, 1973 to 1974, and 2000 to 2002. Multiple years of gains are much more common, which makes sense because the market rises approximately seven out of 10 years. What is unusual about this bear market is that bonds have been in their own bear market, leaving investors with no place to hide, with the 20+ Year Treasury Bond index falling 35%.