So what goes with this equity market?
U.S. equities remain strong but investors are on edge and pundits, as always, are skeptical. With 94% of Fortune 500 companies having reported second quarter results, 84% of companies have beat EPS estimates and 72% have been above revenue estimates from securities analysts. That's pretty astounding. We are getting into "It can't get any better than this territory" which sounds positive but to investors can be a bit scary. "It can't get better?"
The big worry of the moment is about major tech names. Many of China's major tech names, notably Tencent and Alibaba, have disappointed investors recently and seen share drops between 10% to 20% over the past few months. Tech is global so this is not trivial. Facebook and Netflix in the U.S. have retrenched in recent months, for totally different reasons, that's big tech showing some vulnerability. Amazon, Google, and Apple remain solid. On the consumer side, housing starts have been on the low side but consumer confidence remains strong. Whether that confidence is due to consumer wealth capacity growing or due to looser lending standards in a more competitive retail market is the real question. Opinion here is that it is the latter, which requires some thought.
Where is the right balancing point between desired wage and productivity growth and the possibility of some unexpected hiccup in inflation? Really, all seems quiet on that front but that is the looming question. The other overhang is having an unbalanced leader who could roil the geopolitical front or the domestic political front in a serious way at some point. Who knows, but if he manages to make a major blunder the market has room to move down 10% without destroying anything but some retail and traders, but not institutions. If he does something catastrophic, look out below. We watch...
Still invested here at usual range of limits, a bit risky if one is into age based investing but that's not done here.
So we watch...
The big worry of the moment is about major tech names. Many of China's major tech names, notably Tencent and Alibaba, have disappointed investors recently and seen share drops between 10% to 20% over the past few months. Tech is global so this is not trivial. Facebook and Netflix in the U.S. have retrenched in recent months, for totally different reasons, that's big tech showing some vulnerability. Amazon, Google, and Apple remain solid. On the consumer side, housing starts have been on the low side but consumer confidence remains strong. Whether that confidence is due to consumer wealth capacity growing or due to looser lending standards in a more competitive retail market is the real question. Opinion here is that it is the latter, which requires some thought.
Where is the right balancing point between desired wage and productivity growth and the possibility of some unexpected hiccup in inflation? Really, all seems quiet on that front but that is the looming question. The other overhang is having an unbalanced leader who could roil the geopolitical front or the domestic political front in a serious way at some point. Who knows, but if he manages to make a major blunder the market has room to move down 10% without destroying anything but some retail and traders, but not institutions. If he does something catastrophic, look out below. We watch...
Still invested here at usual range of limits, a bit risky if one is into age based investing but that's not done here.
So we watch...
posted by John Borden at 4:44 PM
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