Bonds Performed Poorly Leading Up To Release of Fed Minutes

Posted by David Templeton on Wednesday, May 20, 2015
In our last post about a week ago we noted the slow pace of economic growth that has unfolded since the financial crisis. This slow pace of growth has resulted in the unprecedented easing programs (quantitative easing-QE) instituted by the Federal Reserve over the past few years. A consequence of these QE programs is the apparent inability of the Fed to embark on a monetary tightening path since the markets seem addicted to these programs. In our view, given the low level of rates today, an init...
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Anemic Economic Growth Since The Great Recession And Some Causes

Posted by David Templeton on Monday, May 11, 2015
The March trade deficit grew to $51.4 billion which has many economist now predicting subsequent revisions to first quarter GDP will show the economy contracted for the first time since contracting -2.1% in the first quarter of 2014.  In the first quarter the advanced reading on GDP or economic growth was reported at .2% which was below an expectation of a Q1 growth rate of 1%. The large increase in the trade deficit is being attributed to resolution of the West Coast labor dispute resulting in...
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Dividend Paying Stocks Struggling Mightily

Posted by David Templeton on Wednesday, May 06, 2015
In a post last month we highlighted the fact value strategies and dividend paying strategies were lagging both the S&P 500 Index and the S&P 500 Growth Index over the past twelve months. Frequently the value type stocks have a dividend component that provides additional return for investors.Further confirmation that dividend paying strategies have been underperformers can be seen below. S&P Dow Jones Indices reports the average performance of the dividend payers in the S&P 500 Index have lagged ...
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Stock Buybacks Are Not A Primary Factor In Lower Wage Growth Rates

Posted by David Templeton on Wednesday, April 29, 2015
Recently, a number of articles have been circulating about the need for companies to use more of a firm's cash flow to pay employees a higher wage versus using the cash flow growth to fund stock buybacks. For example,How the Stock Market Destroyed The Middle Class (MarketWatch)Stock Buybacks Are Killing the American Economy (The Atlantic)Profits Are Up, But Wages Are Stagnant. This Senator Has A Plan (ThinkProgress) The implication in a number of the articles is stock buybacks increase a company...
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A Further Rise In Crude Oil Prices Facing Headwinds Near Term

Posted by David Templeton on Friday, April 24, 2015
Oil rig count has fallen dramatically in the U.S., yet oil supply is continuing to pile up nearly unabated. The market is of the belief that this decline in rig count will ultimately put a halt to the supply growth.From The Blog of HORAN Capital AdvisorsRex Tillerson, CEO of Exxon Mobil (XOM), recently spoke at the IHS CeraWeek conference in Houston, TX. Tillerson believes oil prices are likely to remain at a lower level for the next several years. Additionally, ConocoPhillips (COP) CEO noted t...
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Investor Letter Spring 2015: Another Weak First Quarter?

Posted by David Templeton on Thursday, April 23, 2015
The first quarter of 2015 once again was a period where reported data suggests a mixed economic picture for the global economy. Interest rates declined slightly leading to positive returns for nearly all U.S. bond market segments. This was once again influenced by lower yields outside the U.S. and the strengthening Dollar. Worries about an economic slowdown have resulted in Europe, Japan and China incorporating additional economic stimulus via interest rate decreases and bond purchase programs. ...
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Higher Yield and Value Oriented Strategies Underperforming Broader Market

Posted by David Templeton on Wednesday, April 22, 2015
One interesting aspect of the recent equity market advance has been the investor focus on higher quality dividend growth equities. A result of investors' search for yield is many of these higher yielding equities are trading at the higher end of their historical valuation range. Also, given the heightened focus on yield, one would expect the higher quality dividend growth equities to have outperformed the market over the past year. However, as the below chart shows, the SPDR Dividend ETF (SDY) h...
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Is This The Beginning Of A Larger Equity Market Correction?

Posted by David Templeton on Sunday, April 19, 2015
Awaiting the 10% equity market correction seems to be on the minds of a number of strategists as soon as the market begins a turn lower. The last correction of greater than 10% occurred in 2011 when the S&P 500 Index declined nearly 20% between July and October 2011.Since March 23rd through Friday's close, the S&P 500 Index has declined 43 points to 2,072 or a decline of just 2%. In the first week of March, the S&P fell 3.5% before rebounding. An important support level has been the 50 day movin...
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Economic Surprise Indices: Bad News Might Actually Be Good News

Posted by David Templeton on Sunday, April 19, 2015
One criteria investors and strategists evaluate on a regular basis is whether or not economic data that is reported on a near daily basis is exceeding or missing expectations. A commonly reviewed index is the Citigroup Economic Surprise Indices (CESI). According to Bloomberg,"The Citigroup Economic Surprise Indices are objective and quantitative measures of economic news. They are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A...
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Expecting A Weak Q1 2015 Earnings Season, But Looking At Forward Guidance

Posted by David Templeton on Sunday, April 12, 2015
With first quarter 2015 earnings season beginning to hit full stride in the coming two weeks, earnings growth expectations for Q1 2015 are now negative at -4.6%. The last negative quarterly growth result was Q3 2012 as can be seen in the below table from Factset.From The Blog of HORAN Capital AdvisorsSource: FactsetOut of the small percentage of S&P 500 companies that have reported to date, 70% have cited the strong Dollar as the cause of their negative Q1 2015 report. As noted at the beginning ...
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