Nervous Investors Return to Risk Assets…But Economy Remains too Strong??

Nervous Investors Return to Risk Assets…But Economy Remains too Strong??

  January 19, 2024 By Mitchell Anthony Investor’s hunger for high returns has driven liquidity back to risk assets despite nervousness about the direction of interest rates. Risk assets have performed like a yoyo over the last year as expectations for inflations have been up and down with changing economic data. There are no clear answers to some obvious questions that are on the mind of investors regarding the need for lower inflation?  Will employment soften and will consumption decelerate? Investors are clearly hoping for weaker economic data that will support lower interest rates, friendlier fed policy, and as a result higher asset prices.  Given the rise in interest rates that we have experienced it is only natural to think that consumption and employment will soften leading to sustained lower inflation.  However this has not occurred yet and consumers continue to spend.  While many investors worry there is something terribly wrong with the economy and a bust is on the horizon , the real problem is that the economy has too much underlying strength.  Softer growth will be great news for stocks and bonds.Read more

Why are Investors leaving Risk Assets! 

Why are Investors leaving Risk Assets!     October 10, 2023 By Mitchell Anthony   Investors left stocks, bonds, REITs, and bitcoin in the third quarter as the uncertainty for inflation caused investors to hit the pause button for BUYS  and contrarily build cash positions.  Inflation is still above the Fed speeding limit and higher rates will prevail until inflation buckles. The rush out of risk assets hit treasuries the hardest with the intermediate treasury fund (TLT) down 13% from its July 31 highs dealing a blow to prudent investors who thought treasuries & bonds were a safe place to be.  Stocks likewise declined with the S&P 500 down 5% and deeply cyclical value stocks as measured by the Russell 1000 Value (IWD) down over 7%. REITs declined 9% or more with office building REITs down over 15% (BXP) and residential property (REZ) faring a bit better at -7%.  MACM’s Dynamic Growth portfolio performed better with a modest decline of 1.9%. Read more

Equities Rock Again – Are New Highs Ahead?

Equities Rock Again - Are New Highs Ahead?   July 3, 2023 By Mitchell Anthony   Investors have returned to risk assets as recent economic data shows a Goldilocks like scenario unfolding yet again.  A year ago it was unthinkable that the economy could slow enough to cause inflation to hit a wall without economic growth hitting a wall as well.  Somehow the unthinkable is playing out and this Goldilocks like scenario has caused investors to embrace risk assets and give up safe returns of 5% or more in ultra-short treasuries.  The S&P 500 rose 8.7% in the second quarter, MACM’s dynamic growth portfolio rose 11.3%, and NASDAQ triple Q’s rose 15.3%.  While all of these indexes are still 5 to 10% below all-time highs there has been a substantial bounce in equity markets over the last six months, making an assault on new highs entirely possible.   Value stocks were abandoned in favor of sexier growth stocks with the Russell 1000 growth Index advancing 12.8% compared to the Russell 1000 value index returning only 4.1%. The allure of fixed income was lost and treasuries for the most part were down 2 to 4% in the quarter.   The stability of the economy combined with much lower inflation drove the performance in the markets! Read more

Markets Rally Big in Q1!  Can it Continue and with What Leadership?

Markets Rally Big in Q1!  Can it Continue and with What Leadership?   April 10, 2023 By Mitchell Anthony The first quarter of 2023 was volatile for both the economy and the financial markets. Expectations for economic growth and expectations for inflation mostly fell during the quarter but optimism for the soft landing ultimately prevailed.  Inflation has been a tremendous burden on the US economy for the last two years and consumers are close to the end of their discretionary savings and they have been spending more and getting less for quite a while now.  Consumers have yet to show frustration or walk away from the higher prices but it would seem that this sort of mentality is near. The financial markets mostly performed poorly in 2022 as inflation ran out of control and the Fed looked terribly behind in his job fighting inflation.  Stocks, Bonds REITS, and Crypto all fell hard.  However optimism has started to prevail in 2023 as many of the leading economic indicators showed clear signs of a significant slowdown that will curtail if not end the inflation cycle that we have endured.  At this point it is unclear what lies ahead for economic growth but inflation seems set to re-anchor near the 3 to 3 ½% level by the end of 2023.Read more

First Major Banking Collapse Since 2009 – What Does it Mean?

First Major Banking Collapse Since 2009 – What Does it Mean? March 11, 2023 By Mitchell Anthony     Silicon Valley Bank (SVB) collapsed yesterday as depositors withdrew cash! This is the first major banking collapse since the great financial crisis of 2008.  While the crisis and details of this takeover are still unfolding the early visibility we have reveals that this failure is not part of a systemic problem within the US economy and we are unlikely to see other banks fail in a similar manner.  The problems and circumstances that led to the default seem unique to this highly specialized regional bank that worked almost exclusively with the start-up tech industry in Silicon Valley. At first blush it would appear that the majority of major banks are sound and not subject to the unique circumstances that brought down this highly specialized bank. The problem that we have is the fact that banks are not required to disclose or mark to market their bond portfolios that are being held to maturity or they hope to hold to maturity. There could be significant unrealized losses on these portfolios.  This crisis may force banks to reveal their bond portfolio status and it could certainly require them to start paying higher returns on cash deposits. Investors are obviously bracing for the worst and the stock prices for almost all banks plunged by as much as 20 to 30% over the last few days as the crisis unfolded. We believe the crisis and the plunge in bank stock prices likely represents a value opportunity. We have been underweight banks in our portfolio since the pandemic began for reasons such as this!Read more