Equity Markets Rebound

US equity markets rebounded at an amazing pace in the first quarter of 2019.  Historically it has almost been unheard of for equity market corrections of 15% or more to be retraced at the same or better pace than what occurred during the fall.  This is exactly what occurred in the first quarter of this year.  This obviously has us thinking deeply about what was behind the selloff that occurred in the fourth quarter and whether it was in fact a manufactured correction by hedge funds seeking to make enormous amounts of money through a big short.  We hypothesized in January of this year that the selloff in the fourth quarter was likely due to a big short put on by hedge funds and institutional investors and not likely due to fears from investors worried about a substantial change in the economic environment.  This seems to be what primarily occurred.  Now in hindsight there are some other observations that can be made and clearly more data is available about the economic conditions that were the headline news driving markets lower in Q4. Read more

Facebook – The F in the FAANG?

By Mitchell Anthony There is a reason why Facebook is the first name in the FAANG!   Facebook has become one of the most widely known companies in the world for many reasons.  It has led the evolution of social media and its tools for sharing ideas, personal views, political views, pictures, and just about everything else has been widely used by Generation X, the millennials, and now the baby boomers.   Facebook has learned how to monetize their products as their clients are highly sought after by anyone with something to sell.  Facebook’s revenue for advertising has been growing hyperbolically and the outlook remains fantastic.  Facebook has also been monetizing information they gather about what their clients do on their platform, what they share with friends, and what sites they visit.  All of this has been done legally and with authorization from the clients. However, what they are doing here has been widely misunderstood by regulatory bodies and the media and anyone seeking to make a story that will sell newspapers. Read more

Is the Fear Driven Selloff Over?

By Mitchell Anthony   The equity markets retreated as selling beget more selling and fear beget more fear in the fourth quarter of 2018.  This dramatic change of course for the equity markets in 2018 was reminiscent of similar market action in 2014 and 2015 when weakness in global economic conditions emerged.  However this correction was sharper with most indices falling 20% or more, compared with 10% or more corrections in 2014 and 2015. Was this just a big bump in the road to much higher levels for US equity markets? Or has the path for equity markets already reached its summit because recession lies on the horizon.  Most investors have found themselves asking these questions over and over recently.  While none of us know what lies ahead, trends in economic data point to further growth for the US economy as the impact from the trade war becomes more of a distraction to economic conditions than a game changing event. Further this is all occurring while inflation and central-bank policy mostly remains benign.  This environment of continued steady growth will ultimately lead to higher equity prices particularly those equities that are insulated from the problems in manufacturing and highly cyclical industries.  As the equity market continues on its path of recovery the leadership in the equity market will likely to take on a different twist as investors avoid the US sectors and foreign markets that are directly impacted from the trade war that is likely to persist for the short to intermediate term. This is a difficult time to own deep cyclical industrial names but contrarily a great time to own companies experiencing organic growth occurring with innovation and development of great products.   We have had tremendous alpha for the last few years based upon our ability to identify where investors were going early.  We owned the fang long before most people knew what the fang was.  The acronym for the market leaders in 2019 will be a different version of fang, but will clearly be areas insulated from global trade and benefiting from organic or secular growth. Read more

How Problematic is the Divide in America?

By Mitchell Anthony   The equity markets have continued the correction that began in October as fear of the unknown have motivated equity holders to move to cash and give up their equity positions for minimal returns in cash. The unknown involves all of the disconnect that seems rampant throughout America and the globe.  Is the Federal Reserve disconnected from the fragility of our economy and is he recklessly raising rates? Is a highly divided Congress disconnected from the impact their actions may have on consumer confidence.  Is the White House disconnected from how much change America can embrace without breaking consumer confidence? Are investors disconnected from the fundamentals that drive our economy and are they recklessly selling equities despite a strong forecast of steady continued growth from our Central Bank? Last and most importantly is Mitch disconnected from the fundamentals that are driving our markets and our economy? Read more

Should an Investor become a Trader?

By Mitchell Anthony   When markets behave with extreme volatility there is opportunity for traders.  These trading opportunities can enhance returns, or damage returns, of an investor’s portfolio. Many times investors become traders during periods of high market volatility because of fear or greed.   Mitchell Anthony Capital Management (MACM) has not succumbed to the urge to trade during periods of high volatility.  This is evidenced by our recent decisions to stay invested rather than move to treasuries or cash to benefit from the fear that entered our marketplace over the last few months.   Some of our clients have questioned the wisdom of staying long equities, noting how better positioned we could be today if we would’ve left equities in September and came back to them now that equities are 10 to 15% lower.   These questions need a reply and the answer is simple and involves the fact that our dynamic growth and asset allocation portfolios are not trading portfolios but rather asset allocation portfolios.  My objective in managing both of these portfolios is that of an investor who is positioning his portfolio to benefit from the environment that drives financial assets.  This generally involves expectations for central bank policy, inflation, and earnings growth.   The outlook for these leading indicators will determine the ideal asset allocation.  For example if our economy starts to produce high inflation than investors will seek to ride this inflation and commodity prices will rise as a result. I attempt to forecast where inflation will be for the next few years and get ahead of most investors and buy these asset classes before the inflation is notable. Likewise if we have a low inflationary environment with modest or moderate growth than equities will be sought out by investors. Again, if I can forecast accurately the inflationary environment, and the growth environment, that I can position the portfolio today to be ahead of where investors will go next year. Read more