Mitchell Anthony

Recent Volatility and Equity Market Valuations?

By Mitchell Anthony September 23, 2020   The Markets Recent Volatility The equity markets have been going through a bit of a correction over the last two weeks. This is the first correction since the February-March 2020 correction that occurred due to the coronavirus outbreak and the shutdown of the global economy. After this correction the markets ran wild to the upside after the central bank and the US Congress essentially stated that they would monetize their way out of this economic problem. Valuations soared in industries and names that were highly leveraged to the stay at home environment that ensued and continues today.  Cyclical names have also rebounded but the performance has been far different as these cyclical names are not leveraging the current environment but in fact impacted by the current environment. The rally in both has now paused as investors assess the likelihood of a second stimulus package from the US Congress. The stimulus package has stalled because of a few areas within the Democratic demands that the Republicans have not been able to stomach.  Most notably bailouts for states and local governments that acted irresponsibly for many many years.  The Republicans just want less stimulus for consumers and small businesses than the Democrats want.  The Republicans are hung up on principle for the time being but likely will fold when they realize that maintaining control of the presidency and the Senate are more important than blocking stimulus now that will just happen later if they lose control. Investors obviously worry and as a result stocks have corrected 10% or more from their highs recently.  This correction will likely end soon if it hasn’t already as the economy continues to stay on a path of recovery and interest rates remain at zero and the fact is there is nowhere else to put your money besides risk oriented investment areas like stocks or real estate.Read more

New Fed Posture Justifies Higher Valuations For Assets.

By Mitchell Anthony September 1, 2020   The Feds New Posture Chairman Powell spoke at the Jackson Hole Economic Pow Wow last week about the Fed’s role in controlling inflation and made it clear to investors and financial markets that the Fed is prepared to let inflation rise over the intermediate term in order to achieve a full and complete economic recovery.  The Fed believes inflation has been down and out for too long and in fact now recognizes that it acted in error in 2017 by raising rates aggressively when inflation began to ebb higher.  The Fed’s actions slowed the economy then and now Covid 19 has slowed the economy even further causing historically low levels of inflation that the Fed is unhappy with currently.  The Fed believes higher levels of inflation are consistent with a strong economy.  The Fed believes that the last few years of ultra-low inflation must be accounted for when assessing inflation that is on the horizon.  The Fed has been to vigilant in fighting inflation and so have other central banks around the world and as a result the globe has been mirrored in a period of ultra-slow growth with deflation in some areas. Just how serious is the Fed about letting inflation rise and to what extent will the Fed let inflation rise?  This statement is a bit unusual from the central bank chairman we have grown to know.   Comments about letting inflation rise would normally spark a rally in gold and other inflation hedges, however gold did not react significantly to the Fed statements nor did other commodity assets. Investors are becoming astute at reading the Fed and this time recognized that the Fed is not acting in a reckless manner and really just see him more aware of the need to allow this economy to progress.   Stocks however did react and have pushed higher with comfort of a continuation of the current accommodative rate environment.Read more

Election Impact on Markets

Election Impact on Markets By Mitchell Anthony July 31, 2020   With the election on the horizon and the economy in recession it is certainly reasonable to think that a change of the Washington regime is possible, hence the impact on the economy and the financial markets must be evaluated. Historically changes in Washington regimes have occurred during periods of recession, or after substantial loss of confidence in the regime’s ability to get the US economy back on a path of growth. Further changes in the Washington regime have occasionally occurred because the majority believes that the current president is out of touch with the majority’s needs and desires.  Sadly, America is sharply divided today and probably more than ever in its history.  There is civil unrest to some degree across America in a small minority,  and the economy is in recession as a result of Covid 19 virus.  Is this recession and civil unrest enough to cause the majority to vote for change, and if so what will this mean to the US economy, financial markets, and MACM portfolios?Read more

Markets Change Course as Virus Outlook Evolves

Markets Change Course as Virus Outlook Evolves By Mitchell Anthony The US economy and financial markets recovered in the second quarter of 2020 as the outlook for Covid 19 evolved. Authorities and regulators across America and the globe introduced and began executing plans for reopening their economies.  Texas and Georgia were one of the first to reopen their economies but also the first to back peddle on reopening plans as the virus reemerged and cases accelerated. Clearly Covid 19 remains out of control despite the fact that the first efforts to control the virus in America were largely successful, however infections in America have reemerged at an alarming rate far above that of Europe and Asia.  The death rate which had been tilting steadily lower for the last few months has now shown signs of tilting upward over the last few weeks. Consumers and investors are confused as conflicting views from highly respected experts continue to emerge about the outlook for containing the virus without shutting down the economy again.Read more
How Do We Turn the Lights Back On? June 15, 2020 By Mitchel Anthony The financial markets have roared back 30 to 40% from pre-virus correction levels but have begun to struggle to move higher as investors assess the outlook for the US and global economies. The US economy has lost considerable ground and does not appear to have found a bottom yet.  While the US economy is not roaring back to life like the equity markets, positive economic signs do seem to be on the horizon. This economy had been in an extended period of slow growth and we were likely only in the fifth or sixth inning of this ballgame when the virus hit. Now it is unclear whether the remaining innings will be played and we will get the lights back on the game or whether the game will be called because of the storm that has hit.  Despite this investors have become optimistic and liquidity has returned to the equity markets.  This recovery in the financial markets has been largely driven by strong messages of support for the US consumer and US business from the central bank, the U.S. Treasury, and the U.S. Congress.  The Fed has said that they will use all tools available and will provide whatever liquidity is needed to the U.S. Treasury and the financial markets to avoid a collapse in the economy and attempt to ensure a quick recovery from the effects of the government ordered shutdown. Washington politicians have basically made the same statements. As a result optimism has abounded as the Fed has never been unsuccessful in the past.Read more

Equity Markets Nosedive as the Plug Is Pulled On the Economy

By Mitchell Anthony April 10, 2020 The S&P500 fell 19.6% in Q1 2020 compared to a loss of 11.1% for MACM’s Dynamic Growth Non-Qualified portfolio. The US Economy has deflated after orders from Washington and the States as the coronavirus rips its way across America and the globe. The US economy was unplugged just as stronger growth was beginning to emerge after a long period of modest growth since the great recession.  Indeed pre-virus economic trends in the US economy were quite good.  Housing was experiencing some of the best data it had seen in many quarters. Consumer spending on housing, digital devices, and experiences was accelerating. Energy prices were stable and the Fed’s balance sheet was declining. Employment was at all-time highs and mortgage delinquencies at all-time lows. Consumer confidence was near all-time highs and consumer balance sheets were strong. The banking system was solid and corporate America had healthy balance sheets. There was no overcapacity in the economy and asset prices were higher across almost all asset classes. So in other words a very bad time opportunistically to have shut down the economy.Read more

Coronavirus Forces Hand of Government Leaders

March 18, 2020   By Mitchell Anthony   Unfortunately this virus and its ability to spread and penetrate the globe was misunderstood by us and by most investment managers worldwide.  While the world watched selective footage of the virus grip China it was unclear what was being done in China to prevent and contain the spread of the virus and how America would have to react if the virus reached American shores.  Historically coronaviruses that began in China never reached the rest of the globe in a significant manner.  However this time the virus has spread quickly across the globe and threatens human life.  As a result the globe has taken a very defensive posture against the virus.   Government and corporate leaders across the globe have had to weigh the impact of the virus on human life versus the impact of extreme defense measures on economic activity.  Thus far economic survival has fallen and given way to maintaining human health around the globe.  Historically capitalists have sacrificed sometimes almost everything including health for economic and financial gain and prosperity, however in today’s world capitalism has fallen in rank dramatically to our current society’s goals about life and health for humanity. Read more

Coronavirus Update

  The risk of recession continues to rise and as the risk plays out equity markets fall and treasury markets rally.  Stocks generally have fallen almost 20% from their all time highs achieved just a few weeks ago.  Conversely 30 year treasuries have risen almost 15% during that same timeframe as record lows in interest rates are embraced.  The 30 year treasury is now yielding less than 1% and 10 year treasuries are yielding approximately 1/2 of 1%.  If the fear of recession turns into reality treasury yields will undoubtedly move into negative territory across the yield curve and equity prices will possibly fall another 10 to 20%.  Gold has not turned out to be much of a hedge for this recent drop in equity prices.  While gold has done well at times historically during periods of fear gold has now become a bit more of a commodity used in jewelry and hence tied to economic strength.  As recession is embraced investors are less thrilled with gold. Treasuries are a much better hedge for inflation then gold it would appear.Read more

Is the Coronavirus (COVID19) just creating Market Volatility, or is this the End of the growth phase of this Economic Cycle

The steady rally in equity markets that we have enjoyed for over 12 months may have come to an end. Our current rally began in January 2019 after our last correction that occurred in October 2018.  The S&P 500 has declined approximately 11% from its all-time high achieved just a few weeks ago.  Volatility has risen to the highest level in several years over the last two weeks.   Has the rally just paused or is this the beginning of a more significant correction as investors discount the likelihood of the growth phase of this economic cycle ending because of the impact of the coronavirus.  We highly suspect that this is not the case! However, we cannot ignore the unknowns that exist with this highly infectious virus that has not proven to be very deadly, but is a threat to people who already have respiratory distress. The last time we had a coronavirus in the globe was in 2003 with SARS. It began in China as well and mutated from animals very similar to this virus. The SARS virus caused little if any damage to the global economy or the American economy and burned itself out within six months. SARS had a much higher death rate and was also very infectious but never spread to a vast part of the globe.  We have had other viruses over the years that were deadly but have never shut down or changed course of the global economy. SARS, MERS, Swine Flu, the list goes on…Hopefully this will just be another one that is added to the list of viruses that burned himself out before they ever damaged the US economy.Read more

Markets Advance as US Economy Ebbs

The US equity markets moved counter to the economy and the bond markets in the fourth of 2019. US equity markets had their best quarter in years as the S&P 500 advanced 9% and MACM’s dynamic growth portfolio (DG) and diversified equity (DE) advanced 11.9% and 12.9% respectively.  The rally was rooted in several beliefs that grew deeper in the minds of investors as the quarter unfolded. The attacks on capitalism by liberal Democrats began to wane as Warren and Sanders retreated from their strong rhetoric of tearing apart corporate American superstars like Amazon, Facebook, Apple, Google, and Netflix.  The trade picture also improved during the quarter as a deal was struck with the Chinese that would be incorporated in two phases.  While trade has really not impacted the economy in America it has slowed the Asian economies dramatically and hurt global growth.  These manufacturing areas of the world purchase significant amounts of American industrial equipment and this part of the US economy has been soft for several quarters.  These areas of the economy came to life in the fourth quarter and we also saw Netflix and Amazon return to the top of the leaderboard.Read more