Investors Remain Confident Despite Declining Economic Growth

Many stock markets around the world moved higher last week.

Investors’ optimism in the face of economic headwinds has confounded some in the financial services industry. Laurence Fletcher and Jennifer Ablan of Financial Times cited several money managers who believe investors have become complacent. One theory is investors’ buy-the-dip mentality has become so firmly ingrained that any price drop is seen as a buying opportunity, regardless of share price valuation.

Another theory is investors remain confident in the face of declining economic growth expectations because they expect central bankers to save the day:

“Key stock markets are hovering close to record highs even while the death count from the China-centered virus rises and travel in, out, and around the country remains heavily restricted, hurting the outlook for domestic and international companies. Regardless, stumbles in stocks are quickly reversed. To some traders, this is proof that investors believe major central banks will pump more stimulus into the financial system.”

Ben Levisohn of Barron’s doesn’t think investors in U.S. stocks are complacent. He wrote:

“Yes, [investors have] decided to stay invested in U.S. stocks, but compare it with the other options. Emerging market stocks near the epicenter of the outbreak? Treasury notes with yields of just 1.59 percent? Cash? But, they haven’t sat idly by, either. They’ve dumped the stocks most exposed to coronavirus and to a slowing economy – things like energy, cruise lines, airlines, steel.”

Treasury bond markets are telling a less optimistic story than stock markets. The U.S. treasury bond yield curve has flattened in recent weeks. On Friday, 3-month treasuries were yielding 1.58 percent while 10-year treasuries yielded 1.59 percent. When there is little difference between yields for short- and long-term maturities, the yield curve is considered to be flat.

Historically, the slope of the yield curve – a line that shows yields for Treasuries of different maturities – is believed to provide insight to what may be ahead for economic growth. Normal yield curves may indicate expansion ahead, while inverted yield curves suggest recession may be looming. Flat yield curves suggest a transition is underway.

Best regards,

Womack Investment Advisers, Inc.

WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Website: www.womackadvisers.com

Comments

Another Tornado Record's in Sight for U.S. as Thunderstorms Boom

Bloomberg by Brian K Sullivan Another wave of tornado-spawning thunderstorms is set to rip across the Great Plains and South this week, putting the U.S. within reach of a record year for life-threatening twisters. Severe storms will drench a swath of the country from Texas to Mississippi over the next five days, according to the U.S. Storm Prediction Center. Through Thursday, 369 tornadoes have been reported across the country, the most in five years and more than double the normal number of sightings. An active jet stream and unusually balmy weather are to blame for the burst of deadly tornado activity, the storm prediction center said. Strong winds have dragged storms into the warm, humid air that’s blanketed the eastern half of the nation, creating conditions ripe for a weather phenomenon that leads to at least $400 million in damage a year in the U.S. “We have a severe threat starting today and continuing for each of the next five days through at least Monday

Womack Weekly Commentary: September 18, 2017

Womack Weekly Commentary September 18, 2017 The Markets “In theory, there is no difference between theory and practice, in practice there is.” Yogi Berra was talking about baseball, but the concept also applies to diversification, according to the GMO White Paper, The S&P 500: Just Say No . From the title, you might think the authors – Matt Kadnar and James Montier – don’t like U.S. stocks. They do: “Being a U.S. equity investor over the past several years has felt glorious. The S&P 500 has trounced the competition provided by other major developed and emerging equity markets. Over the last 7 years, the S&P is up 173 percent (15 percent annualized in nominal terms) versus MSCI EAFE (in USD terms), which is up 71 percent (8 percent annualized), and poor MSCI Emerging, which is up only 30 percent (4 percent annualized). Every dollar invested in the S&P has compounded into $2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.” The au

Markets Were Rattled Last Week

The market hates surprises, especially when the surprise comes from a central bank. Last week, the European Central Bank (ECB) unexpectedly reversed course and took a more accommodative stance on monetary policy in an effort to encourage stronger European economic growth. Tom Fairless of Barron’s explained: “Officials are seeking to shore up an economy that has been rattled by shocks ranging from a slowdown in China to mass protests in France and bottlenecks in Germany’s crucial auto industry. They are threading a careful path between providing sufficient support for the region’s softening economy while avoiding any appearance of panic, which could ricochet through financial markets.” The Eurozone isn’t the only region feeling the pinch of weaker economic growth. China’s exports were down more than 20 percent in February, reported Investing.com . Analysts had expected a decline of about 5 percent. Concerns about the health of China’s economy have been growing since the p

Womack Investment Advisers

Search This Blog