With another massive roll over in the global markets, today's market action could be considered a respite. CNBC certainly thinks so, running a segment within their Closing Bell series entitled The Upside of a Down Market. The premise, as you may have guessed is that stocks that were expensive are now
cheap enough to buy.
So a couple of problems here...the benchmark S&P 500 is down 4.2% year-to-date ; even the clear laggard amongst the major indices, the Dow Jones, is down "only" 6%. Yes, these are big numbers for a relatively slow moving market (for perspective, consider Japan's Nikkei 225, which blew through 4% of valuation in just one day alone!). However, what financial pundits are implying
is that this is a bottom-feeding opportunity. That it most certainly isn't.
So long as the Federal Reserve remains stubborn with its political dogma that
the economy is in recovery, the taper will still be on and the markets will
continue their decline. If capital gains is the only concern an investor has, I
see no reason to jump on board right this minute unless to satisfy a (very)
short-term trade.
The fundamentals are poor in what has been a saturated environment : the
opportunity for growth in the majors is exceptionally limited and will be for
some time. The main drag continues to be the American consumer, who has reduced
spending across all thresholds. Yum! Brands is now the latest indicator :
despite their 9% pop up today, they're still more than 3.6% behind the curve
year-to-date.
That brings up a question of earnings quality. From what I'm seeing, we have
a long ways to go yet...
cheap enough to buy.
So a couple of problems here...the benchmark S&P 500 is down 4.2% year-to-date ; even the clear laggard amongst the major indices, the Dow Jones, is down "only" 6%. Yes, these are big numbers for a relatively slow moving market (for perspective, consider Japan's Nikkei 225, which blew through 4% of valuation in just one day alone!). However, what financial pundits are implying
is that this is a bottom-feeding opportunity. That it most certainly isn't.
So long as the Federal Reserve remains stubborn with its political dogma that
the economy is in recovery, the taper will still be on and the markets will
continue their decline. If capital gains is the only concern an investor has, I
see no reason to jump on board right this minute unless to satisfy a (very)
short-term trade.
The fundamentals are poor in what has been a saturated environment : the
opportunity for growth in the majors is exceptionally limited and will be for
some time. The main drag continues to be the American consumer, who has reduced
spending across all thresholds. Yum! Brands is now the latest indicator :
despite their 9% pop up today, they're still more than 3.6% behind the curve
year-to-date.
That brings up a question of earnings quality. From what I'm seeing, we have
a long ways to go yet...
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