Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
China Hang Seng Stocks Index Collapses and Commodities - 24th May 19
Costco Corp. (COST): Finding Opportunity in Five Minutes or Less - 24th May 19
How Free Bets Have Impacted the Online Casino Industry - 24th May 19
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

A Stocks Bull and Bear Market

Stock-Markets / Stock Market Valuations Nov 24, 2008 - 05:06 PM GMT

By: Paul_J_Nolte

Stock-Markets Best Financial Markets Analysis ArticleLooks like I picked the wrong week to quit sniffing glue! Up until Friday, last week was a pretty bad year, down over 13% and the specter of another US bank hitting the ropes along with most, if not all the auto companies sent investors running for the safety of government bonds. The yields are now below 0.05% on 3-6 month bills (that is NOT a misprint!). By Thursday's close, the markets had erased all of the gains from the bull market of '03-'07 and pushed the SP500 down to levels that were first breached during April of '07.

Of course, the economic numbers look bad and the coming week, although a holiday shortened one, will be chock full of data including more housing related data and a glimpse of economic growth in the third quarter. The Friday rally could be attributed to bargain hunting or the announcement of the new Treasury Secretary, either way it allowed investors to step a bit lighter going into the weekend. Finally, this week begins the holiday season and the focus will be intense on the retailers. So once the turkey digests and the last piece of pie has been tucked away in your stomach, get out and do your patriotic duty on Friday and shop!

Now that the bull market gains have been erased and there is blood in the streets (knee deep!), what is an investor to do? The rapid unwinding and capricious daily selling in the markets have surprised us, leaving many stocks selling for less than what they could fetch if the entire company were sold off.

Our long-term models continue to point to well above average returns for stocks over the next 3-10 years, given the depressed levels that exist today. Of course stocks could go lower still (some are calling for another 30-50% from Friday's close), however we do not believe the economic conditions warrant that type of decline. Given the huge compression in the market over the past 12 weeks, a rally of 15-20% could easily occur without breaking the markets out of the bear market trend that is in place. We still have the opinion that those with at least a 3+ year horizon should be slowly increasing/adding to equity holdings. Once the sun starts shining again the bargains of today will no longer exist.

The bond model continues to point to lower rates, but given the huge move into the “safe” investment, the question remains open as to whether rates can go much lower. Certainly short-term rates can't fall too much further, given the rates outlined above. Even the two-year note is getting close to being less than 1% annually.

Commodity prices continue to fall; money has been poured into the financial system, potentially increasing inflation in the future (but that presupposes that credit is being created – and today it is not) so what are fixed income investors to do? As nasty as things are getting in the corporate bond market, it may be the time to buy some quality short-term corporate debt. Spreads have widened out to levels that we haven't seen since the Depression (there is that comparison again!). While default rates are likely to rise further, some very viable company debt can be had for high rates of interest.

By Paul J. Nolte CFA

Copyright © 2008 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules