Monday, September 16, 2019

We might be nearing the end of the economic expansion and the stock market cycle

The conditions today are that investors are heavily invested in equities in the US. They are bullish, otherwise you would not have all these IPOs of companies that do not make any money and they immediately go up in the secondary market and you would not have the high valuations among FAANG stocks. There is a lot of optimism about US equities and cash levels are low. So, any disappointment could lead to a longer term decline in the market. 

I do not believe you will get the crash like in Argentina where essentially in dollar terms, the stock market performance was down 37% and the currency was down so altogether more than 50% in one day! That is a crash, 50% in one day. I do not think you will get that in the US. 

via economictimes

Wednesday, September 11, 2019

President Trump hopes to get re-elected in 2020

We have the election in a little more than a year and to be re-elected, he [Trump] has to show a strong economy and not a recession in the US. 

The US is an asset driven economy. We have an unusual situation in most western equity markets, .... where it is not the economy that drives the stock market but it is the stock market that drives the economy. If the stock market goes up, the economy has performed okay, if stocks drop 10-20%, we will have recession. We are not down 10% from the peak though we are down modestly. 

So Trump is very conscious about the stock market and he believes that the Federal Reserve by cutting rates could essentially boost equity prices. I am not so sure about that because the equity market nowadays looks at different factors than just monetary factors. If you just looked at monetary factors, the Japanese Nikkei should be the strongest stock market in the world and it is not or European markets that have had negative interest rates for a very long time, should be the strongest markets but they are not.

via economictimes

Monday, September 9, 2019

Emerging markets are probably a safer bet than US markets right now

The emerging markets overall, not India specifically, peaked in 2015 and since then, they have been in a bear market and have grossly under-performed the US. So regardless of what you think, I believe that an investor should rather look at emerging economies at the present time than at the US stock market which looks very expensive -- just the fundamentals of equities -- and the US dollar looks to be on the high side.