political

An Absolutely Incredible Stock Market!

Posted on by George Mahfouz

It is absolutely incredible that this stock market is weathering the threat of impeachment! We have witnessed the strongest bull market in history! Not even the threat of impeachment can rattle this market. I do not want to get too political here but if half of this is true the markets just don’t care. Then throw into the mix the constant flip flopping that is going on with the China trade war and we are still near all-time highs? This makes me believe more now than ever that passive investing has almost got a total grip on stocks. Seemingly NOTHING can shake these markets. It’s almost like close your eyes and hang on for the ride. This worries me a bit. Why? Well for starters stocks used to be valued by their proprietary nature, growth potential, earnings power and ultimate dividend yields. We have witnessed a melt up in the stock market for more than a decade despite the shocks that have come and gone. What’s more is the geopolitical risks that are here and present and now our own President is going through an impeachment process and we still are near all time highs? Simply an absolutely incredible stock market we find ourselves in!

Well there is an old saying on Wall Street and that is the “trend is your friend!” My friends there is no denying this over the past decade. Let’s also keep in mind that the market is a lot smarter than we think. Meaning, there is no panic with this latest tape bomb of impeachment. Well one can say there is no way this President will get impeached because the Senate will not roll over. This very well may be the case. One thing we can do is pay attention to how corporate America continues to perform or not perform. At some point in time one would think that valuations will matter and that the markets will begin to pay attention to the normal risks that are inherent with any market.

Good luck to all 🙂

~George

 

 

Happy New Year!

Posted on by George Mahfouz

Happy New Year! Well if you have been long the markets and with the way stocks closed out 2018, it wasn’t so happy for the bull camp. However, a new year means new beginnings :-). Let’s do take a gander to see how the major averages fared in 2018. The Dow Jones Industrial Average ( click here or see chart below) finished the year down 5.6%, the S&P 500 (chart) closed the year down 6.2%, the Nasdaq Composite (chart) closed down 4% and the small-cap Russell 2000 (chart) closed 2018 down 12%. This is the worst performing year for stocks in a decade.

So what happened? In my view and simply put how can stocks go up in a straight line for over a decade without a correction? That’s right, stocks essentially have gone up for over 10 years’ without a healthy 20% correction. So when the markets finally had a real correction which is what occurred in the 4th quarter, it felt like the sky was falling. No question the Federal Reserve and rising interest rates have played a role in the market correction, however, let’s keep this in mind a 2-2.5% Fed funds rate is still historically low. What wasn’t normal over the past decade was a 0 percent interest rate policy and no market volatility. Everyone got spoiled with such an accommodative policy and market environment.

Another factor playing into the mix of the Q4 market correction is without question the trade war and tariffs that our President has ignited. This to me is even more of an issue to our economy than rising interest rates lifting to a normalized level. Not only is the trade war and its ramifications playing a role, but the inconsistency and chaos out of Washington are wreaking havoc on the markets.  No doubt in my mind that investors and Wall street are falling out of love with how our country is being governed, especially over Twitter. This is all fixable, we will just have to wait and see if the ego’s and the political agendas on both sides of the aisle can get the confidence back in our marketplace. Paula and I wish everyone the happiest and most prosperous 2019.  Good luck to all 🙂

~George

Dow Jones Industrial Average - George Mahfouz Jr

No Fear Here…

Posted on by George Mahfouz

Despite North Korea launching its seventh missile test of the year on Sunday and the White House seemingly in an upheaval, stocks continue to demonstrate no fear and continue their record setting ways. Today the S&P 500 (chart) and the Nasdaq (chart) hit all time highs. Without question this bull market is now even catching wall street veterans off guard. Q1 earnings reporting season is close to wrapping up and other than retail, most companies have reported in-line or outright beats in their earnings results, especially the tech sector. Tech has been on fire lately and this is due in large part of mega-cap tech smashing analysts expectations. Earnings results from companies such as Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN), Alphabet (NasdaqGS: GOOGL) and Facebook (NasdaqGS: FB) has propelled the Nasdaq (chart) and these particular issues to all-time highs. The Dow Jones Industrial Average (chart) and the Russell 2000 (chart) remain in striking distance of setting new records as well. It is truly remarkable how the markets have been able to weather the current political environment here in the U.S. and the geopolitical risks abroad.

From a technical perspective, the aforementioned key indices are in pretty good shape. The Nasdaq (chart) is the only one of the four that remains in overbought territory according to the relative strength index. All of these averages also remain above their respective 50-day and 200-day moving averages, yet another bullish sign. Volatility also remains at historic lows. So one may ask what about the “sell in May and go away” adage? From a technical standpoint, I do not see any reason why these markets won’t continue to melt up from here. Of course there is always the risk of a geopolitical event or the actual seasonal risk of assets taking a pause or retracing a bit. That said and whatever the case may be, it is undeniable that the markets have been the most resilient in years, if ever.

Good luck to all 🙂

~George

What A Rollercoaster Ride!

Posted on by George Mahfouz

This week started off with the vote no one expected. Global markets were shocked with the outcome of the United Kingdom’s vote to the leave the European Union. Here at home, the Dow Jones Industrial Average (see chart below) lost close to 1,000 points between Monday and Tuesday, the Nasdaq (see chart below) over that same two-day period lost close to seven percent as did the S&P 500 (chart) and the small-cap Russell 2000 (chart). A breathtaking 2-day drop which was so swift and profound that it violated the 200-day moving averages of all of the aforementioned indexes. Fast forward to today and what seemingly was the start of an angry correction, has turned into yet another “buy the dip” opportunity. No matter what the challenges are or have been on the macro-economic or political front, markets over the past several years have shrugged them off. I honestly did not think stocks would snap back this time as quickly and as powerfully as they have.

Yet again, oversold conditions created a trader’s dream with this snap-back rally. Ever since this bull market began, every shocking or unexpected headline which have rattled the markets have always been met with strong support that then turns into the resumption of this protracted bull market. However, it is also very clear that we have been trading in a range for quite some time now and every time we have tried to breakout of this trading range, resistance is met and we retrace back to a variety of moving averages.

So you may be asking how do we break out of this S&P 500 (chart) 2000 to 2120 trading range? One catalyst that can do this is the upcoming second quarter earnings reporting season which kicks off here in July. I do not think that the economy is such that record earnings results will come forward. In fact, companies may take it upon themselves to use the Brexit circumstance to soften their future guidance? We will see. In my humble opinion I think the possibility of a downward break is more probable in the near term than stocks breaking out to all-time highs, especially after this snap back rally. Good luck to all!

Paula and I wish everyone a safe and Happy 4th of July holiday 🙂

~George Mahfouz, Jr.
Dow Jones George Mahfouz JrNasdaq George Mahfouz Jr.