StockActive MarketClub

03/04/2018

https://www.facebook.com/bloombergview/posts/1708684865874350

History redux? The surging tension over trade between the U.S. and China has prompted comparisons to American combativeness toward Japan that preceded the 1987 equity meltdown -- at least, in the mind of veteran market analyst Hao Hong.

19/03/2018

https://www.facebook.com/bloombergmarkets/posts/1554036604664659

First it was the euro-area’s benchmark Euro Stoxx 50 in late February. Then the U.K.’s FTSE 100 last week. And now Germany’s DAX, Switzerland’s SMI, and Europe’s main gauge Stoxx Europe 600.

18/01/2018

Outlook 2018: bull market in home stretch

The bull market is in its most exciting phase, and it is not a time to be out of the market, according to Tom Stevenson, investment director at Fidelity International.

The current equity bull market is in its ninth year, and in the last and most exciting phase of the upward stage of the cycle. It's 'not a time to be out of the market’, according to Tom Stevenson, investment director at Fidelity International. Indeed, this phase can give the best returns, he says.

Expectations of President Donald Trump’s tax reforms buoyed the market in 2017 and continue to do so this year. But therein lies a risk, Stevenson adds, in that they could stoke the US economy too much.

In December, the US president signed legislation containing $1.5 trillion of tax cuts.

Although the current bull market is the second longest, and second biggest in recent history, in Stevenson’s opinion it still has further to run. He does not expect it to end with recession. ‘Bull markets don’t really die of old age, they tend to be murdered by central banks’.


The risk he sees is that Trump’s tax reforms will overheat a US economy that is picking up, amid a strengthening global economy. And this might lead to a return of inflation, as well as the US Federal Reserve (Fed) raising interest rates faster and further than expected.

The latest figures from the International Monetary Fund show global growth running at 3.7%. Two to three quarter-point rate rises are expected in the US this year.

Company earnings in the US are rising but this is needed, Fidelity’s investment director said, as price-to-earnings ratios (P/E) are climbing towards the heady levels of the Dotcom bubble.

09/01/2018

https://www.facebook.com/IGcom/videos/1574885712602469/

31/12/2017

https://www.facebook.com/bloombergmarkets/posts/1479045592163761

It's been a peculiar year.

27/12/2017

https://www.facebook.com/bloombergview/posts/1607821325960705

Adjust your expectations for market turmoil before it occurs, not during or after the fact.

18/12/2017

What did we learn in 2017?

18 Dec, 2017 2 min read

A look at some of the lessons 2017 taught us.

Calling an end to trends

Trends go on much longer than anyone ever thinks possible. While it seems odd to think that something will just continue to move in one direction, they often do, and usually surprise everyone in the process. Bitcoin is, of course, the most obvious example, going from $820 to over $16,000 in the space of 12 months. But others such as the Nasdaq 100 spring to mind, as does the Dow Jones, with its almost tedious insistence on surpassing milestones.

The trend is very much your friend; trying to call the turn in any trend is a dangerous game.

Comparing charts is a bad idea

We were, apparently, due a major correction, if not an outright crash, in October of this year. Aside from the fact the year ended in a seven, and that both 1987 and 2017 had seen big rallies in stocks in the first nine months of the year. The comparison looked good – a chart of 1987 overlaid on one from 2017 seemed to have a pleasing symmetry, but the similarities ended there. Despite the possibility that the rise of passive funds increased the risk of a crash, October 2017 passed without incident.

Predictions are dangerous

Most investors love predictions, they make them in order to make themselves sound smart and/or to reassure themselves about their positions. Supposedly, 2017 was to be the year of the US dollar (USD), but the dollar index is around 9% lower as we enter the final straight of the year. Goldman Sachs thought that European stocks would post double the return of US equities, but at present the reverse appears more likely to be the case. By all means analyse the state of play, but drop the attempt at crystal-ball reading.

A quiet market is not a warning sign

All year pundits have warned that renewed volatility was just around the corner. And yet the Volatility Index (VIX) has continued to plumb the depths. This period of quiet was supposed to be the calm before the storm. Well, it’s still calm. The maximum drawdown on the S&P 500 has been about 3%. Perhaps quieter markets are more of the norm than we thought, and the heightened volatility of 2016 was the aberration.

29/11/2017

https://www.facebook.com/bloombergmarkets/posts/1450532261681761

Returns likely to be lower across all assets in medium term.

27/11/2017

What to look out for in US tax reform process

With US tax reforms taking shape, what are the key roadblocks, and what would it mean for US indices should we see the bill passed?

Donald Trump has promised much and delivered little in his time at the White House, with roadblocks coming from congress and the courts. However, that is about to end, as the likeliness of a raft of US tax reforms appears to be on the rise as we head into year-end. Crucially this is also the big ticket item that markets wanted the most, with growing expectations driving the Dow Jones, S&P 500, and Nasdaq into new highs throughout the year.

Whether or not we take on 2018 with this same bullish outlook is going to be heavily reliant on the ability to pass these reforms, rather than whether the Federal Reserve (Fed) will raise rates or not in December. The process has so far thrown up some hurdles which must be overcome to get the tax cuts across the line. There are two main issues which must be overcome, should the current House and Senate packages move into the negotiation phase.

Time of corporate tax cut
The Senate plan differs from the House proposals on a number of fronts. However, one of the key things that stood out for markets was the decision to push the corporate tax element of the reforms into 2019. A major delay to arguably the most important part of the bill (to markets at least) would lessen the near-term positive impact to US stocks, yet would provide a longer term and less dramatic impact.

That being said, to some extent this could help prolong the bull market at a steadier pace, rather than one short-term blowout. As we move towards the negotiation phase, where the House and Senate will have to find a compromise between the two bills, it is likely that the timing differences could be resolved rather than providing a roadblock.

Individual mandate
The Senate version of the bill also sought to extend the reach of the tax reforms, by simultaneously attempting to kill off Obamacare via something called the ‘individual mandate’. The individual mandate is a requirement that everyone in the US needs an insurance policy of a minimum standard, or else face a penalty. The removal of the individual mandate would likely undermine the ability to maintain the core Obamacare tenet that insurance firms cannot exclude or penalize people for their prior or current illnesses.

With the Democrats unlikely to support such a move, it will be down to the Republicans to garner enough internal support for this move to pass it. Given the controversial nature of this attempt to stop the notion of universal coverage, this could be a key roadblock both in the Senate, and then ultimately within the Congress negotiation phase.

Recent weeks have shown the process to be surprisingly quick, with Republicans hoping to expedite the process to enable it to be on Trump’s desk by his Christmas deadline. This speed has seen many economic and political experts raise their expectations of whether (and when) these reforms will occur. Alec Phillips, a Goldman Sachs political economist has raised the likeliness of an early 2018 reform introduction from 65% to 80%. Meanwhile, Marko Kolanovic, JPMorgan Global Head of Derivative and Quantitative Strategies, has said that markets were being overly pessimistic about the chances of a reform package being implemented.

It is this potential mispricing of the tax reforms which are of particular note, with the possibility of substantial upside for indices should it come to fruition. Looking at the Dow Jones Industrial Average (DJIA) chart below, there is a clear hurdle to overcome at 23,526, where a breakout could spark another strong move higher for the index. Keep an eye out for signs of progression in the tax reform process, with particular attention paid to the corporate rate timing. With a clear uptrend in play for US stocks, we could yet see substantial upside if these reforms are passed in the coming months.

22/11/2017

Investing for income: the power of dividends
21 Nov, 2017 4 min read
When it comes to investing, stock dividends are a key consideration. Whether you reinvest them or use them for a regular income from your portfolio, it’s important to know how to maximise your dividend returns.

Companies pay dividends to return a slice of their earnings to their shareholders. Essentially it is a way of ‘sharing the wealth’ generated by the business regardless of how its share price is doing. It is usually set as a ‘dividend per share’, so how much you get is proportional to the number of shares you own. Dividends can take the form of cash or stock, and may be paid quarterly or annually.

Sometimes companies may also pay special dividends. These are one—off payouts made when a company has excess cash on its balance sheet and wants to return some of it to investors. You’ll also often hear the term ‘progressive dividend’ policy, whereby dividends are generally increased on an annual basis as long as key rules are met.

In the UK stock market, a large proportion of total dividend payouts are concentrated among just a handful of FTSE 100—listed businesses; including oil giants BP and Royal Dutch Shell, pharmaceuticals company AstraZeneca, mobile giant Vodafone and bank HSBC. According to AJ Bell, just 10 stocks account for 59% of forecast FTSE 100 dividend payments for 2017.

Double whammy

Dividend stocks are popular with those who are investing for income because they give you a potential double whammy — you can benefit from the regular dividend payments, as well as any rise in the share price (although you should always remember that share prices can fall as well as rise). Many retirees invest this way because they rely on regular income payments to support their finances in retirement. But it’s not just about holding stocks or equity income funds, because bond and property investments are also popular strategies to generate income, and a balanced portfolio will combine these different approaches.

If you are not in retirement and you don’t need the regular income you can get from dividend payments, you shouldn’t let your dividends sit idly in a cash account. You can really ramp up your savings pot if you reinvest them instead by buying more shares in the issuing company. The power of compounding means your dividends can generate their own returns, and these are then reinvested to generate their own returns.

For example, if you had invested £10,000 in the UK market 20 years ago, the extra return you would have gained from reinvesting your dividends over that time would swell your savings pot by £12,384, according to JPMorgan Asset Management.

This process is the reason why dividends are sometimes said to account for the majority of stock market returns over the long term.

Where to start

If you’re ready to start investing for income, one option is to buy shares in well—known dividend payers such as oil, mining or pharmaceutical companies. Buying solid FTSE 100 names may sound like a safe strategy, but holding individual stocks brings greater risks than spreading your money across a diversified investment portfolio. If you want to hold shares, you need to do your homework. Remember that even big companies can struggle, and may not be able to maintain their dividend payouts if they fall on hard times. If you are set on holding direct shares, ideally you would look for those companies which have a track record in growing their payouts year after year, showing that they are sustainable, the business is consistently cash—generative, and it will be able to cover future dividends with earnings growth.

You could let an expert pick your stocks for you. There are some very respectable income funds on the market which have long and successful performance track records. You can choose equity, bond or property income funds, or select by region or company size. There are even monthly income funds if you want your investments to give you a regular monthly salary, or enhanced income funds which aim to deliver higher yields, often by using derivatives to maximise income.

Investment trusts can also be a useful option as their structure allows them to hold back cash reserves so they can continue to pay regular and growing dividends even when times are tough. For example, three listed investment trusts — City of London Trust, Bankers Investment Trust and Alliance Trust — have all managed to increase their dividends every year for the last 50 years, an impressive track record. You can buy these stocks just as you would any other.

Exchange traded funds (ETFs) are a popular low—cost way to generate income. For example, there are passive funds offering exposure to everything from US mid—cap dividend paying stocks, to emerging market names, to the highest dividend payers globally. ETFs have the advantages that they will often be easy to trade and can be cheaper than active funds. But bear in mind if you are buying a passive fund that tracks the FTSE 100 that concentration in those key dividend payers means you might end up over—exposed to a small number of stocks or sectors.

13/11/2017

https://www.facebook.com/bloombergmarkets/posts/1435946246473696

Europe is no longer the sick man of the world economy.