The Path Of Least Resistance Is Upward (Bob Doll)
Nuveen's Bob Doll says recent strong corporate earnings means higher stock prices for the rest of the year and into the next. "The recent sideways trend of global equities should gradually give way to a renewed uptrend as the global economic recovery gains traction," he writes. "While equities are still digesting last year’s strong gains, an imminent upturn in corporate earnings implies higher stock prices on a 6- to 12- month horizon, with risks tilted to the upside. A strengthening economic recovery also signals higher G7 government bond yields, especially as the markets begin factoring in the start of Fed rate hikes sometime next year. Investors remain cautious about the outlook but should gain greater comfort as global growth shifts onto a stronger trajectory. This should eventually result in a steady flow out of cash and bonds into stocks. Geopolitical risks aside, the path of least resistance for equities and bond yields is shifting upward."
Don't Sell In May And Go Away This Year (Guggenheim Partners)
You probably shouldn't be adhering to the old adage — or any adage, for that matter — that the sweetest spot for stocks is spring. But for Guggenheim CIO Scott Minerd, this is a particularly bad year to do so. "...in the face of strong U.S. economic fundamentals, which should be pushing interest rates higher, technical factors at home and abroad have driven interest rates in the opposite direction. This only adds to already improving U.S. economic prospects. Low interest rates and increasing employment will have a positive impact on housing and on consumer confidence and spending. We will also likely see a pick-up in mergers and acquisitions activity, and U.S. first-quarter corporate earnings have beaten estimates -- factors which should help push equity prices even higher. In fact, 2014 may be a year where it is wise to ignore the old adage to sell in May and go away."
What's Causing The Risk-Off Blip? (Kevin Ferry)
Yields on U.S. treasuries have slipped recently in the face of seemingly stronger economic data. What gives? In an email to Kevin Ferry, an unnamed analyst lays out his thesis: "Public corporate pension funds — thanks to the over 30% gain in the S&P500 last year and the rise in rates, which lowered the net present value of the liabilities many — are 100% to 110% funded. At the end of the first quarter a number of large pension funds were up 8% on the year because of there holdings in the "MOMO" stocks (Amazon, Facebook, Netflix etc.) and with the net present value of their liabilities lower, it became attractive to reduce growth assets and increase hedge assets. I think this explains the decline in momentum stocks in April and the strong bid for long dated fixed income. The question is this asset reallocation over. The answer is no! Big picture there are 16T in Private pension fund assets and 12T in US treasuries so this story will continue to play out as our population ages and preference for fixed income increases."
There Is Nothing New Under The Amazon Bestseller List (Josh Brown)
The Reformed Broker notes the list of best selling books on investing are all relatively old, written by guys like Lynch, Graham and Bogle. "What’s interesting to me is that so many of the top books for stock investors are from decades ago – in one case almost a century ago. I’m not sure you’d see that in other verticals, like sports, romance, suspense, history, politics etc. I think it goes to show how permanent sound financial advice is, how truly timeless some market wisdom has turned out to have been."