The stock market drop in October has been unsettling for anyone with a portfolio, particularly after a 3 percent plunge Wednesday that wiped out the year’s gains. Could this be the beginning of a larger crash, or a recession?
Well sure, it could. But even before accounting for the moderate rebound in markets Thursday morning, it makes more sense to view this sell-off differently. This isn’t a crash, it’s a reset. The economy is shifting in ways that aren’t bullish for stock prices in the years ahead, but signal mostly good news for the economy and for ordinary people trying to make a living.
The bull market that will turn 10 years old early next year has, for most of its run, been a total dream for stock investors.
Economic growth in the United States has been steady, but growth worldwide has been slow — which has kept interest rates low, making stocks a more compelling investment than cash or bonds in comparison.
Weak growth and high unemployment meant companies faced little pressure to pay more for their inputs, including both labor and raw materials. If a worker demanded a raise or a supplier threatened a price increase, there were plenty of alternatives.
Late in this bull market, the Trump administration made its signature domestic policy initiative a steep cut in corporate tax rates, which flows through directly into higher after-tax profits for shareholders.
Those three factors together were enough to propel the S&P 500 up more than 300 per cent from its March 2009 low to its recent high in September. But now, all three are shifting.
Read the rest of this article here (for subscribers).
-- Neil Irwin, The New York Times News Service
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Stocks to ponder
Royal Bank of Canada (RY-T). There are a lot of banks among the weakest stocks this week. This can happen when overall selling pressure gets intense because the bank stocks have the most liquidity and are the place sellers can find the most bids. Scott Barlow picked Royal Bank, the fourth most oversold company in the index, as the focus chart for this week’s edition of the most oversold and overbought stocks on the TSX. RSI buy signals have been reasonably successful in uncovering profitable buying opportunities for Royal Bank stock during the past 36 months. A series of oversold signal in mid-January 2016 forecasted a rally of more than 50 per cent in the following 12 months. Another buy signal in February of this year was less useful as the price rallied a scant 4 per cent afterwards before heading lower. (For subscribers).
The Rundown
There’s no reason to be too spooked by the prospect of a bear market
Halloween is near at hand and the spectre of a bear market stalks the land. It’s shaping up to be a thriller for investors. But the graveyards of the past provide a dose of solace for those who fear that the clammy hand of death will descend on their portfolios. Norman Rothery takes a look at past dips in the market and what that’s meant for the near future afterwards (for subscribers).
Why are investors so gullible?
A year ago, we were swooning over bitcoin. Today, we’re mooning over pot stocks. Not since the dotcom bubble have so many investors been so eager to grab a slice of the next big thing. Exactly why gullibility has roared back into fashion isn’t entirely clear. Maybe it’s the natural side effect of low interest rates and rising stock prices. Or maybe it’s the dearth of enough critical voices. Ian McGugan takes a look at this phenomenon in his column for ROB Magazine (for subscribers).
Mutual funds mogul Michael Lee-Chin on why advisers need to step up their game
Michael Lee-Chin, the billionaire philanthropist, CEO of Portland Holdings and chair of National Commercial Bank of Jamaica, talks about what turned him against the mutual fund business and why investors should be looking for public companies that act like private ones. Dawn Calleja reports for ROB Magazine.
Sun Life Global Investments exploring best potential approach to enter ETF market
Sun Life Global Investments (Canada) Inc. will not yet be jumping back into the Canadian exchange-traded funds industry with proprietary products, opting to launch actively-managed mutual funds that incorporate ETFs into their holdings. Sun Life Global Investments, the mutual fund division of parent firm Sun Life Financial Inc., announced the launch of Sun Life Tactical ETF portfolios, a set of five new mutual-fund portfolios that invest in underlying ETFs, and other mutual funds. Clare O’Hara reports (for subscribers).
Looking ahead: The Retirementality
Listen to Rob Carrick’s new podcast on retirement, listen to here or download on iTunes or on Spotify. There are three episodes, one aimed at millennials, one at Gen X and one at baby boomers.
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Others (for subscribers)
Earnings growth is strong, so what’s with all this selling?
Friday’s analyst upgrades and downgrades
Global oil pricing worries hit U.S. energy shares as earnings loom
Wall Street disconnect: Traders panicky despite robust economy
Others (for everyone)
Mixed U.S. inflation signals leave investors adrift
The best defence: investors flee tech stocks for utilities
When risks outweigh growth; Wall Street’s bell jar rises
Microsoft overtakes Amazon as second most valuable U.S. company
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Compiled by Gillian Livingston