November 8, 2024

In advance of the presidential election, there was a significant amount of worry…Hedge funds significantly reduced market exposure (risk) in the weeks before the election.  Long-only clients of major investment banks sold billions worth of stock last week, the largest weekly sale year-to-date.  Many institutional money managers came into election day under-invested.

November 1, 2024

Low volatility in the stock market is generally considered bullish.  The best way to think about this is to look at the inverse case, high volatility.  High volatility is an expression of investor uncertainty.  In an uncertain world, the risk premium (discount rate) of stocks goes up because “anything” can happen.  When the risk premium rises, stock values decline.

October 25, 2024

Investment banks are beginning to publish their forward 12-month and beyond forecasts.  The 20% plus appreciation of the S&P 500 year-to-date is a surprise to most market strategists. …many strategists are, at best, reluctant bulls.

October 18, 2024

The stock market is being powered by accelerating economic growth and falling short-term interest rates.  S&P 500 consensus earnings are forecast to be up 15% next year.  Historically, the unwind of high inflation and high interest rates in the absence of recession has been supportive of S&P 500 appreciation.

October 11, 2024

U.S. recession risk appears to be fading.  U.S. growth data has improved recently. Investment bank Goldman Sachs just reduced their recession risk probability for the next twelve months to 15% from 20%.

October 4, 2024

Strategically, it appears all is well.  US real GDP has averaged 2.8% over the last 8 quarters.  This is well above the expected long-term normal rate of 1.8%. 

September 27, 2024

The Federal Reserve, Delta and much of the professional investment community interprets an inverted treasury yield curve as a predictor of recession.  The yield curve inverted over two years ago.  The economy is growing at roughly 3% rate.  From mid-2022, the S&P 500 is up over 60%.

September 20, 2024

A key component of investing is the expected rate of return versus a “hurdle” rate.  If the return prospects of an investment are above a hurdle rate, the investment opportunity is considered attractive.  This week, the Federal Reserved lowered the risk-free rate by half a percent.

September 13.2024

NVDA traded up by about 8%.  NVDA did the heavy lifting in pulling the S&P 500 Index up 2.7% on the day off the lows.  Emerging doubts about an Artificial Intelligence (AI) bubble were subdued. 

September 6, 2024

The 10-year U.S. treasury rate at about 3.7% is near the 52-week low. This offers good and bad news. The good news is it suggests the bond market believes inflation is coming down and will eventually reach the Fed target rate of 2%. The bad news is it suggests U.S. economic growth may also be diminishing.

August 30, 2024

This week, the equally weighted S&P 500 (RSP) and the Down Jones Industrial Average (DIA) reached all-time highs. It is not just about Nvidia anymore. With investor confidence rising for September rate cuts and a soft landing, the rest of the stock market is beginning to...

August 23, 2024

Yields on risky company debt (aka: junk bonds, non-investment grade bonds, high-yield debt) have fallen to the lowest level in more than two years. The bond market is making it clear that the odds of a recession are low. In a recession, many companies experience declining sales...

August 16, 2024

The market is resilient. It digested a $20 trillion yen carry trade crisis in three days last week. The S&P 500 is back to within 2.7% of its all-time high. The economy is expanding. The Atlanta Federal Reserve Bank is forecasting 2.4% real GDP growth in the third quarter...

August 9, 2024

From the market close on July 31 to the low of August 5 (three trading days), the S&P 500 depreciated by 7.3%. Headline news reported it was due to heightened recession fears. The unemployment rate ticked up from 4.1% to 4.3% and the ISM manufacturing report...

August 2, 2024

One of the most crucial determinants of market behavior and economic health is the money supply. Central banks, including our Federal Reserve, manage the money supply by adjusting the monetary base, which is closely linked to the size of the Fed's...

July 26, 2024

Large capitalization technology stocks have led the market higher year-to-dateAs of about two weeks ago, the S&P 500 was up roughly 16% versus the equal-weighted S&P 500 index (RSP) and small capitalization Russell 2000 index (IWM) up 5% and...

July 19, 2024

Up until Wednesday of this week, the S&P 500 had been up 10 of the last 11 trading sessions. The Russell 2000 surged 11.7% in seven trading days which represents the bulk of the positive performance of the small cap index for the year…

July 12, 2024

Fed Funds futures contract prices imply there is an 86% probability that the Federal Reserve will lower the Fed Funds rate by 0.25% at their September 18 meeting. Fed Funds futures are volatile and the probability can shift by substantial amounts in short periods of time.…

July 5, 2024

The S&P 500 was up +15.2% for the first six months of the year. The index is market cap weighted, meaning larger companies have more significance in its performance. When larger/mega cap stocks perform well, the S&P 500 Index tends to outperform the…

June 28, 2024

The top three retailers in the world measured by sales volume starting from the top are Walmart (WMT), Amazon (AMZN) and Costco (COST). All three of these stocks reached all-time highs in the past week or so. As a group, their average appreciation this year has been 30%.…

June 21, 2024

When investors have conviction, they generally are willing to invest. When conviction is lacking, it is hard to act. This year, investment bank strategists have lacked conviction. The best recent example of this is Goldman Sach’s S&P 500 end-of-year valuation forecast released last week…

June 14, 2024

This week, the AI Star goes to Apple (AAPL). Week to-date, AAPL added roughly $366 billion worth of market cap to its value. That is the equivalent of adding the value of Costco (COST). From the low of less than two months ago (April 19), Apple has climbed by more than the value of…

June 7, 2024

Once again, the stock market has defied expectations. Although analysts significantly reduced their estimated probability for recession this year, it has been widely assumed that this election year would be volatile and there was not much room for the “expensive” stock market…

May 31, 2024

The lottery ticket called Nvidia (NVDA is up 130% year-to-date) leaves no doubt that there is an AI surge underway. As of yesterday’s close, NVDA represented 6.3% of the S&P 500 market cap weighted index and is the second largest holding in the index…

May 24, 2024

Over time, stock valuations follow earnings. Right now, Artificial Intelligence (AI) and Nvidia (NVDA) are an earnings piledriver. Nivida reported better earnings, revenues and guidance than expected this week. They announced a 10-for-1 stock split and a 150% increase in its dividend…

May 17, 2024

The S&P 500 Index reached a new high this week of 5,300+. The forward 12-month Price/Earnings (P/E) multiple of the market is 21x. The 30-year average forward 12-month P/E is 16.6x. Measured by P/E, dividend yield, price-to-book, price-to-free cash…

May 10, 2024

With 80% of the S&P 500 having reported, 77% beat earnings expectations and 61% beat revenue expectations. Earnings growth is 5%, the highest year-over-year growth rate since the second quarter of 2022 (5.8%). 59% of all reporting companies beat EPS expectations by…

May 3, 2024

Inflation depends, in part, on what consumers expect it to be. If consumers expect prices to be higher in the future, they buy now which creates inflationary demand pressures now. In the Fed statement and press conference held this week, the Fed said…

April 26, 2024

The S&P 500 crested a high on the first day of April. By April 19, the S&P 500 had plunged roughly 6% lower on the realization that six Fed rate cuts may be two or none in 2024 because of better-than-expected economic growth. Off the low, the S&P 500…

April 19, 2024

On the last day of March 2024, the S&P 500 index touched a peak at 5264.85. Month- to-date in April, the market has been unwinding its gains for the year. The economic news has been too good and too much. On April 1, the ISM Manufacturing Index…

April 12, 2024

The Bull market bucked hard on a higher-than-expected March CPI report this week and expectations for Fed rate cuts in 2024 receded from three to two. At the start of 2024, the consensus expectation was six rate cuts. The chance there are zero rate cutsin 2024 is moving higher…

April 5, 2024

Conclusions about how the economy and inflation are trending should not be derived from any single data point. However, there are times when one data point can provide more insight than many others. The March ISM-Services (Institute for SupplyManagement) report.…

March 22, 2024

Despite recent reports of faster economic growth and higher than expected inflation, the Federal Reserve indicated this week that they expect to cut interest rates three times in 2024. Three rate cuts are what the Federal Reserve projected in their January meeting…

March 15, 2024

U.S. share of global equity value has risen to 50%. The U.S., with a population of about 332 million people, has created half of all equity wealth in a world of 7.9 billion people. If this does not indicate capitalism works better than socialism and communism, it is…

March 8, 2024

As of last Friday, the S&P 500 was up 16 of the last 18 weeks, which is something that has not happened since 1971. If the market closed at the time of this writing, the record would update to positive 17 of the last 19 weeks. Nvidia (NVDA) opened on January 2, 2024 at…

March 1, 2024

For the past quarter of a century, upside participation with downside protection has been what Delta’s founders have been thinking about and working to implement. We began our careers selling research to institutional portfolio managers who were…

February 23, 2024

Artificial Intelligence (AI) chip maker Nvidia (NVDA) reported earnings this week. Year- over-year, revenues are up 265%. Their share of the data center computer market has grown from about 15% five years ago to about 75% today. The company’s gross margins are…

February 9, 2024

The S&P 500 Index is up 21% from the October 2023 low at is roughly at 5000. This has come as a surprise to many investors. Citi’s U.S. economic surprise index has risen to its highest level since November as investors have been slow to see economic acceleration…

February 2, 2024

The Federal Reserve (FOMC) voted to keep the Fed Funds rate unchanged in a range of 5.25-5.5% this week. Fed Chairman Powell made it clear in his press conference on Wednesday that a rate cut in March is base with this remark. At the start of the press conference…

January 26, 2024

Since the low at the end of October, the U.S. stock market has shown very strong appreciation. 75% of the appreciation in the S&P 500 in 2024 can be attributed to the 25% advance in Nvidia and the nearly 8% advance in Microsoft. Although the equally weighted S&P 500…

January 19, 2024

Year-to-date into Thursday, the S&P 500 is essentially “unched” (unchanged in value). Relative to the start of 2023 when recession fears were at a peak, the consensus institutional investor outlook today is relatively benign with earnings and GDP expected to…

January 5, 2024

The S&P 500 returned 26% in 2023 and ended the year just short of the all-time high of 4796. Components of the 2023 return included +6.32% from better earnings, +17.91% from expansion in forward P/E multiple to ~20x, and +2.06% from dividends. Since 1950, the S&P 500…