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The Long Term View


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#41 Rich C

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Posted 19 June 2019 - 10:08 PM

Q1 GDP was revised down a tad to 3.1% on the second estimate, still good.  Factset has lowered its forecast for Q2 earnings to -4.0% vs. the prior year, a negative.  The Fed left rates unchanged today, but indicate they are monitoring economic activity and are open to easing if it is warranted.  International economies are slowing and the question is how much will back up into the US economy.  The valuation on the S&P remains about the same as last month, 21.5 on the 12 month trailing GAAP P/E, moderately overvalued.  When you look at the long term chart, we remain in the long term up channel we have been in for a decade, but since the fall we are living in the bottom half of the channel, which is a little concerning. 

 

The long term bull market remains in effect, but chinks in the armor are starting to show.  I don't see the seeds of a big market upswing any time soon, and there are issues that could derail the market if they go in the wrong direction.


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My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.


#42 Rich C

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Posted 17 July 2019 - 09:12 AM

The Atlanta Fed GDPNow estimate of GDP for Q2 is now 1.6%.  I don't put any credence in GDPNow early a new quarter, but within a couple of weeks of the govt. release of data, I find that it gets reasonably accurate.  That will give the Fed all the cover it needs to deliver a small rate cut on the 31st and the market will like the cut, but it is cutting because of slight economic weakness, and that is not good.  Factset still projects Q2 earnings to be flat to slightly negative.  Valuation remains moderately elevated with the 12 month trailing GAAP PE of 21.5 compared to my trimmed 30 year average of 19, unchanged from last month.  Technically I look at a 10 year chart for the long term update, and the price action is comfortably within the long term up-channel.

 

The long term bull market remains in effect.


Blogging at http://RichInvesting.wordpress.com

 

My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.


#43 Rich C

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Posted 21 August 2019 - 03:34 PM

My monthly Long Term update is on the blog.  GDP for Q2 came in at +2.1%, a good enough reading.  It was down from 3.1% in Q1, but I think there was an anomaly with the Q1 number, so I don't think we slowed as much as the numbers indicate.  The Fed cut the Funds rate by 1/4% on 7/31 to the range of 2.0 - 2.25%, as expected.  The 12-month trailing GAAP PE fell to 21 from 21.5 last month, on the new tariff threat against China.  The valuation is moderately overvalued relative to my 30 year trimmed average of 19.  S&P 500 earnings with 90% of the index reporting are down .7%, the second consecutive quarter of negative earnings vs. the prior year, the first time that has occurred since 2016.  Regarding the geo-political environment, conditions are a bit less stable, and less supportive of the long term bull market.

 

Bottom line: The long term bull market continues.


Blogging at http://RichInvesting.wordpress.com

 

My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.


#44 Rich C

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Posted 18 September 2019 - 04:30 PM

The second revision of Q2 GDP was +2.0%, and the Atlanta Fed GDPNow for Q3 GDP is at +1.9% as of today.  GDPNow is near enough in time to the late Oct. release to give them some credence.  The Fed cut the Funds rate by 1/4% today to the range of 1.75 - 2.0%, and the longer dated maturities have seen yields rise over the last month, on receding fear of a near term recession.  The lower rates are helping the housing market and auto sales. 

 

The S&P 500 12-month trailing GAAP PE rose over the last month to 22.3, as earnings held steady while stock prices rose.  That is moderately overvalued relative to my 30 year trimmed PE of 19.  What I like about the 12-month trailing GAAP PE is that ALL of the data is in the numbers (like writeoffs that are not in operating earnings), and there are no forward ESTIMATES, which companies may hit, or they may "revise earnings" and just say "ooops, we're not going to really hit that number".  All the data is in, and it is all hardened historical FACT.  There is a lot to be said for dealing with the numbers this way; it is the way I have chosen.  Q2 blended earnings from Factset came in at -.4% compared to Q2 2018 and Q3 earnings are estimated to come in at -3.6% vs. 2018.

 

The geo-political scene is messy and risky, with the China trade war, Brexit, Iran nuclear deal, war in Yemen pitting Saudi Arabia against Iran, slowing growth in China, most of Asia, and Europe.  I am very cautious going into Oct.

 

Bottom line, the long term bull market continues, but it looks tired about now.


Blogging at http://RichInvesting.wordpress.com

 

My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.


#45 Rich C

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Posted 16 October 2019 - 10:57 AM

The third revision of Q2 GDP was unchanged at +2.0%, while the Fed GDPNow estimate for Q3 slipped a tad down to +1.7%.  Fed funds rate was unchanged at 1.9%, but bond futures show traders think the Fed will ease again on Oct. 30.  The 12 month trailing GAAP PE on the S&P 500 slipped a bit to 21.7, compared to my trimmed 30 year average of 19, moderately overvalued.  Factset projects that S&P earnings for Q3 will come in -4.6% compared to last year, and that will not inspire the stock market if that is what happens.  The geo-political scene has many risks, but at the moment none is burning overly hot.

 

I added a line to my long term graph showing how the long term bull market rate of ascent has slowed; this bull market looks like it is tired to me.

 

Given that, it is still a bull market in my opinion.


Blogging at http://RichInvesting.wordpress.com

 

My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.


#46 Rich C

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Posted 20 November 2019 - 08:36 PM

The first estimate of Q3 GDP was +1.9%, and the GDPNow estimate for Q4 GDP is currently +1.6%.   The Fed cut the Funds rate by 1/4% on 10/30 to 1.5 - 1.75% but there was little market reaction.  The 12 month trailing GAAP PE on the S&P 500 rose to 23.1, as the market has risen to new all-time highs, but earnings for Q3 (90% reporting) are down 2% vs. last year's Q3.  That is the third consecutive quarter that earnings have declined vs. the prior year (last happened in 2015), so with stock price up and earnings down, the valuation moved up.  The global and domestic geo-political environments are riskier than recent history, which increases market risk.  The long term chart looks good.

 

The long term bull market continues IMO.

 

However, earnings have been weak for 3 quarters, and geo-political risks are up.  Risk is rising IMO.


Blogging at http://RichInvesting.wordpress.com

 

My swing trades typically last a couple of weeks to a couple of months and I focus on SPY.