Last quote by Nicholas Colas
Nicholas Colas quotes
No one really trusts the rally, the positive sentiment or the low volatility. Everyone is waiting for the next shoe to drop. But without a clear market catalyst for a pullback, we will drift higher.
This Trump trade is getting so long in the truth. It doesn't feel like there's any motion in it. … Everybody is asking the same question – when are we going to see something actionable on taxes, infrastructure and regulation.
Every new administration has its hiccups and false starts so I think everyone is giving Trump a pass, but at some point the honeymoon is over.
The missing piece is going to be more active managers outperforming. That's going to take time only because we literally just had the breakdown in correlations two months ago. Investors will want to see at least a quarter or two of outperformance before they start shifting allocations.
If you use the magazine headline indicator, then certainly we are at peak passive. Everyone has chiseled out the tombstone for active management.
In some ways Brexit is a case study for what the effects of the dissolution of the euro might be. It was the first domino to fall back last year, even before Trump won the election and in some ways it is the vanguard.
You kind of win if you get inflation kicking in and you kind of win if industrial production picks up as well, so you get a two for one.
Be aware that a lot of policymakers don't like high-denomination bills. So if you want to have a little nest egg of $100 bills, you might as well do it now, because who knows what happens a year or two or three from now.
It's hard to say what was the breakthrough year or if we've had a breakthrough year yet. Certainly in price terms, this has been a pretty impressive year. But in terms of broad mass market adoption, it's still to come.
It is one tool that many people around the world use to try to preserve wealth. Bitcoin has gone from being just a nerd's version of gold years ago to now being another thing people do to try to hold onto their wealth.
You may have a playbook, but "you may still lose the game.
Put another way, the Federal Reserve has actually not changed its basis perspective on the trajectory for interest rates through 2017 in the back half of 2016. A little nip here, a tiny tuck there … But (Wednesday's) change was far from a radical redo of its expectations.
And since most investors don't have a lot of money on the sidelines, they are expressing these views by selling losers [tech and utilities] to buy the new market leadership.
Now, we have a brand-new paradigm that is actually the same as the old [pre-crisis] paradigm. Since President-elect Donald Trump's surprise win, investors have been hustling to identify new macro trends [higher interest rates, primarily] and unlock potential winners [financials, industrials, materials and health care, for the most part].
One month, however good, is not enough time to know for sure. But you have to start somewhere, even in the curse-breaking business.
Lower correlations signal that investors are actively choosing winners and losers more aggressively than at any point since the financial crisis.
The second thing is, options might not be the best way to play it. You might want to buy the underlying asset because sometimes it takes one quarter or two quarters to get that bounce back through fundamentals or reversion to the mean.
The next few quarters are setting up as a cyclical investor's dream, but like all dreams, they require some interpretation.
The industry is looking for further consolidation, and the current structure of regulation didn't allow all that consolidation to occur this year.
The hope is that the next administration is going to allow some consolidation to occur, and hence this group works. But we think it's probably overbought right here; we'd wait for a pullback before getting in.
The Federal Reserve may well decide we don't want to raise rates in such an uncertain environment.
The bottom line is that, like a fire hose, a high-pressure economy is hard to control. And while it is a historically rare occurrence, a cold dousing for U.S. stocks and bonds may be one of its unintended consequences.
If you historically can outperform by picking the right sectors, this (correlation) tells you, you have to be more dramatically underweight or overweight.
The upshot of all this is that the US economy isn't really accelerating; it may, if items like the pickup truck data or the Gallup spending information, be slowing a little. There may be some core inflation, but everyday items like food are showing deflationary pressures. If you tore up the Fed's usual briefing books and indicators, would you see enough reason for a rate hike in December?
Sometimes the official data is fine, but we think it never hurts to triangulate against other signposts we see on the road. (Conventional) wisdom is sometimes wrong, after all.
Why should U.S. equities overall be up 5-12 percent and banks stocks only flat on the year? Readers with long memories will remember other times when markets had skewed perceptions of financial stock valuations, either for good (2007) or bad (2000). Neither ended up working out especially well. I would argue that large cap financials either need to start working better, or the market overall has a problem.
If you look at the VIX of the health care group, it's currently running around 12 percent, very low levels and near the lows of the last 12 months. And if you go back to last October, it was 30 percent.
It's a very solid idea.
Gold, like Paris, is always a good idea but we worry that too much of the recent move has come from ETF demand. What the margin clerk giveth, he or she also taketh away.
When a cluster of high-profile hedge fund and long-biased managers go out of their way to give dire warnings about the U.S. equity market with stocks sitting at or near all-time highs, any sensible investor needs to pay attention. These are people with access to information that most market participants could only dream of having.
They had to live through some choppiness in the first half of the year, adding that the payoff came at the end of July, when the tech sector.
The nature of this breakout in the S&P tells me that it's as much or more about earnings. We've had five straight down quarters of earnings, and Q3 is supposed to be the breakout quarter back to the upside with further growth in Q4 and into next year. So it all lines up to tell me that earnings growth is actually the more important factor and we need to see that come through in Q3.
Stocks, in short, are the new bonds. With a yield on the S&P 500 of 2.13 percent versus 10-year Treasurys at 1.56 percent, they provide a superior payout.
In the back half of last year when gold was really falling off a cliff and threatening to break $1,000, there was a lot of negative press, folks stepped in and bought physical coins from the U.S. Mint at levels we haven't seen since 2013.
The stock investor should take a lesson from the gold investor and really believe in the asset a little more strongly and buy when it's down, because that tends to be where you make money.
Both parties will host their nominating conventions and market participants will start looking for winners and losers in asset classes, sectors and individual stocks. Brexit was a warning sign that calling political outcomes is harder than it looks.
Right now many analysts expect the second half of the year to show better revenue and earnings comparisons versus the first half. A lot of that optimism was predicated on a weaker dollar. Now, the world has changed and a weaker dollar seems off the table. Will underlying fundamentals pick up the slack?
It's one thing to buy things on the cheap. That gives you a cushion. But no one considers this equity market cheap.
Markets I think have really been caught off guard by the recent trend towards polling that says Brexit leave is preferable to Brexit remain among likely voters.
Five years ago the stock market went up together and everything went up together, or it went down together and everything went down together. And that was really unhealthy because it meant there was no value in diversification.
It seems like the VIX is trying to measure not just one or two events, but five or six, and that's really the problem here.
In the end, the resurrection of this group will have to come from one place, and one place alone: all those clever people who run the companies.
The key takeaway from both this final point and the piece as a whole is that financials will likely remain a tough place to make outsized returns. Regulatory burdens are a piece of that, to be sure, and in the absence of a change in Washington that drag seems likely to continue.
In any given year, at least one institution has been singled out for deficiencies and the 2016 reviews will likely follow that precedent.
Still, the marriage of a low-yield investment environment and a low-growth but stable domestic economic environment seems tailor-made for real estate. This may not be layup, but it's not a three-point shot at the buzzer either.
The 'dot plot' ... is much better anchored to market realities than the March 2015 version. At the same time, fed funds futures markets are still skeptical that the Fed has it right.
While the attack was in Europe, stocks all around the world will see pressure on Monday.