Displaying items by tag: volatility

(San Francisco)

Tech stocks have two very unappealing characteristics right now. They are at once both very expensive and increasingly vulnerable, as evidenced by their major selloff over the last week and a half. However, there are cheap tech shares out there, and Barron’s wants to share them with you. The five cheapest tech stocks in the Nasdaq 100 are Micron Technology, Western Digital, Seagate Technology, Lam Research, and Applied Materials. Their P/E ratios range from a low of 5.2x to a high of 11.9x.

FINSUM: Just a note of caution—these stocks were not selected to be good value, they were presented solely on the basis of valuation, so the multiples may be very representative of the quality of their businesses.

(New York)

Investors beware, US stocks may be in for a real summer storm. On the surface things have been looking better. Despite a week in which many geopolitical events went wrong (e.g. trade war, Trump and North Korea, Italian bonds/government), the markets stayed strong. However, underneath the positive surface, there is some real bearishness. The average stock in the S&P 500 is underperforming the market as a whole by almost a whole percent. The S&P 500 is up 3% this year, but the average stock has gained just 2.1%, showing that market breadth has narrowed.

FINSUM: We do not think the current market breadth figures show much of anything, but then again, we are more concerned about the overall economy than the signals the market is sending.

(New York)

Advisors considering putting client capital into smart beta funds need to be prepared for what to expect. The reality is that smart beta strategies tend to accentuate the returns of the market, or run counter to them altogether. In up times a smart beta strategy playing into the market’s strengths can do much better than the index overall, the opposite can happen in down markets. However, even in decent markets, many smart beta strategies can perform terribly because of the nature of the rise.

FINSUM: If you are just getting into smart beta funds, it is really important that you understand the strategy inside and out to make sure you understand how it will sit within your portfolio.

(New York)

Bloomberg has published a thoughtful and interesting article arguing that there is a little-known sign in the market that prices are likely to fall. This year’s trading activity has been in major contrast to the last few years, and not just because of more volatility. Rather retail investors have come back en masse. In the March of this year, retail trades from TD Ameritrade’s and E*Trade’s platforms accounted for more than 25% of all trading volume. Historically, investors coming back to the market is such fashion has been negative for prices.

FINSUM: If you combine this view with the reality that stocks have not really gained despite the best earnings season in many years, you do start to worry the bottom might be ready to fall out.

(New York)

Investors beware, the market might be losing its nerve. Back and forth markets for most of this year appear to be making investors very wary, as the market is fleeing to cash. Investor holdings in “cash sanctuaries”, which include money market funds, are approaching 2%, the highest level seen in a decade. According to one prominent asset manager “Cash is an asset class once again”. According to Crane’s, “Money funds were on a starvation diet with yields at zero percent … Rate increases have given them a stay of execution”.

FINSUM: Aside from volatility, the other big driver is that yields on money market funds have risen considerable alongside the Fed hikes, making them much more attractive.