David Kostin

MANIC MARKET FLIPS ON TRADE HEADLINES

Stocks rallied after the Trump Administration delayed some of the new trade tariffs planned for next month. The Dow is currently up 363 pts, the SPX is up 1.3% and the Nasdaq is up almost 1.6%. Not surprisingly, the leading sectors today—consumer discretionary, industrials, tech—are viewed as having the most vulnerability to an escalating trade war. By contrast, the two sectors seen as the safest in an uncertain global trade environment—utilities and real estate—are in the red today. The VIX Index, a common gauge of fear among options traders, fell back to 17.9 from 21 yesterday. European stock markets rallied sharply on the trade tariff news as well. Asian markets, however, were down overnight on civil unrest in Hong Kong. The US dollar continues to strengthen as the Chinese yuan weakens. But better investor sentiment today is propping up commodities. WTI crude oil spiked 3% to $56.80/barrel for no good reason. Bonds are selling off after an enormous 2019 rally. The 10-year Treasury Note yield bounced back to 1.68% this morning. Since investors’ primary concerns at the moment are 1) trade war, and 2) falling interest rates, any day in which rate rise will generally evoke risk-on sentiment.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

December 10, 2018

December 10, 2018

Stocks sank at the open again this morning. The Dow is currently off 367 pts and the SPX is down 1.25%. Energy and financials are worst-performing, down over 2.5%. Even the more defensive utilities sector is down nearly 1%. The VIX Index, a gauge of fear among traders, is up around 25, matching late October levels. WTI crude oil is down 2% to trade around $51.50/barrel. Most other commodities are down on the day and the dollar is stronger. Bonds are trading flat to slightly higher.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 29, 2018

October 29, 2018

Stocks opened higher this morning. The Dow is currently up 105 pts and the SPX is up .7%. Utilities, consumer staples, materials, real estate, healthcare and financials are all up over 1% at the moment. Energy and consumer discretionary sectors are down slightly. The VIX Index, a measure of traders’ fear, fell back to 24 after spiking above 25 on Friday. European stock markets will close up over 1% and Asia was mixed overnight. China’s markets, however, are still under pressure. The Shanghai Composite Index is down over 28% this year in local currency terms. The dollar is a bit stronger today against a basket of foreign currencies, and up nearly 5% in 2018. Wall Streeters are increasingly concerned that a stronger dollar will hurt US businesses selling overseas. A few blue-chip companies have said so in recent days. Commodities are trading lower. WTI crude oil is down .6% to trade at $67.17/barrel. Bonds are selling off today after a pretty strong run over the last week or so. The 5-year and 10-year Treasury yields ticked up to 2.94% and 3.10%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

September 18, 2018

September 18, 2018

Stocks surged at the open despite escalation of the trade war with China. The Dow is up 118 pts and the SPX is up .58%. Technology and consumer discretionary sectors—thought to be especially vulnerable to a trade war—are leading the way with 1% gains. European markets will close modestly higher and Asia was mostly higher overnight. In fact, China’s Shanghai Composite Index rose 1.8% and copper prices surged more than 3%. That is absolutely not the expected reaction to more trade tariffs. Commodities are higher on the day and the US dollar is trading flat. Iron ore is up over 1% and WTI crude oil is up around $69.60/barrel. Bonds are selling off today as interest rates head higher. The 5-year and 10-year Treasury yields are up around 2.92% and 3.03%, respectively. In addition, the yield curve steepened just a bit.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 21, 2018

Stocks are surging after Treasury Secretary Mnuchin put a positive spin on trade negotiations with the Chinese. So don’t expect it to last. The Dow is currently up 280 pts and the SPX is up .65%. All eleven major market sectors are in the green, led by industrials (+1.5%) and financials (+.8%). Commodities are  mostly higher as well. WTI crude oil is up 1% to trade around $72/barrel. The march higher continues, and investors are starting to think about commodity inflation’s eventual impact on consumer spending the corporate earnings. Bonds are mostly unchanged today. The 5-year and 10-year Treasury yields are hovering around 2.90% and 3.01%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

December 18, 2017

The major stock market averages gapped up at the open (Dow +175 pts; SPX +.6%). Energy and materials sectors are in the lead, up over 1%. Utilities, on the other hand, is the only sector in the red. Small-caps are surging 1.2% on tax reform optimism. The VIX Index remains below 10 and VIX January futures are trading around 11.3. So there’s not much fear out there. European markets are poised to close up over 1% today and Asia was up overnight. Including the effects of currency, the Hang Seng Index is up 31% this year and the Euro Stoxx 50 Index is up 23%. Commodities are mostly in the green today, with WTI crude oil up around $57.50/barrel. Bonds are mostly unchanged, however. The 5-year and 10-year Treasury bond yields are trading at 2.15% and 2.37%, respectively.

According to Bloomberg, both the House of Representatives and the Senate are planning on midweek votes to pass the final version of the tax reform bill. This morning, CNBC interviewed Jim Paulsen of the Leuthold Group, who said passage of the tax bill is already priced into the stock market and this looks like a “buy the rumor and sell ultimately on the news” event. Corporate earnings will be boosted by the tax cut, but the market’s P/E multiple (20x) is rather high. And with unemployment three-tenths away from a 50-year low, interest rates probably need to reset higher. That’s “where the tension might turn” in 2018. Typically, stock market P/E ratios fall when interest rates rise.

Analysts at Goldman Sachs expect another good year for stocks in 2018. The firm’s chief US equity strategist projects the S&P 500 Index will climb another 7% over the next 12 months. And he doesn’t expect a return of volatility.  


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

March 27, 2017

Stocks opened lower again this morning (Dow -65 pts; SPX -.26%). The Dow is on a 7-day losing streak. Banks are leading the way lower (-.9%), along with transports (-.3%) and semiconductors (-.25%). Gold miners and biotechs are actually in the green. The VIX Index is up around 13.5 as consternation over the GOP healthcare bill grows. European markets just closed slightly lower and Asia was down overnight. The dollar is lower today, and is now down 3% year-to-date. But that’s not giving a lift to commodities this morning. WTI crude oil is down modestly to trade around $47.60/barrel. Bonds are rising in price as yields fall. The 5- and 10-year Treasury yields are down to 1.91% (1-month low) and 2.38%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

February 28, 2017

Stocks opened lower this morning, just like the last two trading sessions. The Dow is flat, the SPX is down .14% and the Nasdaq is down .3%. Once again, the defensive sectors (utilities, consumer staples) are faring better than the cyclicals. The VIX Index is trading up around 12.2 and VIX March futures are trading up to 13.3. So the fear gauge is picking up just a tiny bit. The dollar is weaker today and has really sold off since mid-December. That’s helping commodities tread water or even rise a little. WTI crude oil is down this morning to $53.40/barrel. Remember, a year ago oil was under $30/barrel. Bonds are mostly unchanged today. The 5-year and 10-year Treasury yields are hovering around 1.85% and 2.35%, respectively. And I would argue the bond market isn’t yet signaling that a March Fed interest rate hike is imminent. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 25, 2016

Stocks fell at the open this morning (Dow -57 pts; SPX -.37%). Nearly all major market sectors are lower, save utilities and consumer staples. But most of the movement today is in individual stocks following earnings announcements. WTI crude is down slightly to $50/barrel. Baker Hughes says US land-based drilling activity is increasing. The dollar is flat and other commodities are mixed. Copper is up over 2% as China’s stock market hit a 9-month high. China GDP is up 6.7% for three straight quarter encouraging investors to believe China has stabilized. Bonds are mostly unchanged on the day. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.