Today’s Financial Markets

Volatility Low & Risk High: What Does This Mean?

As the U.S. stock market hits new highs, and bond yields continue baffle everyone who “knew” that interest rates were bound to rise this year, the most dramatic data point of all might be volatility, which keeps plumbing remarkable lows. And this isn’t just stock-market volatility (as measured by the VIX index), the intermarket volatility index, which averages expected volatility of stocks, bonds, currencies, oil and gold is at its second lowest reading in 20 years. What does this mean? Not sure–mixed signals. One the one hand, low volatility means that prices aren’t moving much either way, which means that […]

The US Equity Bull Market: Where are we today?

As the bull market in US equities charges into its sixth year, I’ve been chewing on what drives stock prices higher. “Duh,” you say, “more buyers than sellers.” Sure, but what kinds of tailwinds encourage buyers to load up?  And how hard are those winds blowing today? Going into a recession, the stock market tanks in anticipation of a decline in corporate earnings.  Then in time the recession ends, earnings rise, and the stock market recovers.  So recovery from a bear market is driver #1.  Today?  Well, following the smash in 2008, US companies did enjoy strong earnings recovery from […]

Stocks and Bonds in the New Year

As we start a new year, the universal view of market pundits is that bonds suck wind and stocks look okay.  This alone should make equity investors nervous and give some comfort to bondholders.  But expectations are modest:  the S&P 500 closed 2013 at 1848 and 2014 year-end targets from various investment banks range from 1850 to 2000, corresponding with returns of 0% to 8%. As we know from (sometimes bitter) experience–and extensive research–such predictions aren’t worth the paper they’re printed on, but can we say anything useful about risk? According to Sentiment Trader, which monitors investor sentiment, several stock […]