Tag Archives: Bull Market

The First Break?

Posted March 15, 2012 by admin. tags:Tags: , ,
Chess Game

Written by Nathan White, Chief Investment Officer, Paragon Wealth Management

Is this the first move in the long awaited end to the bond bull market or just a short-term blip? Treasury yields shot up yesterday after comments by the Federal Reserve seemed to indicate that since the economy is picking up there would not be a need for another round of bond purchases.  Interest rates have been pushed to historic lows due to slow economic growth, central bank purchases, flight to safety moves (i.e., European credit fears), and general investor aversion to equities. Due to these factors the U.S. government has had an easy time financing its large budget deficits which has pushed debt levels up drastically. Eventually these government actions could lead to significant inflation and/or a fiscal crises such as Europe is experiencing which would be significant negatives for bonds.

Massive amounts of investor money has been flowing into bonds and they posted stellar performance last year. Many (including us) have been calling for the end of the 30 year bull market in bonds because with rates at near zero they simply can’t get any lower. The difficult part is trying to call when rates will start moving back up. Over the past 3 years many have placed unprofitable trades trying to time the end of the bond bull market.  The idea is right but the timing (as always) is difficult to pull-off.  Just because rates are low doesn’t mean that they will jump back up drastically.  Many factors (i.e., baby boomers retiring, continued central bank action, credible deficit reduction actions, etc.) could keep a lid on rates for a while to come.  Perhaps it will just be a slow inexorable climb. So has the tide started to shift?….stay tuned.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results. 

 

Volatility Continues

Posted May 20, 2010 by admin. tags:Tags: , , , ,
Rollercoaster


photo by andreia

Written by Dave Young, President of Paragon Wealth Management

After initially recovering from the flash selloff two weeks ago, the markets have spent the past six market days going down.

Including today’s 376 point sell off, from their recent highs, the Dow is down 10.2 percent, the S&P is down 12 percent and the NASDAQ is off 12.9 percent. This is the first official “market correction” since the bull market began 14 months ago.

The VIX, which measures volatility hit 46 today, indicating extreme fear. Historically, a reading above 42 generally triggers a buy signal. That is usually the point where the market reverses and starts moving back up. The only exception to that rule was in the 2008 bear market where for the first time ever the VIX moved beyond 45 and kept going as the bear market got more and more extreme.

So is this going to be a rerun of 2008?

That question stokes the fear and is in the back of everyone’s minds.

This sell off is being driven primarily by concerns over the economic mess in Southern Europe, in other words, Greece, Italy, Spain and Portugal. The list of concerns is too long to put in this blog post. Those concerns come from traders who assume the worst possible scenario. They then further exaggerate the situation by imagining every possible related problem that might occur.

There are legitimate issues to be concerned about. In my opinion, and I emphasize, only in my opinion, I don’t think that this is a return of 2008. I believe that this is a regional issue that is currently causing the U.S. markets a lot of unnecessary grief.

Of course nothing operates in a vacuum, but if you look at the U.S. market alone, it appears to be reasonably healthy.

Earnings, which drive stock prices, have been nothing short of amazing. Companies have consistently beaten their earnings estimates each of the last five quarters. Beating their estimates has caused many companies forward PE ratios to move to a level that normally indicates significant undervaluation.

In summary, it appears that many areas of the market are relatively cheap again. Also, the correction has once again made market sentiment favorable for the U.S. market. In other words, now we see compelling reasons to buy U.S. stocks. The mess in Europe is currently throwing cold water on all stock markets. We believe that once the fear surrounding European mess dissipates, (for whatever reason) our markets and a few others may be very well positioned to resume their upward trend.

What we don’t know, is how long before the fear surrounding the mess in Europe diminishes. It may be soon or it could take a while to play out.

This sell off reminds me a lot of the Asian crisis in 1998. That selloff was short and sharp, and its subsequent recovery was relatively the same.

The most important issue for you as an investor is to make sure that you are invested according to your risk tolerance so that you can ride through the volatility.

Stay tuned…

Paragon Wealth
Management
is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

Whack-a-Mole Market

Posted September 10, 2008 by admin. tags:Tags: , ,
Wack-A-Mole Game

Written by Nathan White, CFA

 

Bad news after bad news just seems to keep popping up. As soon as we seem to knock down one item of bad news, FannieMae/FreddieMac, another just pos up – Lehman Brothers.

The market is definitely exhibiting the characteristics of a bear market with short sharp rallies that have no legs and just end up fading.

Another aspect of a bear market is when all sectors of the market, either together or one by one, get taken down. Financials were of course the first to go. Technology and most everything else went next.

The last bastions were Energy and Materials as they were supported by high commodity prices. Now that commodities have fallen off a cliff these sectors have also been taken out to the woodshed.

September is historically the worst month for the market and so far it is living up to its reputation (although I might make the argument that July is the worst).

What remains to be seen is whether this is the darkest time before the dawn.

You can’t have a bull market with some sectors going down while others are going up. There needs to be a broad based rally with all areas acting well.

So although oil going down might be good in the long term for the market (reducing production costs for industry) in the short term it can be bad if the effect is to take down the Energy and Material sectors. Look for rallies that have broad participation and staying power.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this article has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this article constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

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