Thursday, June 22, 2017

What Happened to Buybacks?

Even as the stock market keeps hitting new highs, companies have been holding back on share repurchases. S&P 500 firms repurchased $133.1 billion of their own shares in the first three months of the year, down 18 percent from the same period a year earlier, according to S&P Dow Jones Indices.

What's odd about this is that the decline came during a quarter in which the S&P 500 hit 13 new record highs; corporate executives typically boost share repurchases when the market is strong. Buybacks, for example, hit a record in 2007 before plunging in 2009 during the financial crisis.

And it’s not as if they don’t have the assets available for more buybacks. Cash levels have risen to a fresh record high of $1.5 trillion for S&P 500 companies, excluding financials, utilities, and transportation firms, which already keep high reserves, according to S&P Dow Jones Indices.

Wednesday, June 21, 2017

A Bear Market for Oil

The oil market, which looked like it was recovering at one point, may now be entering a bear market. Another sharp drop in U.S. crude prices yesterday set new lows in oil prices dating back to August.

U.S. crude prices slumped 2.2 percent on the day, to settle at $43.23 a barrel, down 21 percent from its 2014 high of $54.45. It would be 2017′s first reversal from bull to bear market, following five such swings last year.

Earlier this year there were hopes that a historic agreement by OPEC to cut output might start to right the supply-demand imbalance. But rising production from the U.S. and Libya, along with stubbornly high stockpiles, have continued to buoy prices.

Tuesday, June 20, 2017

Hedge Fund Woes Continue

There were 189 new hedge fund launches in the first quarter of 2017, according to Hedge Fund Research, up from the 153 in the fourth quarter of 2016. This marked the first quarter since the first three months of 2016 where the number of launches grew, but there are still plenty of troubling signs for hedge funds.

There were also 259 liquidations in the first quarter. The greater number of closures than launches meant that the total number of active funds dipped to 9,773 in the first quarter. In 2016, more than 1,000 funds closed down, the most of any year since the financial crisis.

And the performance has not been there. In May, the HFRI Fund Weighted Composite Index rose 0.5 percent, bringing its year-to-date gain to 3.5 percent. To compare, the S&P 500 is up 9.4 percent so far in 2017.

Monday, June 19, 2017

College Kids Getting Warier

The younger generation is taking a more cautious approach to college tuition, according to the nonprofit College Savings Foundation. When asked if they would take on debt to cover college bills, only 11 percent of the high school sophomores, juniors and seniors who participated in the survey said yes.

That’s down significantly from 20 percent just last year. Seventy-nine percent of the respondents said costs are a factor on college choice, with 39 percent saying high costs caused them to change their path and enroll in state schools, community colleges and vocational and career schools.

Fifty-four percent have already taken jobs to earn money for higher education, and 85 percent said they would work during college, with 20 percent planning on holding a full-time job. As these kids are well aware, the total amount of student debt stands at $1.4 trillion.

Friday, June 16, 2017

Happy Father's Day!

Americans will spend a record amount on Father’s Day gifts this weekend, a survey from the trade association National Retail Federation found, hitting a 15-year high of $14.3 billion. Some 77 percent of Americans celebrate Father’s Day, and the amount of money consumers spend on the holiday has increased each year consistently since at least 2007.

The average American is now spending $134.75 on gifts, up from $125.92 last year. On the other hand, dads would increasingly prefer to spend time with their kids, rather than a pair of socks or the usual tie.

The number of people opting to give a special outing such as dinner or brunch is at 48 percent, up 5 percent from 2007. Now, 27 percent of dads say they would enjoy an “experience” gift, and 25 percent of shoppers plan to buy a ticket to a concert or a sporting event for the holiday, up from 22 percent last year.

Thursday, June 15, 2017

The Fed Raises Rates

As expected, the Federal Reserve raised its benchmark Fed Funds rate yesterday, to a range of between 1 percent and 1.25 percent. According to the so-called dot plot of forecasts, released at the same time, they’re still projecting one more increase this year, making three total in 2017.

The Fed also released its updated economic projections, and they are all very slightly better than the last set. The Fed members lifted their projected growth in gross domestic product this year to 2.2 percent at the end of 2017 from March’s forecast of 2.1 percent.

The projected unemployment rate was lowered to 4.3 percent from 4.5 percent. And the Fed’s preferred inflation measure is expected to come in at 1.6 percent at the end of the year, down from 1.9 percent.

Tuesday, June 13, 2017

What Worries Investors?

Investors are more likely to say they worry about current geopolitical matters harming their investments than worry about harm from the economy, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. When asked about possible threats to the U.S. investment climate in the coming year, three-quarters of investors were very or somewhat worried about the impact of the various military and diplomatic conflicts happening around the world.

The domestic political climate ranked a close second at 69 percent. The overall performance of the economy sparked far less concern, with about half, or 49 percent, saying they are very or somewhat worried.

The latest Investor Optimism index now registers at plus 124, down slightly from plus 126 in February. This marks the first time since the first quarter of 2016 that the index did not improve.

The FAANG Crash

The so-called FAANG stocks have been leading the market much of the year, but the past two days have been pretty rough for them. While tech stocks have been dropping, Facebook, Apple, Amazon, Netflix and Google parent Alphabet have had the most dramatic falls of all. Over the last two trading days:
  • Facebook has dropped 4.1 percent
  • Apple has dropped 6.2 percent
  • Amazon has dropped 4.5 percent
  • Netflix has dropped 8.7 percent
  • Alphabet has dropped 4.2 percent
Altogether, those five stocks have lost $125 billion in value since Thursday.

Monday, June 12, 2017

The Charitable Role of Women

One way in which women approach their finances differently from men is in their charitable giving. According to the recent Woman and Giving survey released by Fidelity Charitable, women are more spontaneous, engaged and empathetic. Half of the women interviewed say they give in the moment rather than as part of a formal giving strategy, as opposed to just 40 percent of men.

Woman-headed households are more likely to give to charity than male-headed households. At nearly every income level, women donate almost twice as much as men, but women in the top 25 percent of permanent income give 156 percent more than men in that same category.

Boomer women tend to be more confident and strategic in their philanthropy. Seventy-two percent of boomer women are satisfied with their philanthropy, compared with just over half of Millennial women.


Friday, June 9, 2017

The Nasdaq's Records Record

The Nasdaq Composite Index finished at another record high on Thursday, marking its 38th all-time closing high in 2017. That's the highest number of records in a single session for the equity gauge since 1999, according to WSJ Market Data Group.

On a year-to-date basis, the Nasdaq has registered its most all-time highs since 1986. Over the first part of that year, the index posted 48 closing records by June 8.

You might think we're on a pace to smash the all-time record of 62 record closes, set way back in 1980. But markets don't work with that much regularity. In 1986, after those 48 closing records by June 8, there were only seven more left the rest of the year..

Thursday, June 8, 2017

What the Wealthy Are Buying

Where are the wealthy putting their money? According to one new report, it's not hedge funds. Wealthy members of the Tiger 21 peer-to-peer learning network instead increased their allocations to real estate and commodities in the first quarter, according to the organization's latest report.

Real estate allocations hit a new high of 32 percent in the first quarter, two percentage points above the previous high in the fourth quarter. Members also allocated 1 percent to commodities in the first quarter, their first commodity exposure since the third quarter of 2014.

Allocations to private equity, fixed income and hedge funds each fell by one percentage point from the fourth quarter to 20 percent, 9 percent and 5 percent, respectively. At 5 percent, hedge funds have tied their historic low for members’ allocations.

Wednesday, June 7, 2017

The Jobs Mismatch

U.S. job openings surged to a record high in April, but employers appeared to have trouble finding suitable workers. The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent slowdown in job growth could be the result of a skills mismatch.

Job openings increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking them in 2000. The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, its highest level since last July.

Hiring, however, decreased by 253,000 jobs in April. The gap between job openings and hiring points to a growing skills mismatch; a report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.

Tuesday, June 6, 2017

The Scars of the Financial Crisis

Ten years after the financial crisis hit, it is still having a major psychological impact on investors, even those too young to have lost money in the crash. According to a new survey from Legg Mason Global Asset Management, millennial investors in the United States report that the financial crisis and subsequent recession strongly influence their investment decisions, leaving them more risk-averse than any other age group.

The survey finds that 82 percent of the surveyed millennials said their investment decisions are influenced by the financial crisis, with 57 percent saying they are “strongly influenced.” By comparison, 39 percent of Gen X, 13 percent of baby boomers, and 14 percent over age 65 said their investment decisions are still “strongly influenced” by the global financial meltdown.

A similar number of millennial investors said they are conservative investors (85 percent), with 52 percent calling themselves “very conservative.” Only 30 percent of Gen X, 29 percent of baby boomers, and 28 percent over age 65 consider themselves “very conservative.”

Monday, June 5, 2017

Amazon's Big Year

Amazon’s stock ended at $1,007 Friday, the first time it closed in four figures. It briefly pushed above $1,000 during Tuesday’s trading session before finishing at $997. Google parent Alphabet also came within pennies of $1,000, ending the week at $996.

Though it is a retailer, Amazon stock is acting much more in line with the other big tech firms. Amazon shares have climbed more than 34 percent this year, trouncing shares of traditional retailers. The SPDR Retail exchange-traded fund, which tracks more than 100 stocks, is down more than 6 percent on the year.

Amazon is keeping pace with the big gains that have been posted by tech stalwarts like Facebook and Apple. Each of those stocks has climbed 34 percent this year.

Friday, June 2, 2017

May's Jobs Report

In May, the economy added a mildly disappointing 138,000 jobs, but the unemployment rate fell to 4.3 percent, according to this morning's data from the Bureau of Labor Statistics. This is a new post-recession low for the unemployment rate — which is now at its lowest level since May 2001.

Employment in health care rose by 24,000 in May, while mining added 7,000 jobs. Employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.

The economy has seen an average monthly gain of 181,000 over the prior 12 months. With today's figures, the number of jobs added for March was revised down from 79,000 to 50,000, and the change for April was revised down from 211,000 to 174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported.

Thursday, June 1, 2017

The Broad-Based Tech Rally

The market-cap weighted index of tech stocks in the S&P 500 is up 20 percent in 2017, more than double the 7.8 percent advance of the S&P itself. It's tempting to think this is the result of a few big tech stocks: Apple, Microsoft, Alphabet and Facebook by themselves account for 43 percent of the S&P 500’s tech sector market capitalization.

But it’s worth noting that the majority of tech stocks in the S&P 500 are having stellar years as well. An equally weighted iteration of the S&P 500 tech sector, in which Apple carries the same sway as software company Adobe Systems, is itself up more than 17 percent this year; the median tech stock in the S&P 500 is up 18%.

Even smaller tech stocks are outperforming. More than half of the 303 tech stocks in the Russell 3000 Index, a measure of large-, medium- and small-cap companies, have recorded at least double-digit percentage gains this year.