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Disciplined Investing

Investment Fund Outflows Dominate

 December 9 2018     David Templeton
The most recent flow data for ETF's and mutual funds reported by ICI last week notes outflows occurred in nearly all of the broad asset categories. One exception was a small positive flow into commodity oriented investments. Source: ICIFollowing the large $18.6 billion bond investment outflow for the week ending 10/31/2018, bond investments continued to be sold by investors. Below investment grade...

Trying To Make Sense Of China/US Trade Issues

 December 7 2018     David Templeton
What seems to be influencing the market the most at the moment is the trade issues with China and the U.S. Jeff Miller who writes at the Dash of Insight blog published a short article yesterday that seems to get to some of the main issues surrounding trade and the equity markets. A couple of highlights from the article follow, but the entire post is a worthwhile read. Jeff notes the market's react...

GM Restructuring News Not A Sign Of A Slowing Economy

 November 26 2018     David Templeton
Today General Motors (GM) announced a restructuring that will cut 14,000 positions and the possibility of closing five auto manufacturing plants. Some headlines attributed the restructuring to an economy that may be slowing. However, when one reviews the data that comprise new sales of automobiles and light trucks, the exact opposite conclusion is drawn. A divergence has developed in the sale of c...

Low Level Of Bullishness Means Equity Market Bottom Maybe Near

 November 22 2018     David Templeton
Investor sentiment continues a trend of turning less bullish. Today's Sentiment Survey report from the American Association of Individual Investors noted individual investor bullish sentiment decline 9.8 percentage points to 25.3%. Neutral sentiment declined 1.3 percentage points with the result that bearish sentiment rose 11.2 percentage points. The net result is the bull/bear spread of -21.8 pp ...

Institutional And Individual Investors More Bearish On Equities

 November 15 2018     David Templeton
At the end of October the American Association of Individual Investors reported individual investor bullish sentiment was 28.0%, one standard deviation below the bullishness average. Sentiment measures are contrarian ones and are most actionable at their extremes. October's reading was certainly not an extreme level; however, the reading was at a low level of bullishness for the individual investo...

Small Business Continues To Be Highly Optimistic

 November 14 2018     David Templeton
Today's NFIB Small Business Optimism Index was reported at a strong 107.4, down only 1.4 points from the Index's 45-year August high. According to the NFIB report for October,"Small business optimism continued its two-year streak of record highs. Overall, small businesses continue to support the 3%+ growth of the economy and add significant numbers of new workers to the employment pool. Owners bel...

Dollar Defies The 7-Year Cycle

 November 11 2018     David Templeton
Historically the U.S. Dollar has had a tendency to exhibit strength over a 7-year cycle. In July of this year the Dollar strength cycle crossed into its eighth year though, as seen in the below chart.One factor impacting the Dollar's rise is the increasing interest rate environment in the U.S. relative to rate moves outside the U.S. The U.S. Dollar has a high positive correlation (+.71) to the dir...

Emerging Markets: An Opportunity?

 October 30 2018     David Templeton
For a period of time this year, the U.S. equity market avoided the weakness that was occurring in many other equity markets around the world. October has certainly changed this though. As can be seen below, the S&P 500 Index is in correction territory now, i.e., down greater than 10% from its high at the end of September.Faring worse than the U.S. equity market are markets outside the U.S, especia...

Much To Like About The Economy

 October 29 2018     David Templeton
Recent equity market volatility has raised the question about the health of the current economic expansion. I must confess it is difficult to find too much in the way of negative news. What is important about this is the fact that a recession does not seem to be around the corner in our view. William Delwiche, CMT, CFA of R.W. Baird noted in a recent commentary, "Bear markets are almost always ass...

VIX Curve Moving Back Towards Contango A Positive For Stocks

 October 23 2018     David Templeton
The level of the VIX is one measure to gauge fear in the equity markets. When the near term VIX index is trading at a higher level than the VIX further in the future, for example, the 3 month VIX (or ticker VXV), then the VIX curve is said to be in backwardation. This is not the normal structure for the VIX curve as the VIX curve is usually in contango, meaning prices in the distant future are hig...
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