Market Outlook Archives - Page 4 of 5 - NorthStar Capital Advisors

The Cost Of Sitting On Cash

According to the latest financial security index by Bankrate.com, here’s how Americans prefer to invest money that they don’t need for more than 10 years:

26% say they prefer cash for long-term investments. Cash is arguably a great place to store your wealth briefly, however 80 years of data show cash is a horrible long-term investment.

The following chart shows that cash has averaged a negative real, after-tax return (be sure to click on the chart for a closer look). Inflation and taxes are killers.

Click to enlarge

“Americans not saving enough is well-documented, but hunkering down in cash investments and settling for low returns will only magnify the problem of not having a sufficient nest egg to meet longer-range financial goals such as retirement,” said Greg McBride, CFA, Bankrate.com’s senior financial analyst. “Other choices may not do the trick either, as real estate is not only very cash-intensive, but often illiquid. And precious metals spit out zero cash flows, with gains solely dependent on price appreciation.”

Sources:
BankRate.com

BlackRock

Strongest Bull Market Since WWII

The current bull market that began in March 2009 is the strongest bull market recorded by the S&P 500 since the end of World War II (see green line in chart above).

The market has accomplished this achievement despite a litany of negatives,

Fiscal cliff tax increases;
Sequester spending cuts;
High oil prices;
Italian election debacle;
Cyprus bank bailout;
Weakening Chinese economic growth;
Federal Reserve communicating the intention to end quantitative easing (QE);
Downward revisions to earnings growth estimates;
Rising interest rates;
A rise in geopolitical risk from North Korea, Egypt, and Syria; and
Bouts of defensive sector market leadership and weak trading volume.

Sources:
Chart o’ the Day: Strongest Bull Market In 65 Years
What’s Powering the Strongest Bull Market Since WWII?

Dow at All-Time High: What Has Changed?

Click for larger view

The Dow climbed to 14253.77 on Tuesday to set a new all-time high. The economic landscape has changed a great deal since the previous record was set in October 2007:

GDP Growth: Then +2.5%; Now +1.6%
Unemployed: Then 6.7 million; Now 13.2 million
Food Stamp users: Then 26.9 million; Now 47.69 million
Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
Debt as a Percentage of GDP: Then ~38%; Now 74.2%
Total US Debt: Then $9.008 trillion; Now $16.43 trillion
Consumer Confidence: Then 99.5; Now 69.6
VIX: Then 17.5%; Now 14%
10 Year Treasury Yield: Then 4.64%; Now 1.89%
Gold: Then $748; Now $1583
NYSE Average daily volume: Then 1.3 billion shares; Now 545 million shares

Source: WSJ

Do I need to worry about the “fiscal cliff”?

This is a frequent question that we have heard from our clients and friends lately. Do I need to worry about the “fiscal cliff”?

We don’t think the fiscal cliff represents a long-term concern to investors’ portfolios. The market may make a temporary move down if a compromise is not reached before January 1st. However, an agreement is inevitable and the market should move forward with renewed confidence.

There are so many unknowns involved that the best course of action is likely no action at all. We are not making any special changes to our NorthStar client portfolios (FYI: our stock portfolio is up over 30% YTD for 2012; see details and performance disclosures).

It’s interesting to note that retail investors (aka individual, “mom and pop” investors) have been selling and fleeing the market in response to the fiscal cliff hype-a-palooza. Meanwhile, professional investors (institutions and hedge funds) have been strong buyers. See the chart below.

Investors Continue to Avoid Stocks Despite Strong Performance

The recent buoyancy in the stock market hasn’t won over mutual-fund buyers. August marked the 16th consecutive month in which investors pulled more cash out of U.S.-stock mutual funds than they put in.

The painful bear market of 2007-09 has left investors with a skewed view of U.S.-stock performance. In investor surveys conducted in early 2010, 2011 and 2012, at least 48% of respondents each year said the stock market had been down or flat in the preceding year. In fact, the Standard & Poor’s 500-stock index was up strongly in 2009 and 2010 and eked out a 2.1% return (including dividends) in 2011.

source: Wall Street Journal

Are You Better Off? Take a Look at the Stock Market

Are you better off now? This is not meant as a political question. We’re actually trying to make an important point regarding investor behavior.

As of September 14, the S&P 500 index with dividends is 87% higher than it was on inauguration day, January 19, 2009.

This fact shocks many people because it’s just hard to believe given the financial fallout of the Great Recession and the ensuing slow recovery. As humans we tend to be backward looking. The pain we experienced collectively and personally persists. However, the stock market is focused on the future and investors judge the long-run prospects of the entire U.S. economy to be strong.

Bottom line: Your personal experience, economic opinions, and intuition are often a poor guide to managing your investments.

For example, is your stock portfolio up 87% as well or did you invest emotionally and cash out at the depths of the Great Recession?

Best Stock Market Rally Since WWII

The current stock market recovery came out of the Great Recession of 2008 and is now more than 3 years old. Despite the persistent worry and extreme caution of investors, this is one of the strongest stock market recoveries since World War II. The charts below demonstrate not only is the current stock market recovery the best ever this far into the economic recovery, but nearly the best through out the entire recovery cycle.

Post-War Stock Market Rallies — Cumulative Return from Recession Low
(red highlight denotes current recovery stock market rally)

Post-War Stock Market Rallies — Cum Return from Recession Low to 870 Days
(red highlight denotes current recovery stock market rally)

Source:
Wells Capital Management
BEST EVER Post-War Stock Market Rally!
August 20, 2012

The Thundering Herd Cometh in 2011?

Though we largely advise our clients to avoid market timing, the rest of herd may be returning to the market soon…”In 2011, strategists expect the stock market to notch double-digit gains and recommend investors boost allocations to ride the wave”

For Many Market Strategists, Equities Are Top Dog Againhttp://finance.yahoo.comAsset allocation strategists haven’t had an easy time in recent years. They’ve grappled with deflation, recession, plummeting U.S. stock markets and surging foreign economies. And for awhile they dished out bigger weightings to defensive plays-bonds, cash and commodities.

Physicist Leads Flash Crash Investigation

NorthStar Capital Advisors was founded by a group of astrophysicists. So it warms our hearts to see another trained physicist successfully applying his analytical skills to bring stability and insight to the financial markets.

Ex-Physicist Leads Flash Crash Inquiry
The New York Times

The Great Recession: December 2007 ~ June 2009

The Great Recession is official in the record books. The 18-month recession began in December 2007 and ended in June 2009. This was the longest slump since the Great Depression according to National Bureau of Economic Research’s Business Cycle Dating Committee, a group of academic economists that determines these benchmarks.

Great Recession

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