Author Archives: Michael Murphy

Dear New World Investor: Click for larger graphic 2023 was a good year for the market but a disappointing year for us. Although I (barely) outperformed the S&P 500 Index, I lagged way behind the Nasdaq Composite. In part that was due to my bias towards smaller companies in a year the Russell 2000 did poorly, and in part to the biotech bear market that (A) just started to recover at the end of the year; and, (B), I underperformed badly. I spent part of the holidays thinking about lessons learned and changes to be made. Digital Dominators Click for...

Read More »

Dear New World Investor: Due to the lack of news, the holidays, and a daughter home from college for an all-too-brief visit, I’m going to do my annual holiday skip of next week’s issue and be back on January 4 for a much better 2024. The markets are about to extend what is now the longest string of weekly gains since 2017. This has been one of the biggest Christmas rallies in history. On January 3, 2022, the S&P 500 hit a record high closing level of 4796.56, just 50 points away from today’s close. We could see a new...

Read More »

Dear New World Investor: As we come to the end of the year, company news flow shrinks sharply. They enter a blackout period when they can’t buy back stock and don’t want to comment on how their December quarter is going, unless it is much better or much worse than what they’ve said previously. With the companies mum, brokerage firm conferences stop. At the same time, Wall Street gets ready for the annual tsunami of pension fund cash from corporations – yes, that’s still a thing – by buying stocks before their customers can. All eyes turn to bigger news,...

Read More »

Dear New World Investor: Before the Fed meeting decision next Wednesday, we get November payroll growth tomorrow morning and the November Consumer Price Index next Tuesday morning. This week we found out that US job openings dropped to more than a 2½-year low in October. The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed that there were 1.34 vacancies for every unemployed person in October, the lowest since August 2021. That’s a strong sign to the Fed that demand for labor is cooling. Click for larger graphic h/t @YahooFinance I expect the Fed to continue to pause –...

Read More »

Dear New World Investor: This morning’s Personal Consumption Expenditures Index (PCE) announcement showed October prices grew 3% year-over-year, down from 3.4% in September and in line with expectations. The core PCE, which excludes volatile food and energy prices and is the Fed’s favorite measure of inflation, grew 3.5%, down from 3.7% inSeptember and also in line with expectations. Month-over-month, the core PCE rose 0.2% in October, down from 0.3% in September. While both the core Consumer Price Index (CPI) and core PCE clearly are in a downtrend, they are a long way from the Fed’s 2% target. Click for larger...

Read More »

Dear New World Investor: This is the fifth week of the BofA Bull & Bear Indicator giving a contrarian “Buy’” signal (left graphic). Note the median 1% to 3% gains from 20 buy signals in the past 20 years (right graphic). That targets 4550 for the S&P 500 – we are there. Click for larger graphic But Goldman Sachs wrote: “Over the last 10 days – Commodity Trading Advisers have bought nearly $70 billion of US equities… this is the largest 10-day buying we have on record. Our data goes back to 2016.” Goldman says hedge funds are record long...

Read More »

Dear New World Investor: The headline October Consumer Price Index showed prices fell 0.04% over September – deflation! – and rose 3.2% over last year. Both were slower than September’s 0.4% monthly and 3.7% annual increase, and below the consensus expectation for 0.1% and 3.3%. The core CPI rose 0.23% monthly and 4.0% yearly, the smallest annual increase in two years. Both were below September’s CPI and consensus expectations. The shelter index, which lags reality by six to nine months, rose 6.7% on an annual basis, the slowest in a year. It was the largest factor in the monthly increase...

Read More »

Dear New World Investor: The September quarter was the best earnings quarter in a year for the S&P 500, thanks to strong consumer spending as Americans continued to dine out, take trips, and buy online. That drove profits at some of the biggest companies. Click for larger graphic According to FactSet, in addition to the 3.7% increase in earnings, the first such increase since the 2000 third quarter, revenues are on track to grow 2.3% from a year ago. Can this keep up? No. The Atlanta Fed’s GDPNow model increased its estimate of December quarter real GDP to 2.1% due...

Read More »

Dear New World Investor: So the Fed continued their pause and said they don’t see inflation reaching 2% until 2025, which implies these rates or higher for another 18 months to two years. I expect a new record length of time between the last rate hike and the first rate cut. Click for larger graphic h/t @WinfieldSmart That’s not what was expected, which was inflation nearly tame by the end of 2024 and rates coming down, but my reaction is GOOD. We need to get back to a normal financial environment, where capital has a price (5% for 10 year...

Read More »

Dear New World Investor: This morning’s first estimate of September quarter real Gross Domestic Product growth was +4.9%. Click for larger graphic It shocked Wall Street, which was looking for +4.5%, and the Blue Chip economists at +3.5%, but not you, I hope. The final GDPNow reading from the Atlanta Fed’s GDPNow model was +5.4%, and as you know they have been forecasting a very strong quarter for months. Click for larger graphic The S&P 500 fell 1.2% today as the “Fed has to increase” bears overcame the “Wow, way stronger economy than expected” bulls I talked about last week....

Read More »