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The Fed just announced that it will taper asset purchases to a monthly rate of $US75 billion from the current $US85 billion pace. But Gluskin Sheff’s David Rosenberg thinks there’s a bigger market issue at hand.
“Never mind the Fed taper — a much bigger issue, perhaps even obstacle, is the earnings landscape which has turned murky,” Rosenberg said in a note ahead of the Fed announcement. This is in part because a record 94 S&P 500 companies have issued earnings downgrades so far this quarter and only 12 have had positive pre-announcements. This 7.83x ratio is the worst in seven years.
Moreover, “the analyst earnings revision ratio is heading south (according to BAML data) — down to 0.86x (positive to negative EPS revisions) in November from 0.90x in October, 0.91x in September and the nearby high of 1.11x in August,” writes Rosenberg. “This is the lowest reading in seven months.”
Advisors Reveal Their Top Investment Ideas For 2014 (WealthManagement.com)
Diana Britton at WealthManagement.com asked advisors for their top investment ideas for 2014. Here are five. 1. 3D printing — Wohlers Associates expects sales of 3D printing products to grow to $US10.8 billion by 2021, from $US2.2 billion in 2012. 2. The Dogs of the Dow strategy — one would annually pick the 10 highest dividend-yielding stocks in the Dow Jones Industrial Average. Since yields move inverse to price, the strategy is a value and contrarian one.” 3. Japan — Some advisors think Japan will be the “next engine of growth” on the back of Abenomics, a three-pronged approach to countering deflation involving fiscal and monetary stimuli along with structural reforms. 4. Long volatility — Betting on VIX options as the measure of volatility has been down in 2013. 5. Emerging Markets — “Half the PE (price to earnings ratio) of the U.S. market and triple the growth rate,” said Jim Goodland, president of Securus Wealth Management.
Wall Street’s Brightest Minds Reveal The Most Important Charts Of The Year (Business Insider)
Equity markets have stopped worrying about macro surprises, Gerard Minack of Minack Advisors told Business Insider. “The chart shows the prospective PE on developed world equities versus macro surprises in G10 (whether macro data are coming in above or below the Bloomberg consensus). I think the markets lost their sensitivity because of three words: ‘whatever it takes’. We no longer worry that macro weakness will cue more systemic stress. In short, markets think we’re back to normal. I don’t think we are, but that’s another story.”
How Advisors Can Prepare For The Coming Less In Assets Under Management (The Wall Street Journal)
As baby boomers retire they will start to tap into their principals which will see assets under management (AUM) with many firms start to fall, writes Bob Glovsky, of Boston-based The Colony Group in a Wall Street Journal Column. But advisors can prepare for this by 1. Changing their revenue model, since many bill their clients based on AUM. Instead they can try switching to a flat fee. This “will insulate you both against the decumulation and also against market downturns because it does not rely on a percentage of AUM,” he writes. 2. They should actively work on bringing in new clients. He suggest reaching out to different demographics because there still isn’t a lot of diversity in their client base.
Fed Vice Chair Janet Yellen is expected to take over as Fed chair when Ben Bernanke steps down in the coming weeks. This transition usually sees gold prices rally faster than stocks, or stock prices fall faster than gold, according to Julian Emanuel at UBS.
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