FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
The Market Could Be Presenting A Bear Trap (Advisor Perspectives)
Some analysts have said the market is carving out a top. Dominic Cimino of Preferred Planing Concepts says these analysts could be right but they could also be wrong.
He points to the S&P 500 and its “major, minor, and minor-minor bullish trend channel”. The S&P 500 is above the support level i.e. the minor-minor trend line. The Russell 2000 and Dow Jones Transportation Average index charts are also above their support levels.
“The analysts and commentators warning about a market peak could indeed be correct, and perhaps a major top is already in place. But they could be wrong as well, and the market could be presenting a bear trap for those shorting the market. If you watch the support levels I’ve mentioned, you may perhaps better gauge your sentiments on this issue. If support levels hold, or are only temporarily breached, it could be that the market moves higher and traps any bears that have shorted it. On the other hand, any true breaching of these support levels may indicate a significant correction is under way. My advice is you plug your ears and watch the charts.”
There Is A Huge Disconnect Between What The Financial Media Covers And What People Want (The Reformed Broker)
Most financial media are focused on reporting about trading, stock moves, and analyst recommendations. Josh Brown says there are about 3 million investors that actively trade their own stocks, and need this kind of news. Millionaire households which total about 8.6 million want news on long-term planning instead.
“The financial media is irrationally addicted to trading stories because they have urgency and they’re entertaining, even if ultimately unsatisfying to the 90 million Americans who are trying to figure out what to do with their wealth. There is a relentless focus on analyst research calls, upgrades and downgrades, economic data releases, merger and acquisition buzz, hedge fund activity etc. This is all highly interesting and I personally enjoy both consuming and creating this type of content as well. But it should not be the only thing on the web / airwaves. It is disproportionately dominant when compared to its actual utility for the majority of the audience. There is a huge content arbitrage opportunity here.”
In 1996, Federal Reserve Chairman Alan Greenspan asked, “But how do we know when irrational exuberance has unduly escalated asset values?” Pimco’s Bill Gross has begun his latest investment letter with that quote in discussing expensive assets. He says on a scale of 1 – 10 in “measuring asset price irrationality, we’re probably at six and moving upward”.
He says returns on junk bonds will be low.¬† Given that junk bond spreads correlate with stock prices, he argues that we’re not seeing a bubble but that the stock market is nevertheless expensive. He says with the returns on both stocks and junk bonds being influenced by the Fed’s easy money policy, investors should “temper their enthusiasm” when that support weakens or goes away.
David Rosenberg’s Recession Indicator Flipped Positive Today (Business Insider)
David Rosenberg considers the three-month moving average of non-defence capital goods orders excluding aircraft to be a key insight into what businesses are doing with their cash. He said when this went negative it signaled a recession. Today, Rosenberg’s recession indicator finally moved into positive territory.
Photo: Bloomberg, Business Insider
Traditional Financial Advisors Are Threatened By Online Rivals (The Wall Street Journal)
Traditional financial advisors are feeling threatened by online competitors. But Adam Kuettel of NWA Financial Partners told The Wall Street Journal, that they needn’t be threatened just by the presence of online advisors. Instead he says the real threat to traditional advisors comes from firms that are willing to add on these services along with traditional advisor practices. This includes firms like Edelman Online the online presence of Edelman Financial Services and Merrill Edge, the online arm of Merrill Lynch.