This week the preliminary estimate for third quarter US GDP growth came in at 1.5%. This was a slower rate of growth than the prior quarter, as businesses drew down inventories and exports were lower. However, US consumers are continuing to spend, and we saw more healthy employment data this week. Internationally, the UK’s GDP growth for Q3 came in lower than expected, but Japanese industrial production improved for September, as did economic sentiment in the European Union for October. See the BEA link below for more information on this data.
A reminder this week on the dangers of chasing hot investments. It’s tempting to look back and think that you should invest in a particular fund or sector, which has performed well in recent months. But, typically, top sector performers rotate over time, and what was hot last quarter or last year often may perform poorly in the future.
In fact, Vanguard conducted a historical study (link below) that showed that chasing past top performing funds is likely to hurt your returns by 1.5% to 4.0% a year relative to opting for a more stable investment allocation.
This is one reason we believe that investment allocations should be relatively stable with a rebalanced portfolio. We believe chasing short-term returns can be counterproductive. Not only can this drive up trading and tax costs, we believe it can also hurt portfolio performance and increase risk.
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
A new month so some stats:
Since the thread started 2.18 years ago, the US market is up 32%, or 13.58% per year. Measured by the Vanguard Total US Stock Market Index (VTI). Including dividends.
So despite all the problems in the world, these couple of years have been good times to invest. Triumph of the optimists and all that. Keep that in mind since the bad news never goes away but still companies find ways to make money. Modern western corporations are amazing money making machines - best not to bet against them too often, methinks.
7333 posts over 796 days is an amazing 9 posts per day.
We rock and learn!
agip,
It is good to be an informed optimist, which also includes being aware of where we are in the economic cycle. Here is the latest S&P Reporting statistics from S&P Capital IQ.
"While 236 of 336 have beaten on an Operating basis (70%) , only 153 have beaten on an As Reported basis (42%; fewer contributors for As Reported)"
Stock buybacks are adding a 4% tailwind to earnings.
Igy
Current Shiller PE Ratio: 26.43 +0.16 (0.61%)
11:46 am EST, Mon Nov 2
Mean: 16.63
Median: 16.01
Min: 4.78 (Dec 1920)
Max: 44.19 (Dec 1999)
CAPE of Lost Hope wrote:
Current Shiller PE Ratio: 26.43 +0.16 (0.61%)
11:46 am EST, Mon Nov 2
Mean: 16.63
Median: 16.01
Min: 4.78 (Dec 1920)
Max: 44.19 (Dec 1999)
well that's the point, no? 2.18 years ago the shiller PE was probably also around 26. And hark - the market rose 32% from there.
waiting for the last laugh is a very expensive proposition.
Yes, but if that 32% gets wiped out in a 50% drop who gets the last laugh.
Bob Shiller
¡Verdad!
CAPE of Lost Hope wrote:
Yes, but if that 32% gets wiped out in a 50% drop who gets the last laugh.
Bob Shiller
agip,
I would say the biggest influence for the 32% move during that time span was QE. It is also interesting to note the performance of the market since QE ended.
Igy
Indeed. The market took a dip in reaction to the end of QE and has since recovered nicely. Buy and hold.
CAPE of Lost Hope wrote:
Yes, but if that 32% gets wiped out in a 50% drop who gets the last laugh.
Bob Shiller
There are no last laughs. Only interim chuckles.
M. Rossi,
The stock market may have, but company earning have not:
"While 236 of 336 have beaten on an Operating basis (70%) , only 153 have beaten on an As Reported basis (42%; fewer contributors for As Reported)"
Read more:
http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=366#ixzz3qN8v6V9I
I would be concerned about the disconnect.
Igy
Another fantasy stock takes a hit after earnings announcement, the latest FitBit, down 7% in after market. Perhaps 132 PE can't support the stock price. Duh?
Ghost of Igloi wrote:
M. Rossi,
The stock market may have, but company earning have not:
"While 236 of 336 have beaten on an Operating basis (70%) , only 153 have beaten on an As Reported basis (42%; fewer contributors for As Reported)"
Read more:
http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=366#ixzz3qN8v6V9II would be concerned about the disconnect.
Igy
for Pete's sake - now you are talking about "earnings beats"? Come on man.
anyway, we've established the corporate earnings are in fact growing nationwide, just not in the Sp500. And they are growing in the SP500 if you exlude energy companies.
Ghost of Igloi wrote:
agip,
I would say the biggest influence for the 32% move during that time span was QE. It is also interesting to note the performance of the market since QE ended.
Igy
well mebbe
Since the end of QE, which I'll call 10/31/14, the US market is up 7.7%.
So yes, the market rose more during QE than since it ended, but still...7.7% is a nice number.
agip,
Oh, but you gladly cheer the rise of the S&P! Anyway, earnings in the broader S&P are not growing as noted above.
Its ok, SHAK is up and the NASDAQ hit a 15 year high. Everything is awesome.
Igy
Ghost of Igloi wrote:
Everything is awesome.
Igy
I appreciate your attempt at sarcasm, but the reality is that things are pretty awesome. That is, unless you're sitting it out.
Big Dog,
We will see. The market rise is on very narrow group of large cap stocks while most stocks stay below their 200 day moving average. The largest number of suckers get drawn into the later stages of a Bull market. If you are truly a Big Dog you will know exactly when to sell; that was closer to some today than some tomorrow.
Best wishes though.
Igy
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