What’s Fueling Stock Gains Overseas?

What’s Fueling Stock Gains Overseas?

Article SummaryU.S. stock gains have been relatively mild compared to the strength occurring overseas.Stocks in international markets remain undervalued based on the underlying CAPE ratio and average dividend yield.Currency devaluation is triggering new multi-month highs for Purchasing Managers Indices in Europe, China, and Japan.It’s gone unnoticed for most of the year, but U.S. stocks aren’t the biggest bull market. While domestic markets have performed fairly well just two months into the year, markets overseas are outperforming them by a considerable margin. Based on the blasé performance of U.S stocks over the last week, the secret could be out… Read full article at Seeking...
Risk Versus Reward: Measuring Alpha

Risk Versus Reward: Measuring Alpha

Context is everything. Victory over an obstacle needs to have appropriate awards. A win that costs you more than you were willing to pay is known as a Pyrrhic victory – named after the Greek King Pyrrhus who defeated the Romans around 280 B.C. but did so at such a great cost that the Greek King quipped that any more victories would ruin him.In the stock market, similar situations happen all the time. You may succeed in turning the tide on a position and making it profitable, but at such a great cost that you took away from all your other positions to do so and ended up losing out on all the other gains you would’ve had.It’s hard to know if you’ve done well managing your portfolio or not. You may think that simply beating the market averages for the year, a difficult enough feat, constitutes success, but you’d be mistaken. A gambler who bets everything on a roll of the dice and comes up a winner would certainly qualify as beating the markets, but he did so at tremendous risk. Risk that no investor would be willing to take.Understanding risk is critical to being a profitable investor over the long haul. Our measurement of success therefore comes from two parts – percentage gains, and risk assumed.Analyzing RiskWhen you compare your performance to the market average, you generally pick an index that matches your portfolio set-up as closely as possible. It could be anything from the S&P 500 to the Russel 2000 or anything in-between. You need a benchmark to compare not only your performance to, but your...
Technical Indicators You Can Actually Use

Technical Indicators You Can Actually Use

On Wall Street, there are two major schools of analytical thought: Fundamental and Technical. Fundamental analysts focus on financial statements, economic advantages, and corporate management in order to determine the intrinsic value of a stock. Hard core fundamentalists view technical analysis like astronomers see astrology – a complex weave of arbitrary numbers and events to magically arrive at a conclusion.In truth, fundamental analysis tells you what a stock is ultimately worth, while technical analysis tells you what other traders are doing with that stock. That’s why value investing tends to be synonymous with long term strategies while “chartists,” people who use technical analysis, trade in short term patterns.When used together, proper analysis won’t only tell you what stock to buy, but also when to buy it and when to sell it. Like all types of analysis, some metrics are more meaningful than others. We’ll take a look at some of the more important ones used in the market and what they mean in regards to the current environment.Why Volume MattersArguably the most commonly looked at piece of technical data is volume. This is the amount of stock that has changed hands on a given day. It’s usually calculated as the average amount over a period of time.Volume tells you how active the stock is. A low volume can mean that there’s little interest in the stock which can result in liquidity issues – if you own a large number of shares, you may not be able to sell them easily. On the other hand, a large amount of volume means that there’s much more liquidity making it easier to...
Higher Market Volatility Could Be A Buying Opportunity

Higher Market Volatility Could Be A Buying Opportunity

Volatility is back. The market is beginning to falter under the barrage of geopolitical turmoil, depressed commodity prices, muted earnings, and now a drop in consumer confidence.The gauge that measures consumer sentiment fell from 93.4 to 86 from last month to September – an 8% drop that brings a sudden end to a 4-month increase in expectations. A look at the CBOE VIX Index, colloquially known as the “fear gauge,” reveals a sharp rise in the past two weeks of trading. Since September 19th, the VIX has climbed nearly 35% from 12.11 to 16.31 as of September 30th.Many investors look at the sudden increase in volatility as a warning sign, but it could be seen as a trading opportunity for those willing to take a little more risk.Volatility In StocksVolatility is one of the fundamental forces of the stock market universe. Much like gravity is responsible for maintaining the orbits of the planets, volatility keeps the market functioning and allows trading to occur.The standard definition of volatility is that it is a measurement of the dispersion of returns in a given security or market. In other words, if the dispersion is more erratic, then the security would be more volatile and therefore garner a higher rate of return to compensate an investor for the perceived risk in owning it.Volatility can be thought of as a roller coaster. You may be more of a thrill-seeker who chooses to ride the tallest, fastest roller coaster around because you enjoy the exhilaration associated with it and you feel comfortable with taking a risk and feeling fear.Other riders tend to be more cautious...
Why Luxury Stocks Have Lagged Over The Past 6 Months And What It Means For Investors

Why Luxury Stocks Have Lagged Over The Past 6 Months And What It Means For Investors

The bull market is continuing to run free well into 2014 and the stock market has hit multiple new highs throughout the year. However, a sector that has beat the S&P 500 over the last 5 years has been surprisingly lagging.Luxury stocks have stalled out over the past several months. Take a look at a comparison between the S&P 500 and the S&P Global Luxury Index (http://us.spindices.com/indices/equity/sp-global-luxury-index). In the last 5 years, the Luxury Index has posted gains of 19% versus the S&P 500’s 15.5%. Now take a look at the index over the past twelve months. The S&P 500 is up 19% while the Luxury Index has actually lost roughly 0.5%.The big question investors are asking is: are the wealthy simply not spending as much, or are they spending it somewhere else? The answer could potentially change the way investors should be looking at the stock market. The predilections of the wealthy often have lasting effects on Wall Street.Breaking It DownWhat’s the difference between the wealthy and those who are considered middle class or poor, other than the obvious monetary answer? Spending habits.One of the most often cited resources for determining economic growth and stability is the consumer spending index. If we take a look back over the past two years, we can see a disturbing trend when it comes to our Nation’s personal habits.According to data taken from the Bureau of Economic Analysis (BEA), personal consumption expenditures have climbed 7.5% from $11.0306 trillion to $11.8678 trillion during that time frame while personal income only increased by 6.7% from $13.7761 trillion to $14.7032 trillion. Personal savings actually decreased...