Home About Archives RSS Feed

@theMarket: Stocks Regain Momentum

By Bill SchmickiBerkshires columnist
What a difference one week makes! Stocks recouped all their losses this week, and then went on to make new highs. The outcome of President Biden's proposed stimulus bill will determine the market's next move.
Let me set the record straight. Last week, I wrote that I expected stocks to stumble, and hopefully preparing readers for a possible decline of 10-15 percent. That was a mistake. Instead, traders bought last week's 3 percent dip and, at this point, we are now back to square one. Well, not quite.
The U.S. dollar, the 10-Year U.S. Treasury Bond, and the price of gold have all moved substantially since last Friday. The greenback, as represented by the U.S. Dollar Index (DXY), has gained 1.22 percent. That may not sound like much, but in the world of currencies that is a big move. If it continues to gain momentum from here, we could see some of the biggest natural resources gainers in the market hit a brick wall.
As for interest rates, the yield on the 10-Year Treasury Bond is now hovering in the 1.14 percent-1.15  percent range. The rise in rates is a reflection of the current negotiations underway in Washington over the timing and amount of the latest stimulus package. Here's why.
There is a whole breed of bond market investors out there (called Bond Vigilantes), who are quick to buy or sell bonds based on how they interpret the government's monetary or fiscal policy moves will impact inflation. In this case, additional stimulus by the Biden Administration would be considered inflationary, so the Vigilantes are selling bonds. Remember, there is an inverse relationship between the price of bonds (which are going down) and their yield or interest rate. Prices down, rates up.
Commodities, and to some extent, emerging markets, could experience a bout of profit-taking if interest rates and the dollar continue to climb higher. Which brings us to precious metals, specifically gold and silver. This week, gold fell below $1,800 an ounce, since a stronger dollar and higher interest rates are like kryptonite to gold.
Normally, silver would have declined as well with its bigger brother. And it has, but not nearly by the same percentage points. You can thank the Reddit/Robin Hood traders for that. After their initial success with Game Stop, some retail speculators believe they can push the heavily shorted silver price higher by large and concerted purchases of the silver Exchange Traded Fund (SLV).
I doubt they will succeed, since silver is a huge global commodity that would require a heck of a lot of buying power to do more than move the silver price on a short-term basis. I would not recommend readers participate in this endeavor, although I do like silver for other reasons; but wait until the speculation subsides.  
We are halfway through earnings season and investors have been pleasantly surprised by the results. Initially, Wall Street was bracing for an average 10 percent decline in the numbers, but at this point, the shortfall overall is less than 1 percent.  Those results breed confidence in analysts' projections for this year, which are in the 20-25 percent-plus range right now.
Those expectations are based on the success of the U.S. vaccination program and the reopening of the economy. It is why I am bullish over the medium-term, even though I am still of the mind that somewhere ahead in this first quarter we will experience a pullback. On the upside, I could see the markets possibly approach the 3,950-4,000 level on the S&P 500 Index in a burst of irrational exuberance.
As the market climbs, I continue to advise investors to slowly-but-surely take some profits in those stocks where you have experienced outside gains. This is not market timing. This is common sense talking. You will be happy you did, if only because it will afford you an opportunity to buy the same, or different stocks at a cheaper price.

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Mount Greylock Alum Backstops MCLA Men to Frist Win
Williams Volleyball Opens 7-0
Letter: Support for Lynette Bond for mayor
Speakers at Voices of Recovery Encourage Sharing, Connection
Freeman Center's 'Rise For Safety and Justice' Walks Aim to Represent All
One Hundred Hit Streets of Williamstown for Fun Run/Walk
Dalton Equestrian Headed to Nationals
Civics Guide Launched in Honor of Late Pittsfield Mayor Ed Reilly
Pittsfield Man Arrested After Stabbing Incident
Adams Man Found Guilty For Assault and Battery on a Household Member

@theMarket (382)
Independent Investor (451)
Retired Investor (58)
September 2021 (6)
September 2020 (2)
August 2021 (6)
July 2021 (8)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
December 2020 (6)
November 2020 (8)
October 2020 (7)
Markets Currency Commodities Interest Rates Europe Jobs Oil Energy Debt Ceiling Debt Fiscal Cliff Stocks Congress Crisis Election Rally Economy Selloff Recession Metals Stimulus Deficit Banks Stock Market Retirement Federal Reserve Taxes Wall Street Euro Pullback Bailout Housing Japan Greece Europe
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: Let the Good Times Roll
@theMarket: The Bottom Is In
Independent Investor: Europe's Banking Crisis
@theMarket: No More Than 5 Percent
@theMarket: Corrections Are Good for the Soul
@theMarket: One Down, One to Go
The Retired Investor: Non-Fungible Tokens Come of Age
@theMarket: 707 Days
Independent Investor: Time Is Running Out
Recent Entries:
@theMarket: Markets Enter the Danger Zone
The Retired Investor: Moderates Winning on Tax Debate
@theMarket: Some Brokers Are Getting Bearish
The Retired Investor: Japan Is Worth a Look
@theMarket: Investors Are Chasing Stocks Higher
The Retired Investor: Non-Fungible Tokens Come of Age
@theMarket: Taper Talk Tanks Stocks
The Retired Investor: Corporate Activism Comes of Age
@theMarket: Stocks Grind Higher
The Retired Investor: Back-to-School Season