It is Monday, and the world did not change much over the weekend. Today’s opening in the market suggests it too has not changed much since last week – volatility still marks its personality. Steady as she goes is not the applicable phrase … yet.
- A National Association for Business Economics (NABE) survey published on Monday found 61 percent of the firms surveyed planned to increase capital spending, which includes investments in buildings and equipment.
The above relates to business spending over the next year and the results suggest businesses are feeling optimistic about the US economy. Other people with money feel optimistic about the market over the longer term, as well.
- BlackRock, the world’s largest money manager, said on Thursday first-quarter profit rose 20 percent, boosted by strong performance fees and strength in its retail business as investors poured money into long-term funds. The New York-based asset manager, which now manages $4.4 trillion in assets, said it had positive net flows across equity, fixed-income, alternatives and multi-asset funds during the quarter.
It is not just enough to look at the positive numbers of BlackRock. One has to look at the context in which the numbers happened. Remember, the sky has been falling in the market for some weeks now.
- “Even with all of the turmoil in the markets that we saw a few weeks ago, every day during that turmoil, we had net inflows,” Chief Executive Officer Laurence Fink said in an interview on Thursday, referring to the company’s retail client base.
So what was all that turmoil about and what is going on still in the market?
- Fink noted most of that turmoil was due to “fast money” exits, with hedge funds moving out of their positions rather than any broad-based selling among long-term investors.
Things will settle down in the market and if earnings come in as they have, the market will keep on moving up, albeit slowly, which is exactly what one wants, or at least this “one” wants. Slow is good because the forces of contrary out there will still affect the market, but, because it will be “steady as she goes,” the result will be less crest and trough and more rolling seas. For example, here is a minor maelstrom blowing about that may cause some waves, or not.
- Large U.S. stocks have an expected real return of minus 1.6% a year over the next seven years, GMO calculates. Invest in small stocks and you can look forward to an annual 5.1% shrinkage in your portfolio’s purchasing power.”
The “GMO” above does not refer to agriculture or genes, rather it is a global investment firm connected to none other than Jerry Grantham.
- GMO is a global investment management firm committed to providing sophisticated clients with superior asset management solutions and services.
Oh, and so you know, Jerry Grantham is famous in the financial world. A quick look in Wikipedia will tell you that.
- Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles. He has been a vocal critic of various governmental responses to the Global Financial Crisis. Grantham started one of the world’s first index funds in the early 1970s. In 2011 he was included in the 50 Most Influential ranking of Bloomberg Markets magazine.
My point is that no matter if the US economy does well or if earnings produce the desired results, there are those analysts in the market who see darkness ahead.
BTW, how does one come up with a -1.6% real return prediction for large cap stocks over the next seven years? I am sure the answer has something to do with computer modeling, which, if true, suggests a reliance on technology that further suggests we have not come far since the days of casting bones or looking into crystal balls.
Seven years is a long, long time in the market and for someone, or a firm in this case, to predict with such precision a real return over those seven years is, well, arrogant. I guess it is what their clients want to hear, or, it is a marketing tool to gather in more clients who want to hear more prophesy.
In any case, it is still Monday of this week, and the market is still being the market, and that is what I care about. Day to day, day in and day out, this is a job and to do it well, I can’t buy into prophesy. I have to stay real and focused because if there is anything I have learned about the market over the last many years it is that every day in the market is a new day and anything can happen.
Seven years? Seriously?
Trade in the day; Invest in your life …
