Dec 17, 2014 | Post by: modelcap Comments Off

Don’t Fret the Fed: Policy Changes Are Priced-In

At the latest meeting on Nov 16-17, the Federal Reserve replaced its commitment to keep short-term interest rate target near zero for a “considerable time” with language that it will be “patient” in removing stimulus. It means that it’s on track to raise short-term target rate in the middle of 2015. The

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Dec 16, 2014 | Post by: modelcap Comments Off

2014: the year of the United States –

What kind of year was 2014? In financial markets, 2014 should go down as the year of the United States. The Year of U.S. Markets: S&P 500 (IVV), Japan (EWJ), Europe (IEV), Emerging Markets (IEMG) In a remarkable decoupling from the rest of the world, U.S. equities by far outperformed international

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Dec 02, 2014 | Post by: modelcap Comments Off

What Oil Crash Means for U.S. Equities –

Crude #oil sank further this week, to around $60 per barrel of the WTI contract. This confirms that the fundamental supply-demand situation was very negative, as I highlighted in recent posts. So, the continued fall in oil prices was to be expected. However, the speed of the crash was a

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Nov 26, 2014 | Post by: modelcap Comments Off

Back to “Old Normal”

November labor figures were very strong, showing that U.S. employers added 321,000 jobs, the most since Jan-2012 and better than the most optimistic projection by economists. Previously, Q3-2014 U.S. GDP growth was revised to 3.9% annualized growth rate. Combined with Q2 growth of 4.6%, the U.S. economy has now experienced

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Nov 17, 2014 | Post by: modelcap Comments Off

Why U.S. Stocks Are The Best Performers –

When looking at U.S. equities, it appears that the severe October selloff is all but forgotten. After a 2.4% gain in October, the S&P 500 (ETFs: IVV, SPY) continued to reach new all-time highs – for a 14% YTD gain as of Nov 30th. Not so for global markets; in

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Nov 10, 2014 | Post by: modelcap Comments Off

Q3 Earnings Growth is Strong at 7.9%

The S&P 500 Q3 earnings are growing at 7.9% YoY, according to Factset. Growth is much better than analysts’ estimates of 4.6% on Sep 30; and above-average 77% of companies beat estimates. Revenue growth is also strong, 4% YoY. Some tactical investment managers are concerned that equities are overvalued –

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Oct 28, 2014 | Post by: modelcap Comments Off

Oil Price: Beginning Of A Downtrend

Crude #oil tumbled 8.7% today to a 4.5-year low of $67.34 a barrel after #OPEC decision to maintain its production. As I wrote in November 2013, the downtrend in oil was expected – and it began in September 2014. Here’s why OPEC’s ability to change this trend is very limited. Supply-demand fundamentals

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Oct 24, 2014 | Post by: modelcap Comments Off

Why Everyone Is Buying Stocks Again –

Equities seemed to be in a free-fall in October. But since then, the S&P 500 jumped back to being the best-performing asset class in the world, finishing November at a new all-time high, for a 14% YTD gain. Based on our research here at Model Capital, we are convinced that fundamentals

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Oct 20, 2014 | Post by: modelcap Comments Off

The Key to Successful Tactical Management –

What a volatile month October was! The S&P 500 sold off by 7.4% from peak to trough on the closing basis, then regained the lost ground and more, finishing the month up 2.4%. To protect against significant downside, many managers adopted technical indicator-based stop-loss, or “risk-management” systems. Unfortunately, such systems

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Oct 03, 2014 | Post by: modelcap Comments Off

How High Is Equity Valuation?

Observers have been citing the high level of Shiller’s P/E (above 26) as reason to predict a drop in U.S. equities. I highlight below some of the details of its calculation that impact how it should and should not be used. First off, Shiller’s cyclically-adjusted P/E (“CAPE”) is often misused

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