Reverse Wealth Effect

Households as well as businesses feel wealthier when their stocks, bonds and real estate are gaining in value. It’s called the wealth effect. The problem with wealth effects? They often reverse course and, eventually, cause market participants to curb...

Are You Inverted?

Scores of pundits are getting bullish on stocks. Their reasoning? We may have reached peak pessimism. For example, small businesses have never expressed more concern about the outlook for future business conditions. However, the stock market is probably not...

The 2022 Bear is Tracking 1973-1974

In 1973, OPEC’s oil embargo sparked shortages throughout the U.S. I was only six years old at the time, though I still remember waiting with my father for hours on lines at the gas station. Energy inflation played a huge role in the 1973-1974 bear market. It was...

Da Bears

There’s one thing that everyone should know about bear markets. They do not end without capitulation. For instance, in recessionary bear markets, individual investors dramatically lower their stock allocation. In the 2000-2002 bear, individual investors dropped...

Profit Margins: The Next Shoe to Drop

The S&P 500 has not performed this poorly in the first six months of a year since 1970. The picture is even uglier for the growth-oriented Nasdaq. Bubbly asset prices stayed frothy during the Federal Reserve’s money printing spree and zero percent interest...