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Articles by Eric Parnell
The Rhythm Of The Heat
Summary Inflation risks persist, with recent data showing rising headline and core inflation, signaling potential rekindling of inflationary pressures in the economy. High inflation negatively impacts both stocks and bonds, as higher interest rates reduce the equity risk premium and real bond yields. Goods deflation is evaporating, and services inflation remains high, suggesting potential for increased inflationary pressures in the coming months.
The Fast And The Furious
Feb. 08, 2025 3:53 AM ET, , Summary Market volatility is driven by liquidity; if liquidity increases, stock prices rise, and if it decreases, stock prices fall. Despite rapid political and market headlines, the U.S. stock market remains stable, supported by technical indicators and liquidity. Inflation remains manageable but rising; monitoring inflation trends is crucial as they could impact liquidity and stock prices.
Thunderstruck
Summary Monday's tech stock plunge, driven by DeepSeek's AI app news, was shocking but less dramatic in a broader market context, with other sectors performing well. Despite significant declines in AI stocks like NVIDIA and Broadcom, these drops are minor in the grand scheme, reflecting a market correction. Investors should be cautious about buying the dip; extreme valuations and potential further declines suggest waiting for clearer market signals.
5 For 2025: Indicators To Watch
Jan. 06, 2025 2:40 PM ET, , , Summary Corporate earnings growth is crucial for stock prices; robust profit expectations for 2025 could drive markets higher, but shortfalls may lead to declines. The yield curve's steepening suggests potential recession risks; historically, it has been a reliable recession predictor, and recent Fed rate cuts add to concerns.
This article was written by Chief Market Strategist, Great Valley Advisor Group Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Inflation, The Sequel
Sep. 11, 2023 5:18 PM ETSPY, DIA, QQQ, IVV, VOO Summary Inflation is rising again, posing a downside risk to capital markets in the second half of 2023. The Cleveland Fed predicts a further increase in the annual headline inflation rate in August and September. Despite potential inflation concerns, the core inflation rate is expected to continue fading, limiting the impact on capital markets. It was a blockbuster forty years in the making.
The Dog Days Of Summer
Aug. 22, 2023 4:29 AM ETSPY, IVV, VOO, DIA, QQQ Summary U.S. stocks have been declining since the start of August, with the S&P 500 dropping more than -4%. The recent retreat in stocks is a healthy consolidation of gains following a sharp rally in June and July. Key technical support levels, such as the 50-day moving average, have been potentially breached, signaling further downside for stocks. The dog days of summer have descended on capital markets in recent weeks.
Cool Inflation Summer
Aug. 11, 2023 4:36 PM ETSPY, DIA, QQQ, IVV, VOO Summary The primary risk for financial markets in the second half of the year is a renewed rise in inflation. The latest inflation reading for July showed encouraging signs, with the annual inflation rate slightly below expectations. Key indicators to watch going forward include the breakeven inflation rate, the Producer Price Index, and oil prices.
A Closer Look At Corporate Earnings Season
Summary Corporate earnings season is underway, with 85% of companies in the S&P 500 Index expected to report their results and outlook over the next four weeks. Annual earnings per share are expected to decline, marking the third consecutive quarter of annual GAAP earnings declines. Despite the decline in annual earnings, quarterly GAAP earnings are showing signs of improvement. While stocks are expensive from a long-term historical perspective, most are actually more reasonably valued.
A Closer Look At Corporate Earnings Season
Corporate earnings season is underway once again. With the second quarter of 2023 having just drawn to a close at the end of June, publicly traded companies will soon be coming forward to not only reflect on their recent operating results, but perhaps more importantly to update their projections on performance through the remainder of this year and next. Overall, roughly 85% of companies in the S&P 500 Index will report their results and outlook over the next four weeks.
Economic And Market Outlook From Jackson Hole
On Wednesday, I had the opportunity to attend the GIC Teton Economic Outlook conference in Wyoming. The event brought together some of the best and most thoughtful economic and financial minds in the industry today for an interactive discussion about the broader macroeconomic and investment outlook as well as more focused discussions on labor markets and cryptocurrencies.
The Four Horses For Portfolio Gains In 2023 H2
The outlook is strong for asset allocation portfolios heading into the second half of 2023. From a broad diversification perspective, markets are providing good reasons for optimism across the key asset class spectrum. Of course, the outlook is not without risks that must also be considered. Stocks. The trend for stocks as measured by the S&P 500 is definitively to the upside as we pass the halfway point in 2023.
Bonds Are Back, But Certain Bonds Look Better Than Others
Jun. 29, 2023 2:05 PM ETAGG, BND, EDV, IEF, IEI, TLH, TLT Summary The bond market is regaining its footing as inflationary pressures continue to wane, with investors showing confidence in improving conditions for the asset class. Favoring U.S. Treasuries over investment-grade corporate bonds and mortgage-backed securities is recommended for the second half of 2023 due to the current market environment.
Implications Of The Recession Outlook
Jun. 29, 2023 1:18 PM ETS&P 500 Index (SP500), COMP.IND, INDU Summary It has arguably been the most anticipated economic recession in history. Is it possible that the worst is behind us? What should we reasonably expect from any recession that lies ahead? It has arguably been the most anticipated and predicted economic recession in U.S. history.
Blue Skies For Now, But Blue Days Are Still Possible
Jun. 16, 2023 12:35 PM ETDIA, IVV, QQQ, SPY, VOO Summary Recent developments have been resoundingly positive for the U.S. stock market outlook. This includes a technical breakout and cooling headline inflation data. But blue days are not necessarily gone for investors going forward. Investors are being provided with some meaningful signals for optimism as the sun brightens and the weather warms with the summer about to begin.
Surface Pressure
All appears well with the U.S. stock market. Just this week, the S&P 500 hit a new high for the year, and the October 2022 lows look like an increasingly distant memory. And the threat of an immediate pullback in stocks does not at all appear imminent. Despite the feel good headline mojo for stocks as the summer gets underway, unfortunately a different story continues to accumulate under the surface. The strong one At first glance, it looks like everything is looking up for U.S. stocks.
No Clear And Present Danger
Investors have no shortage of things to worry about in the current environment. The threat of a looming economic recession, banking crises, and the ongoing debt ceiling debate are just a few of the current threats. As a result, investors are understandably nervous about getting blindsided by a sudden and sharp downside move in the stock market.
The Path Of Least Resistance
As good as it gets? The U.S. stock market has been in rally mode dating back to last October. This includes an impressive bounce since mid-March in the wake of the collapse of a handful of major U.S. banking institutions. The stock market resilience has indeed been impressive. But despite these various positives, the path of least resistance for U.S. stocks as we make our way into the summer is to the downside.
When The Levee Breaks
If it keeps on rainin'. It was nearly a century ago when the Great Mississippi Flood resulted in one of the most destructive and costly natural disasters in U.S. history. One wonders whether another flood is threatening to break across the U.S. banking system and the broader economy today. Mean old levee.
The Path Forward For Cryptocurrency
I recently had the opportunity to attend a two-day conference in Sarasota, Florida hosted by the Global Interdependence Center. The topic was Cryptocurrency and the Future of Global Finance.
2023 Q2 Outlook (SPX) Original
It has been an eventful start to 2023 for the economy and capital markets. Many investors came into the year anticipating that the onset of a mild mid-year recession would finish the job of bringing inflation back down, providing the U.S. Federal Reserve with the flexibility to get back to the lower interest rates that the markets have come to know and love for so many years now.
Banking Crisis: Who's Next
Meet the new bank crisis NOT the same as the old bank crisis. This is not the Great Financial Crisis II. It’s not the collapse of Long-Term Capital Management in 1998. It’s not the Great Depression either. A lot of what is taking place today has some rhymes with various past episodes, but we are charting new territory with new lessons to be learned to add to the future policy maker playbook.
Reality Check
After a blazing start to 2023, the U.S. stock market has cooled in recent weeks. Looking ahead to the upcoming spring, the path of least resistance for stocks appears to be to the downside. For while the underlying economy has remained solid in the face of aggressive monetary tightening from the U.S. Federal Reserve, this resilience in large part also is a primary headwind preventing stocks from fully shaking off the bear market blues. Fundamental check.
Good As Gold
Feb. 22, 2023 9:23 PM ETGLD, SPY, TLT, IAU, SGOL, PHYS, IVV, VOO, DIA, QQQ, DBP, JJP, GLTR, JJPFF, DGL, BAR, OUNZ, GLDI, IAUF, GLDM, AAAU, BGLD, IGLD, GBUG, IAUM, PBUG Summary Gold has a history of adding meaningful diversification in a broad portfolio asset allocation strategy. Gold is historically uncorrelated with other major asset classes such as stocks and bonds. Gold has been in a sustained uptrend dating back to the mid-2010s.
Falling Slowly
Feb. 15, 2023 12:00 PM ETS&P 500 Index (SP500), DJI, SPX, NDX, RTYSPY, IVV, VOO, DIA, QQQ, IJH, IJR, IWM, TLT, IEF, GLD, SLV, IAU, SGOL Summary The rate of inflation continues to decline, but it's likely falling too slowly to encourage the Fed to shift their monetary policy stance from tightening to easing any time soon. Stocks have been remarkably resilient in the face of this increasing reality.
Don't Go Away
Feb. 09, 2023 6:00 PM ETS&P 500 Futures (SPX), DJI, NDXSPY, DIA, IVV, QQQ, VOO1 Comment Summary The Fed is likely to raise rates higher and keep them higher for longer than the market currently expects. Persistent Fed hawkishness is positive for investors in the long-term, as it helps ensure that inflationary pressures are fully extinguished. Why investors are best served to remain fully allocated to equities despite ongoing inflationary pressures and a hawkish Fed.
Time To Study Abroad
Jan. 31, 2023 12:08 AM ETSPY, DIA, QQQ, IVV, VOO, EFA, HEFA, EEM, HEEM, VWO Summary Developed international and emerging market stocks have been surging relative to the U.S. in recent months. Are non-U.S. stocks finally ready to take the sustained lead over their U.S. counterparts? A closer look reveals that non-U.S. stock performance may not be as impressive as it seems at first glance. Non-U.S. stocks have been on fire as of late.
Investing’s Rich Pageant
Maria: “You should get out of these clothes immediately. You’ll catch your death of pneumonia, you will.” Clouseau: “Yes, I probably will. But it’s all part of life’s rich pageant, you know?” --A Shot In The Dark, 1964 After more than a year of a back and forth downward slide, stocks continue to struggle. Frustrating indeed, but such challenges are all part of the experience of investing in the U.S. stock market.
The Other Side Of The Mountain
We have begun the descent down the other side of the mountain. The long-dormant inflationary pressures that erupted nearly two years ago are increasingly subsiding. Assuming this trend continues, this has important implications for the capital markets outlook as we move through the coming year. The impact on some asset classes makes take time to materialize, while other categories may already be responding to the effects of gradually diminishing pricing pressures. Descending from the peak.
2023 Outlook: The Tempest
Jan. 05, 2023 5:15 PM ETPBJ, SPY, DIA, QQQ, IVV, VOO, XLE, XLP, IHE, XLV16 Comments Summary The storm that descended upon capital markets in 2022 is expected to continue into the New Year. The probability of a recession in 2023 remains elevated. The Fed remains steadfast with tight monetary policy and corporate earnings are historically elevated. Be not afraid. Capital markets including stocks continue to offer attractive upside opportunities in selected segments.
Born Under Some Bad Signs
Head-fake. U.S. stocks have perked up as of late. After trading lower in 10 out of 14 trading days and shedding more than -10% in the process since peaking on August 16, the S&P 500 has bounced nearly +5% over the last three trading days to close out the week. Is a new rally in U.S. stocks underway? Perhaps, but it is likely to be fleeting at best, as this latest rally has been born under some bad signs. Technical resistance.
Choke Up On The Bat
Sep. 04, 2022 11:36 AM ETAGG, AMGN, BKLN, BMY, BND, CSCO, CVX, CWB, DIA, EMB, GDX, GDXJ, GLD, GOOG, GOOGL, HYG, IAU, IHE, ITA, IVV, JPST, K, LMT, LQD, MBB, META, MRK, NEM, NOC, PALL, PBJ, PFE, PHYS, PPLT, PSLV, QQQ, SLV, SPY, TIP, TLT, VOO, VZ, XAR, XLE, XLP, XLV, XOM1 Like Summary Performance across the major asset classes has been challenged in 2022. This difficult performance may continue for the foreseeable future.
Tearing Stocks A New Jackson Hole
The hawks talk. The U.S. Federal Reserve is set to convene its latest annual Economic Symposium in Jackson Hole, Wyoming later this week. The August 25-27 central banking event according to the Federal Reserve Bank of Kansas City “brings together economists, financial market participants, academics, U.S. government representatives and news media to discuss long-term policy issues of mutual concern”.
Energy Sector: Energize Your Stock Portfolio Original
Aug. 20, 2022 7:00 AM ETXLE, XLB, XLI, XLY, XLP, XLV, XLF, XLK, XLC, XLU, XLRE, IYR, XOM, CVX Summary A notable lone bright spot in 2022 is shining over the broader stock market. Can this absolute and relative outperformance last? The selected component parts may serve some investors better than buying the whole. A notable bright spot In what has been an otherwise difficult year for stock investors, one sector has stolen the upside spotlight.
CCCanary In The Coal Mine: High Yield Bonds Are A Leading Indicator For Stocks
Tales from the bond market When seeing to anticipate movements in the U.S. stock market, the best sources of information often come from other capital market segments. One particularly useful asset class for explaining expected stock market performance is the bond market. More specifically, a specialized category deep within the bond space has been a notably strong predictor of future stock market performance.
Stocks Are Overzealous
Aug. 17, 2022 9:37 AM ETSPY, DIA, QQQ, IVV, VOO, EFA, EEM, VWO Summary Stocks have been full of zeal over the past month. Is the rally sustainable? Or is a pullback imminent? Fundamental, technical, and mechanical headwinds. An important caveat. Full of zeal The U.S. stock market has had a phenomenal past month. After bottoming on July 14 not far above the calendar year lows set in June, the S&P 500 has surged over +15%. Is the worst of the 2022 stock market decline now behind us?
Camp Kotok: 5 Maine Takeaways
Remember this age-old question? If you could pick three people to invite to dinner, who would they be? Now, imagine this question with a wild twist: If you could pick forty people to travel with on a five-day fishing trip to Maine, who would they be? This second question helps define my experience over the last week. I had the honor to attend Camp Kotok this year at Leen's Lodge in Grand Lake Stream, Maine. What is Camp Kotok?
Gold: A Golden Opportunity To Invest Going Forward Original
Jul. 29, 2022 5:10 AM ETGLD, IAU, SGOL, PHYS, GBTC, ETHE, LTCN, SPY, DIA, QQQ, IVV, VOO, DBP, JJP, GLTR, JJPFF, DGL, BAR, OUNZ, GLDI, IAUF, GLDM, AAAU, BGLD, IGLD, GBUG, IAUM, PBUG, WGLD Summary Gold has been moving in a trading range over the last couple of years. Gold offers attractive upside potential at the present time. A variety of forces are converging in support of the gold price going forward. Owning gold has required patience these last two years.
Don’t Expect A Fed Policy Reversal Anytime Soon
Great news!(?) The S&P 500 Index roared to the upside on Wednesday afternoon following the announcement by the U.S. Federal Reserve that it would be raising interest rates by another 75 basis points to combat high inflation. It should be cautioned reading too much into this initial post Fed reaction, as markets have a long history after an FOMC meeting of doing the exact opposite on Thursday and Friday versus the post 2PM Wednesday afternoon reaction.
Investors Are Set To Receive A Deluge Of Information This Week
Get ready. After nearly a month of relatively light news on the economic and market front, investors are set to receive a deluge of information to digest in the upcoming week. While some of the outcomes may not necessarily be a surprise, much if it is not likely to be resoundingly positive. Moreover, it will play a measurable part in setting the tone for markets for the remainder of the year. So what's so notable that's on tap for the upcoming week. 1. Second quarter earnings season in the spotlight.
5 Risks To Consider For The Rest Of 2022 Original
Jul. 24, 2022 6:09 AM ETSPY, DIA, QQQ, IVV, VOO, PAK, EGPT Summary I don’t like the cut of the stock market’s jib heading into the second half of the year. Stocks are already in decline, an economic recession may be confirmed as soon as next week, and liquidity is being drained from financial markets. Beyond the typical concerns, five risks in particular are disconcerting as we continue through the second half of 2022. I have concerns.
Go With The Flow
Jul. 22, 2022 7:30 AM ETSPY, DIA, QQQ, IVV, VOO, MDY, IJH, IWM, IJR, EFA, EEM, VWO Summary Stocks appear to have discovered newfound life this summer. It may become increasingly difficult for stocks to muster further gains from here. A period of consolidation if not the start of another leg to the downside may lie ahead through the end of July. Summer surge Stocks appear to have discovered newfound life this summer.
Two-And-A-Half Weeks Before Topping Out
"How does it feel like to be out of control?" --John, 9 ½ Weeks, 1986 Far less salacious, much more significant. It has been more than thirteen years since capital markets have taken investors on such a tumultuous and grueling ride to the downside. But following the most recent sharp drop in mid-June, the latest bounce in the U.S. stock market is now underway. How much further should we reasonably expect this bounce to climb, and what are strategies that might consider employing along the way?
Stocks Are Ready For A Bounce
That was fast. Just last week, I wrote an article on Seeking Alpha discussing expectations for a next leg lower in tech stocks. While I believed the downside would materialize, I didn’t necessarily think it would play out in less than a week.
Inflation, All I Ever Wanted
If you love inflation... The Bureau of Labor Statistics delivered the latest reading on inflation with the Consumer Price Index (CPI) for May on Friday. Make no mistake about it, this was a definitively bad report on inflation as has been widely discussed in the financial media in the days since. Capital markets recoiled at the news as well, as evidenced by the precipitous drop of -2.9% on the S&P 500 and -3.6% on the tech heavy NASDAQ.
Must Love Sector Dogs
Trading places. The information technology sector has been the market leader for many years now. But history has shown that today’s stellar sector leaders often become tomorrow’s relentless laggards. So what sectors will be poised to take the leadership mantle from tech? More often than not, tomorrow’s leaders emerge from today’s sector dogs. U.S. stock market sectors move in and out of favor over time.
Tech Has Lower To Go
Tech has been a wreck since Thanksgiving. Following what was a phenomenal five-year run from 2017 to 2021, the tech heavy NASDAQ Composite Index has been suffering. It was already struggling coming into the year, and the shift to the downside has been unrelenting as 2022 has progressed. While many investors are now wondering whether these declines have opened up long anticipated buying opportunities, unfortunately the tech sector likely has further to go to the downside before finding a bottom.
You Have Been Warned
Warning signs It has undoubtedly been a tough start to 2022 for capital markets. Since peaking on the second trading day of the year, the headline benchmark S&P 500 Index has already endured a -21% peak to trough decline and is still lower by -15% to date. And performance has been notably worse and pain measurably longer underneath the market surface. For example, the tech heavy NASDAQ 100 has fallen -31% peak to trough and is still down by -25% from its late November 2021 highs.
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