Saturday, October 15, 2016

The Long View of the Stock Market


The chart above tries to explain why over the last 25 years, investing in the US stock market has been so frustrating.  We have had the Tech Bubble and the Mortgage Bubble.  Both of the bubbles were popped with serious losses reflected in stocks.  The RED line reflects the core growth over the period without the bubbles and crashes (regression line from 1990 to date): about 10% with dividends.  The BLUE line shows the result of investing at the peak of the market in 2000 until today: about 5% with dividends.  Obviously, investing for any short period during the Last 25 years could result in exciting gains and terrifying losses.














John Boyd, CFP

Friday, July 29, 2016

Volatility Measure vs Stocks


When perceived risk (implied volatility in option prices) declines, the stock market can rise.


John Boyd, CFP

Does the Breakout have “Legs” ?




The recent corrections have probably been enough to provide a base for higher values.   The disturbing episodes of violence are not seen as a threat.  Risk as indicated by the volatility index is still declining.

John Boyd, CFP



Monday, February 22, 2016

RISING IMPLIED VOLATILITY = INCREASING RISK



RISING IMPLIED VOLATILITY = INCREASING RISK


Relative risk as measured by the implied volatility of the S&P 500 is show since 2007 in the chart above.  The large spike in 2008 resulted as the market was in a “crash” due to the debt crisis.  Note that leading up to that period in 2007 the VIX was rising as shown by the regression line.  Comparing this to the 2015 rise in the VIX we can see there is increased risk, but not as significant as that leading up to the 2008 crash. 
What should be done?  Take some precautions with stock market exposure by reduction weak performers.  However, it is no time to panic.  Many of us remember the gut wrenching fall of stocks in 2008, and this recent memory affects our perceptions of the current market to an exaggerated degree. 

    John Boyd, CFP





Thursday, February 18, 2016

STOCKS UP – STOCKS DOWN – WHERE NOW?



STOCKS UP – STOCKS DOWN – WHERE NOW?






The Dow Jones Industrial Index is show for the last 3 years in the above chart.  The chart confirmed a down trend at the end of 2015 as the index made a lower high around 18,000.  There is buying support at the 15,500 level.  Assuming there is no major surprise event, we can expect one or two more cycles within the 15,500 and 17,500 range in the DJI index.
The 100 to 300 point daily swings are insignificant at this point.


John Boyd, CFP