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Showing posts from May, 2022

Sound Advice: May 18, ,2022

The Pendulum Swings Both Ways   For many measures, the average or normal values are rarely the most common.   For the stock market, prices tend to spend more time closer to the extreme ends of the traditional spectrum.   What comes along with this tendency is the expectation that the current path is the one that’s most likely to be followed. Not only is there an expectation of more of the same, but optimism grows as prices climb and pessimism increases as prices drop, which from an investment standpoint is counterproductive.   Lower prices mean you’re getting more for your money.   And vice-versa.   Yet, investors are increasingly spooked by the latest reversal in stock prices. We’ve been through this before and we’ll go through it again.   The pullback that’s been under way since the beginning of the year reflects the long-term process of digesting ongoing economic and geopolitical developments. It’s all part of a much broader picture.   Recent pullbacks such as those of early

Sound Advice: May 11, 2022

Taking the Pulse of the Market   Although investors are regularly bombarded by claims that movements of individual stocks as well as those of the market overall are predictable, those pitches are on a par with the Wizard of Oz and the Tooth Fairy.   It is reasonable to believe that over extended periods of time changes in the prices of individual stocks and the investment market as a whole reflect changes in underlying profitability.   It is, however, not reasonable to think that forecasts of what will take place in relatively short periods of time have any merit. With that said, however, there are some indicators that may be helpful in pointing toward what lies ahead.   Two of the more useful ones are the Goldman Sachs U.S. Equity Sentiment Indicator and the CBOE Volatility Index, a.k.a., the VIX or Fear Index. The last 14 times the Goldman Sachs indicator hit the extreme low levels that we’re seeing now, returns from stocks in the time that followed were positive 100% of the ti

Sound Advice: May 4, 2022

Are Health Care Stocks on the Mend?   The two sectors that have provided the highest returns in years past have been technology and health care.   We discussed technology last week.   This week it’s health care’s turn and even though the pandemic has brought a renewed focus on health care, most of these stocks have also experienced weakness this year. Let’s focus on Johnson & Johnson, Pfizer, and Moderna since they have been the leaders in development of Covid vaccines.   Although all three have been in high gear turning out hundreds of millions of doses, their stock market performances have been anything but consistent. Last year, it was estimated that Pfizer and Moderna had over $50 billion in sales from their Covid-19 vaccines.   Johnson & Johnson had $2.4 billion in Covid vaccine revenues.     Given those numbers, one might well have expected a significant upsurge in the shares of these companies.   But the net result was anything but.   For 2022 to date, J&J sh