A Different Year End Blog: Looking Forward - Weekly Blog # 869

 

 

 

Mike Lipper’s Monday Morning Musings

 

A Different Year End Blog: Looking Forward

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 

 

Using Mutual Fund Data for Other Investors

Mutual Funds reveal their investment performance to the public every trading day and reveal their portfolios quarterly. In many cases the funds are managed by large investment managers responsible for other accounts. Their portfolios by implication reveal some of their philosophy of investing for other accounts.

 

Each week the London Stock Exchange Group publishes fund data that I used to produce. The report tracks 103 equity fund or equity related fund peer groups. Using the last five years of data, the shortest time period one should use in assessing investment performance, only 17 peer groups beat the +14.58% five-year return of the average S&P 500 index. (In selecting funds, I prefer to use 10 years.) There were three peer groups that did better than the S&P 500 Funds Index:

• Science & Technology +17.72 %
• Large-Cap Growth +16.62%
• Energy MLP +14.64%

Remember these are averages, so within the peer group some funds did better or worse than their group average. With only 16.5% of the groups beating the index, I question whether we are preparing a base for a meaningful general stock market advance.

 

Current Structure of the Market

The last four trading days of last week may not be significant but could be. The next two trading days will probably be dominated by last-minute tax-oriented transactions initiated by market makers or late players.

 

In the last four days 49.4% of the shares on the NYSE rose, while 55.8% rose on the NASDAQ. The more bullish NASDAQ players generated 205 new highs, compared to only 73 on the NYSE. Investors participating in the weekly AAII sample survey have been moving toward neutral in the last three weeks. Three weeks ago, the Bulls represented 43.9%, but they only represent 37.5% in the current week. The Bears only increased by 2.4% to 34.1%.

 

Possible Longer-Term Signals

Both political parties feel they should direct the private sector to a much greater degree than in the past. The latest example of this is the FDIC, which has wrung an agreement from the NASDAQ to limit the amount of ownership in small and regional banks. This a long echo of the “Money Panic of 1907” that Mr. Morgan solved in his locked library, which led to the creation of the Federal Reserve. A generation later the US government realized the Fed couldn’t help local farmers, their banks, and suppliers, so they passed the Smoot Hawley tariff bill, which was reluctantly signed by President Hoover.

 

Both the good and bad leaders of many countries recognize that the US has not won a war since WWII. Consequently, the growth of China in many fields is disturbing. Tariffs may protect some US businesses at a huge cost to lower income consumers and eventually isolate the US from growing markets, diminishing our military strength.

 

These issues and others are what we will be dealing with in the new cycle we have entered.

 

We wish you, your family, and friends a healthy, happy, and prosperous New Year.

 

 

 

 

Did you miss my blog last week? Click here to read.

Mike Lipper's Blog: Three Rs + Beginnings of a New Cycle - Weekly Blog # 868

Mike Lipper's Blog: Confessions & Confusion of a “Numbers Nerd” - Weekly Blog # 867

Mike Lipper's Blog: It Doesn’t Feel Like a Bull Market - Weekly Blog # 866

 

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