Market forecasting isn't like the weather . . .

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Weekly Market Commentary
 


 

Weather changes often, so sometimes it’s hard to rely on forecasts.  Instead, looking out the window to see what’s happening in real-time is a great low-tech approach.  But this strategy — and the jokes about weather forecasters and their mistakes — may one day be a thing of the past. 

Even as you yell at your TV during the weather segment of your local newscast, forecasts are actually getting more accurate. Three-day forecasts today are as good as 36-hour forecasts were in the 1980s, and the average error in hurricane-tracking predictions has been slashed by two-thirds since the early 1970s. 

This improvement is a result of computer models that collect all the data — temperatures, clouds, and winds — and put it into mathematical equations. These models were built by looking for and identifying variables that offered some predictive value. Over time, as more of these factors were identified and fed into the model, the accuracy of the forecast improved. 

Experts are attempting to do the same thing with the stock market.  We’ve spent endless amounts of time, money, and human capital trying to identify variables that help predict market behavior.  We’ve looked at the ridiculous (Super Bowl winners) and the more serious (past performance).  Still, none of them have much predictive value, particularly over the short term. 

But that doesn’t stop us from looking, which often leads to guessing.  And guessing is no way to make investment decisions. 

The pioneering investor Ben Graham is said to have described the market as being hard to predict: "In the short-run, the market is a voting machine . . . but in the long-run, the market is a weighing machine." 

And because humans are doing the voting, it’s very difficult to predict which way the vote will go.   

 

Another reason is that investing is not a physical science.  It’s not like gravity or even the weather. It doesn’t follow set laws.  On any given day, the stock market may simply represent the collective feelings of our society.  More often than not, those feelings are based on fear or greed.  And it’s only in hindsight that people recognize their mistakes. 

So while on one level, human behavior seems predictable (e.g., we get excited and buy stocks when they are flying high; we get scared and sell when stocks decline), it’s awfully hard to know what we’re doing until it’s too late. 

We bring up the subject of forecasting and market timing because despite knowing better, we still see a lot of people try.  Unfortunately, there’s no proven, market-predicting model hidden in a computer that only a few people have access to.  

That’s why we build comprehensive financial plans with a roadmap to your goals, ready to weather the ups and downs of the market.  And we’re here to support you and answer any questions you may have.  Don’t hesitate to reach out. 

Until next week, 

Your Eagle Wealth Team 
 

Strength Training For Any Age 

Strength training benefits people of all ages, from children to older adults. According to the CDC, strength training at least twice per week can help you with the following: 

  • Build strength 
  • Maintain bone density 
  • Improve your balance, coordination, and mobility 
  • Reduce your risk of falling 
  • Maintain independence in performing daily activities 

The best part is that starting is easy, and you don’t need a complex routine to enjoy these benefits. Some people begin with bodyweight exercises, such as pushups, sit-ups, and squats, to get a feel for these movements. 

Once you feel comfortable with bodyweight exercises, you can incorporate weights into your routine. Focus on functional movements, which are the movements you do every day. Practical strength training will make things like taking the stairs, carrying groceries, or doing chores easier. 

Always talk to your doctor before starting a new strength training routine. 

Tip adapted from CDC.gov8 

 

The Week on Wall Street

Stocks surged higher in the closing days of a holiday-shortened trading week, ignited by a political resolution on raising the debt ceiling and a strong employment report.

The Dow Jones Industrial Average rose 2.02%, while the Standard & Poor’s 500 advanced 1.83%. The Nasdaq Composite index gained 2.04% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.52%.1,2,3

A Sigh of Relief

The weight of uncertainty over negotiations to raise the federal debt ceiling was lifted last week by the news of an agreement between President Biden and House Speaker McCarthy and its subsequent passage in Congress.

After a modest gain on Thursday following the House vote, stocks rallied on Friday, responding to the Senate passage of the debt ceiling bill, which eliminated a significant overhang to the market. A robust federal employment report also contributed to the Friday rally. The report exceeded market expectations in the growth of new jobs while reflecting a deceleration in wage growth.

The Irrepressible Labor Market

Last week’s employment data showed that the labor market remains stout after over a year of sharp interest rate hikes.

Job openings in April increased to more than 10 million, reversing three straight months of declines, while private sector employment increased by 278,000 jobs in May, according to a survey by Automated Data Processing (ADP), a significant payroll processor.4,5

In line with these strong numbers, the Department of Labor reported 339,000 new jobs were added in May. That came above the consensus estimate of 190,000 and marked the 29th consecutive month of positive growth.6

THE WEEK AHEAD

KEY ECONOMIC DATA

Monday:  Factory Orders. Institute of Supply Management (ISM) Services Index
Tuesday:  Jobless Claims

Source: Econoday, June 2, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 COMPANIES REPORTING EARNINGS

Tuesday:  The J. M. Smucker Company (SJM)
Wednesday:  Campbell Soup Company (CPB)
Thursday:  DocuSign (DOCU)

Source: Zacks, June 2, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

 

Any companies mentioned are for informational purposes only, and this should not be considered a solicitation for the purchase or sale of their securities. Any investment should be consistent with your objectives, time frame, and risk tolerance

 

 

1. The Wall Street Journal, June 2, 2023. 

2. The Wall Street Journal, June 2, 2023.

3. The Wall Street Journal, June 2, 2023.

4. The Wall Street Journal, May 31, 2023.

5. CNBC, June 1, 2023.

6. CNBC, June 2, 2023. 

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.