Weekend Reads for Investors: Will It Be a June Swoon for Stocks?
A sharp sell-off in Japanese stocks and indications that the US Federal Reserve will consider tapering its monthly bond purchases combined to drag global equity indices lower in recent weeks. Whether the pullback is merely a hiccup in the market’s continued advance or the start of something more will, in large part, depend on the economic news flow and, in turn, the response of central bankers.
Top-line growth has been anemic of late and absent renewed economic strength, firms may struggle to meet investor expectations going forward. Corporations have so far delivered on earnings but mostly through cost cutting. The sustainability of profit margins (read James Montier’s “What Goes Up Must Come Down”), already in record territory, bears close watching.
Here are some good reads I came across over the past month.
Central Bank Jawboning
- John Authers says “central bankspeak,” not results, is driving stocks. (Financial Times)
- Another skeptic says the Fed can’t save the stock market again. (American Enterprise Institute)
Bulls, Bears, and Equity Risk Premiums
- Vitaliy Katsenelson on the dangers of sideways markets. (Institutional Investor)
- Richard Bernstein has a different take than most on the Great Rotation. (Richard Bernstein Advisors)
- Are we in a boom or bubble? Read why James Surowiecki sides with the bulls. (The New Yorker)
- Are Stocks Cheap? A review of the evidence. (Liberty Street Economics)
- Aswath Damodaran weighs in on the equity risk premium. (Musings on Markets)
On the Importance of Corporate Profits
- With the ratio of corporate profits to GDP at a record high, should we care? (The Brooklyn Investor)
- The tenuous link between economic growth and future equity returns. (The Economist)
- Profit margins be damned, stock prices measure liquidity, not profit growth. (Wall Street Examiner)
- Profitability matters when it comes to intrinsic value. (Morningstar)
- Does behavioral investing makes sense anymore? (Context)
- Carl Richards finds that in soccer and investing, the bias is toward action. (Bucks)
The Legacies of Graham and Buffett
- Benjamin Graham was one of the first shareholder activists. (Bloomberg)
- Not surprisingly, one observer says Warren Buffett may be irreplaceable. (New York Times)
- And in case you missed it, Jeff Matthews did a superb job recapping last month’s Berkshire Hathaway annual meeting. (Jeff Matthews is Not Making This Up)
SAC Capital in the Crosshairs
- SAC Capital’s Steve Cohen is Preet Bharara’s great white whale. (Vanity Fair)
- James B. Stewart says the SAC case tests a classic dilemma. (New York Times)
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.