It’s been a good couple of weeks for stock market bulls, at least if you follow economic indicators. First, we saw a marked uptick in consumer spending. Next, July business spending remained in expansion territory, despite dipping somewhat from its 16-month high in June. Although the headlines were gloomy — focusing on the low GDP number for the second quarter — there’s just as much reason to expect an increase in business spending as a decline in the coming months. #-ad_banner-#That said, with stock prices near all-time highs, investors need to exercise some caution lest they buy overvalued stocks that… Read More

It’s been a good couple of weeks for stock market bulls, at least if you follow economic indicators. First, we saw a marked uptick in consumer spending. Next, July business spending remained in expansion territory, despite dipping somewhat from its 16-month high in June. Although the headlines were gloomy — focusing on the low GDP number for the second quarter — there’s just as much reason to expect an increase in business spending as a decline in the coming months. #-ad_banner-#That said, with stock prices near all-time highs, investors need to exercise some caution lest they buy overvalued stocks that do nothing despite decent economic performance over the next 12 months. Fortunately, there remain plenty of companies to choose from with solid prospects in the near term and excellent long-term opportunities. One of these is General Electric (NYSE: GE).  GE is an iconic company with roots in classic American themes: innovation, ingenuity and industry. Its history is storied, and blue chips don’t come any bluer. But as I’ve said before, what’s most attractive about the stock is not its past, but its future. GE has restructured its business through spinoffs and acquisitions to again focus on innovation — and it… Read More

Times are good for America’s retailers. Retail sales hit a new record of $457 billion in June and are up 2.7% for the past 12 months, up from 2.2% year over year in May. The National Retail Federation recently increased its estimate for 2016 full-year retail sales growth to 3.4% from 3.1%. That’s healthy growth, especially given that inflation is practically zero. These numbers mean two things: one, U.S. employment growth is translating into greater spending power for U.S. consumers — and they are indeed spending rather than mostly saving, and two, companies that depend on U.S. consumer spending might… Read More

Times are good for America’s retailers. Retail sales hit a new record of $457 billion in June and are up 2.7% for the past 12 months, up from 2.2% year over year in May. The National Retail Federation recently increased its estimate for 2016 full-year retail sales growth to 3.4% from 3.1%. That’s healthy growth, especially given that inflation is practically zero. These numbers mean two things: one, U.S. employment growth is translating into greater spending power for U.S. consumers — and they are indeed spending rather than mostly saving, and two, companies that depend on U.S. consumer spending might perform better than recently expected in the coming quarters. #-ad_banner-#Note that I’m referring here to U.S. spending and U.S. retailers. That’s because in other parts of the world, retail sales aren’t rising quite as much if at all. Indeed, in the UK sales suffered their biggest decline in four years in the wake of the Brexit vote to leave the European Union. So while many U.S. retailers have some foreign exposure, and that doesn’t disqualify them as a potential investment, it makes sense to favor those more heavily exposed to the United States. These stocks appear attractive now and could… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a portfolio that also includes more aggressive offerings. #-ad_banner-#But in addition to those benefits, most dividend payers allow investors to generate wealth over time through an underrated strategy that couldn’t be simpler: using dividends to buy more shares by automatically reinvesting them. Dividend reinvestment is a common practice in retirement plans for investors under 59½. That’s because it allows for no-decision buy-and-hold investing in a portfolio that doesn’t allow withdrawals anyway. (Outside a retirement portfolio, it’s not a bad choice either — just remember that you’ll have to pay taxes on the dividend amounts, so you’ll need to use cash from… Read More

U.S. stocks are near record highs. Many analysts would have downplayed the possibility of such a feat back in January, when fears of a sharp slowdown in demand from China and rising interest rates caused a mini-panic among some investors (and an opportunity for the rest of us). The impressive rebound after the selloff came in recognition of the relative strength of the U.S. economy versus much of the rest of the world. Employment continued to rise, wages finally started inching higher, the Fed kept its power dry and energy prices rallied, but not so much as to cause harm… Read More

U.S. stocks are near record highs. Many analysts would have downplayed the possibility of such a feat back in January, when fears of a sharp slowdown in demand from China and rising interest rates caused a mini-panic among some investors (and an opportunity for the rest of us). The impressive rebound after the selloff came in recognition of the relative strength of the U.S. economy versus much of the rest of the world. Employment continued to rise, wages finally started inching higher, the Fed kept its power dry and energy prices rallied, but not so much as to cause harm to pocketbooks or corporate earnings. Investors also couldn’t help but recognize the solid financial and competitive positions many large global companies have established since the financial crisis. #-ad_banner-#Investors have overlooked several worrisome signs: continued sluggishness in China, Europe, Brazil and Russia; an apparently stepped-up pace of terrorist attacks from ISIS; turmoil in the Middle East; Great Britain’s shocking vote to leave the European Union; an unpredictable, even bizarre, U.S. presidential race; and, most recently, a disturbing series of shootings in the United States that put the nation on edge. As the old expression goes, the market climbs a wall of… Read More

In today’s market, the energy sector is an enigma. On the one hand, oil and gas prices have rallied mightily since hitting historic lows in January — a strong data point for those who believe the multi-year energy cycle has turned northward. On the other hand, energy prices are down more than 10% since early June, providing fodder for those who argue that energy will remain in the doldrums a while longer.  #-ad_banner-#The ambiguity derives in part from the economic backdrop. In the United States, the world’s largest consumer of oil and gas, the economy is growing steadily though slowly,… Read More

In today’s market, the energy sector is an enigma. On the one hand, oil and gas prices have rallied mightily since hitting historic lows in January — a strong data point for those who believe the multi-year energy cycle has turned northward. On the other hand, energy prices are down more than 10% since early June, providing fodder for those who argue that energy will remain in the doldrums a while longer.  #-ad_banner-#The ambiguity derives in part from the economic backdrop. In the United States, the world’s largest consumer of oil and gas, the economy is growing steadily though slowly, with employment rising and personal incomes starting to inch up. That’s a bullish sign for consumption of oil and gas. But around the world, economic indicators are flashing yellow, not green. China, Brazil, Japan, Europe? Don’t look for strong demand growth there. And the UK’s shocking exit from the European Union has only made analysts more jittery. But economic factors explain only part of what drives energy prices — and the related, but not identical, earnings of energy companies. As with any commodity, energy prices tend to move in cycles that are driven not only by demand but by supply. Read More

U.S. stocks have shaken off a lot of bad headlines over the past year. Just consider the gloomy news we’ve endured: •    China’s economy growing at a slower pace •    Energy producers shutting down production, facing bankruptcy •    Terrorist attacks hit several cities in Europe, Middle East •    Europe faces intractable economic problems •    Donald Trump captures GOP nomination •    Employment growth much slower than expected in May •    UK voters opt to leave EU And that’s only a few of the biggest stories. Yet the S&P 500 is up slightly from its year-ago… Read More

U.S. stocks have shaken off a lot of bad headlines over the past year. Just consider the gloomy news we’ve endured: •    China’s economy growing at a slower pace •    Energy producers shutting down production, facing bankruptcy •    Terrorist attacks hit several cities in Europe, Middle East •    Europe faces intractable economic problems •    Donald Trump captures GOP nomination •    Employment growth much slower than expected in May •    UK voters opt to leave EU And that’s only a few of the biggest stories. Yet the S&P 500 is up slightly from its year-ago level. #-ad_banner-#What accounts for the stock market’s resilience? The main reason is the continued strength of the U.S. economy, especially relative to other major economies around the world. Job growth has been fairly strong (May notwithstanding), corporate earnings are chugging along just fine and wages are starting to rise. Interest rates also remain historically low, with the Fed reluctant to hike rates because of all the uncertainty arising from the bad news I listed in the bullet points above. That’s not to say the bad news is illusory or irrelevant. Risks abound in today’s climate. Economic instability abroad could still… Read More

The credit card was popularized in the United States in the 1950s, when Diners Club, Care Blanche and American Express created national — and then global — networks that allowed card holders to charge to a variety of merchants. Loyalty reward programs date back to at least the 1790s in the United States; they’ve remained popular throughout the centuries — from trading stamps through box tops to the present-day airline-style points programs. In the mobile digital age, when consumers have instant access to dozens of shopping options, loyalty is especially important. Consumer-facing companies now aim not only to attract purchases… Read More

The credit card was popularized in the United States in the 1950s, when Diners Club, Care Blanche and American Express created national — and then global — networks that allowed card holders to charge to a variety of merchants. Loyalty reward programs date back to at least the 1790s in the United States; they’ve remained popular throughout the centuries — from trading stamps through box tops to the present-day airline-style points programs. In the mobile digital age, when consumers have instant access to dozens of shopping options, loyalty is especially important. Consumer-facing companies now aim not only to attract purchases but to build networks of loyal customers. Online marketing programs are tailor-made for such efforts, as they allow companies to inexpensively reach customers with targeted appeals. #-ad_banner-#Today, many large retailers have their own credit cards; almost all consumer-facing companies have loyalty programs that reward customers who return to buy their products and services again and again; and almost all such companies also have multi-channel marketing efforts that include sophisticated online programs. One of the leading companies that help manage all of the above is Alliance Data Systems (NYSE: ADS). Alliance describes itself as “the engine” behind marketing and loyalty programs… Read More

The financial world’s reaction to the UK vote to leave the European Union was dramatic and understandable: a huge selloff in the British pound, big drops in most major stock markets and significant gains for U.S. government bonds. After all, voters in the world’s fifth-largest economy decided to remove it from the largest free-trade zone in the world. It’s hard to find an economist who thinks Brexit isn’t a huge mistake. The financial world’s reaction was exacerbated by surprise: despite polls showing a “Leave” victory was quite possible, conventional wisdom in the world’s financial centers was that voters would act rationally… Read More

The financial world’s reaction to the UK vote to leave the European Union was dramatic and understandable: a huge selloff in the British pound, big drops in most major stock markets and significant gains for U.S. government bonds. After all, voters in the world’s fifth-largest economy decided to remove it from the largest free-trade zone in the world. It’s hard to find an economist who thinks Brexit isn’t a huge mistake. The financial world’s reaction was exacerbated by surprise: despite polls showing a “Leave” victory was quite possible, conventional wisdom in the world’s financial centers was that voters would act rationally and remain in the EU, which benefits the UK economy far more than it harms it. #-ad_banner-#U.S. stocks lost about 5% in the first two days following the vote, which makes sense given the potential impact on the global economy — and the importance of the UK and Europe as U.S. trade partners. Stocks in the financial and manufacturing sectors were the hardest hit. Note that the fall comes after a solid period of performance for the overall market; Thursday’s close for the S&P 500 was close to its high for 2016. It’s highly unlikely that Brexit — as significant a… Read More

It’s been nearly eight years since the financial crisis, yet interest rates remain at recession-like levels. That’s good news for economic growth — but it’s a dismal situation for conservative investors relying on income, including millions of retirees who don’t want to take big risks to achieve a decent yield. The traditional safe havens — savings accounts, money market funds, CDs — offer yields that are laughably low. Money market mutual funds investing in government paper currently yield only around 0.33%. Your bank may offer 0.6% on a money market account, which invests in corporate debt but is FDIC-insured up… Read More

It’s been nearly eight years since the financial crisis, yet interest rates remain at recession-like levels. That’s good news for economic growth — but it’s a dismal situation for conservative investors relying on income, including millions of retirees who don’t want to take big risks to achieve a decent yield. The traditional safe havens — savings accounts, money market funds, CDs — offer yields that are laughably low. Money market mutual funds investing in government paper currently yield only around 0.33%. Your bank may offer 0.6% on a money market account, which invests in corporate debt but is FDIC-insured up to $250,000. Five-year CDs pay 1.2%, which is a paltry annual return for the privilege of locking up your money for half a decade. And recall that these rates were even lower before the Fed raised short-term rates by 25 basis points (0.25 percentage points) in December. #-ad_banner-#Now, it’s true that part of the reason that yields are low is that inflation has been close to nonexistent for years; some important goods and services — such as gasoline, natural gas and flat-screen TVs — have declined in price. So low yields haven’t been devastating in terms of purchasing power. But… Read More

Last year, Federal Reserve Board officials spent weeks telegraphing their first increase in short-term interest rates in years. When it finally happened in December no one was surprised. That’s how it should be.  The Fed’s job is to manage the nation’s money supply, in part by setting short-term interest rates, with a goal of balancing economic stimulus with inflation risk. If money supply is too loose, inflation can result; if it’s too tight, one might see a recession. But any interest rate change can be disruptive, altering business plans at companies around the world. So the Fed moves best when… Read More

Last year, Federal Reserve Board officials spent weeks telegraphing their first increase in short-term interest rates in years. When it finally happened in December no one was surprised. That’s how it should be.  The Fed’s job is to manage the nation’s money supply, in part by setting short-term interest rates, with a goal of balancing economic stimulus with inflation risk. If money supply is too loose, inflation can result; if it’s too tight, one might see a recession. But any interest rate change can be disruptive, altering business plans at companies around the world. So the Fed moves best when it’s deliberate and transparent, discussing moves for weeks or months before they happen. No surprises. #-ad_banner-#Last week’s decision not to change interest rate policy was no surprise, though a rate hike had been telegraphed and expected just a few weeks ago. The unexpectedly weak May employment report forced the Fed’s hand; the risk of recession if interest rates rise is too high. While not shocking, the Fed’s non-hike has significant consequences for stocks for the rest of the year. Here’s why: the only other opportunities to raise rates will be at one of the three remaining Fed Board meetings, in… Read More