August 27, 2014

What are credit markets telling us?



James Swanson, Chief Investment Strategist, describes how the credit markets have been early indicators of equity market excesses, but are providing little evidence of a bubble now.

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August 19, 2014

A curious investing conundrum



US growth is accelerating and profits are rising, says James Swanson, Chief Investment Strategist, while China and Japan are slowing, and Europe’s recovery is faltering.

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August 13, 2014

Wrapping up the earnings season

Market watchers have claimed that this summer’s selloff is a long overdue correction in US equities.
We believe that in the long run, market movements tend to align with earnings and revenue growth.
Based on second-quarter reports, the S&P 500 Index has actually been moving with fundamentals.


Earlier this year, pundits in the financial media lamented when the stock market hit new highs — as if that was a bad thing. Then the summer selloff came, and these authorities on the market asserted that US equities had been due for a correction all along.

Whatever these commentators choose to think, we believe that market movements tend to align with earnings and revenue growth over long periods of time. Accordingly, this year’s highs are not surprising but rather, actually in line with history. From June 2009, when the recession ended, through 8 August 2014, the price-only S&P 500 Index (before dividends) and operating earnings on this benchmark both rose about 180%.
 

July 30, 2014

Implications of tight credit spreads



Chief Investment Strategist James Swanson adds to his tenets of investing for the long run, pointing out that the credit markets may provide valuable information about the direction of equity markets.

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July 18, 2014

Linking equities to the economy

Two more tenets cover the links between stocks and the US economy.
To equity investors, private sector growth matters more than headline GDP.
The composition of the S&P 500 is much different from that of the US economy.


In this second of a series describing my tenets for long-term investing, I’ll review the connections between the US economy and the stock market.
 

July 10, 2014

What will GDP do next?

Purchasing managers’ indices can be reliable indicators of future growth.
Manufacturing PMIs have led GDP growth rates by about three months.
Global PMIs have been telling us to expect accelerating growth ahead.


This is the first in a series describing my tenets for long-term investing — that is, the indicators I believe can stand the test of time. I like to think about the markets in terms of the business cycle, so let’s focus on how I make decisions about where we are in the cycle.

It’s particularly important to get the direction of the economy right. When I try to anticipate what GDP will do next, I find that the best indicator of an economy’s future growth is the purchasing managers’ index (PMI).
 

June 27, 2014

Tenets of investing for the long run



Chief Investment Strategist James Swanson highlights a few of the rules of thumb that he relies on to help him determine where we are in the business cycle and which markets are too rich, too cheap or fairly valued.

For more market commentary from MFS, visit our YouTube channel.

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