Despite a strong rally in stock prices that has restored some confidence in the market, Goldman Sachs is advising investors to build their levels of cash now."The potential exists for further equity market downside in the near term even if the recent equity market collapse does not lead to a recession,” says Goldman's recent Macroscope report, pointing out that cash positions are at their lowest in 30 years. READ MORE...

Markets from equities to high-yield bonds that have been flashing warning signs are probably an overreaction to slowing growth rather than a precursor of imminent recession, according to J.P. Morgan Chase CEO Jamie Dimon.READ MORE...

The unemployment rate, however, spiked a bit to 3.9% for the month, compared to November’s record low 3.7%. Average hourly earnings rose by +0.4% over last month – edging past expectation of +0.3%.On a year-over-year basis, wages increased by +3.2%, which is higher than estimates of +3%. The figures seems to suggest that the U.S. labor market continues to show strength amidst potential headwinds like trade uncertainties alongwith concerns related to monetary tightening and stock market correction/volatility.

The final month of the year brought no joy for Wall Street with the S&P 500 losing 10.9% on renewed global growth worries, Fed’s policy tightening and the government shutdown.Though markets saw the biggest single-day jump on Boxing Day since 2009, most of the dissuading factors are still in place (read: Alternative ETFs See Solid Volume: Are Investors Still Shaky?). READ MORE...

Apple stock price inched up +1.9%. Wednesday's rebound comes after the worst Christmas Eve plunge: the S&P 500 entered the bear territory on Monday.Monday’s sell-offs followed reports of Treasury Secretary Steven Mnuchin holding calls with  major U.S. banks last weekend and issuing a statement saying, "The banks all confirmed ample liquidity is available for lending to consumer and business markets."

The DOJ alleged that the hackers worked in collaboration with China's state security service. According to Deputy Attorney General Rod Rosenstein, the hackers belong to a group called  Advanced Persistent Threat 10 or APT 10, and that they nicked data from more than 45 U.S. companies.Hackers might also have attacked data of more than 100,000 U.S. Navy personnel, including the latter’s Social Security numbers, dates of birth, salary information, personal phone numbers, and email addresses – according to the DOJ. Cybersecurity firms including CrowdStrike have linked the hacker group’s activity to China's Ministry of State Security.

The four-week average (usually a less volatile gauge) fell to 222,000. As indicated by the latest figures from the Labor Department, the demand for labor still remains strong in the U.S., despite recently emerging concerns about a possible slowing down of economic growth.The unemployment rate among people eligible for benefits held at 1.2 percent. However, some analysts maintain a cautious outlook suggesting that the holiday season boost in hiring could only be seasonal and therefore might not be fully indicative of the underlying trend in hiring or unemployment claims.  

The target fed funds rate – the interest rate at which banks can lend each other overnight – now stands at 2.25-2.5%, after the latest quarter-point increase. The highly anticipated Federal Open Market Committee (FOMC) meet also brought to fore potential challenges and pressures facing the central bank.As of the latest meeting, only six FOMC participants expect there could be as many as three. Nevertheless, the Fed is still keen on letting fresh data guide their rate hike decisions going forward as well.

companies announced a record $1 trillion in stock buybacks for the full year 2018. This year, a new lower corporate tax rate  coupled with a one-time tax benefit on repatriated earnings potentially helped companies to have more cash on hand – that could have been a major reason behind the spike in share repurchases by Corporate America.  According to TrimTabs Investment Research,  U.S. companies, led by Lowe's and AbbVie, paid out $34.4 billion in buybacks to shareholders last week, thereby counting towards the year's repurchase announcements above $1 trillion - for the first time ever.Buyback announcements have surged 64% so far this year, TrimTabs said (as reported by CNN).  

You've got a nice little nest egg sitting in your 401(k), but Uncle Sam says you can't touch it until you're over 59 1/2, or you'll pay steep penalties.You can take out as much money as you want without paying it back, and you won't be charged any penalties. READ MORE...

Monday’s big drop in the overall market spooked investors and has given me mixed feelings too. First, the chart for the SPDR S&P 500 ETF (NYSE: SPY) has a possible inverse head and shoulders pattern forming and that is a bullish factor.Unfortunately, a personal market indicator that I developed in 2009 just gave the strongest bearish reading so far in 2018. Let’s look at the chart of the SPY first. We see that the ETF dropped to the 270 level in early October and then bounced to the 281 level.

Historically, the highest readings have come at market tops and the lowest readings have come at market bottoms. High readings themselves haven’t necessarily been a signal of an impending bear market, however. From 1997-2000, the index was above the 125 level and the market continued to move higher.However, when the index fell by more than 10% from its peak is when things started getting bad. With the recent peak reading of 138.4, the index would need to drop down to 124.6 in order to represent a 10% decline.

On Wednesday, the Federal Reserve raised interest rates for the third time in 2018, leading to U.S. President Donald Trump commenting he’s “not happy about that”. The central bank increases its policy rate in an attempt to prevent the economy from getting too hot or inflation spiraling off target levels.Trump also expressed that he’s happy for savers since they are likely to earn higher interest rates. Trump’s comments seem to be a departure from tradition. Since the Fed is regarded as independent of political interference,  presidents usually avoid commenting on its monetary policy decisions.

Notwithstanding recent news of a possible U.S.-China negotiation talk on the horizon, U.S. President Donald Trump might go ahead with fresh round of tariffs on China-made goods. A Bloomberg article mentions that Trump met with his top trade advisers on Thursday and expressed his intent of slapping tariffs on an additional $200 billion of Chinese goods imported into the U.S., according to some people familiar with the matter.Not too long ago, there was news of U.S. Secretary Steven Mnuchin sending an invitation to China for talks to resolve the 'trade war' between the two nations. The latest article also reports that when asked in the Thursday meeting whether he was concerned about the new tariffs’ effect on negotiations with China, Trump replied that he was not (as suggested by two people familiar with the matter, according to Bloomberg).

On Thursday, Chinese Commerce Ministry spokesman Gao Feng said that governments of the U.S. and China are discussing a new round of trade negotiations.U.S.President Donald Trump's economic adviser, Larry Kudlow, said Wednesday that China has accepted the invitation from U.S. Treasury Secretary Steven Mnuchin to pursue talks on trade. Last week, Trump threatened to impose tariffs on additional $200 billion of Chinese goods if he felt the need.

Oh, if we only knew… However, one of the brightest minds on the Wall Street, Dr. Marko Kolanovic (his Ph.D. is in theoretical physics) warns about possibility of such an event (it is part of a very detailed and substantial 168 pages report published by JPMorgan). He thinks that computerized trading and the abundance of passive investments set up the stage for a major calamity.Due to the speed of the trading algorithms, the liquidity in certain underlying instruments can disappear very quickly, and this will lead to the well-known phenomenon of sharp drops in the indices.

There are several reasons for that. When most of the analysts establish the price targets for a company, they use the so-called discounted cash flow model (DCF).It this interest rate that determines the “discount” factor, and greater the interest rate – greater the discount factor, and therefore smaller the price target becomes. Of course, the increase in 10-years Treasuries rate defines the overall interest rate environment for corporate bonds, and while this dependence is not that simple, 10-years Treasury rate has a direct impact on the allocation to fixed income securities by large market players (pension funds, insurance companies).

  Fed Chair Yellen Speech- Key Excerpts The process of scaling back accommodation has so far proceeded at a slower pace than most FOMC participants anticipated in 2014. Looking ahead, we continue to expect the evolution of the economy to warrant further gradual increases in the target range for the federal funds rate.All rights reserved.