Round and round she goes, where she stops, nobody knows
By Dian Vujovich
Well, no sun shining on Wall Street today. Or in China. As for the what’s up for tomorrow, nobody knows. But, as always, there are tidbits of news worth considering.
Beginning with stocks…
The DJIA began this week coming off its biggest weekly drop since January, according to CNBC. Behind it, were the S&P 500 and NASDAQ both seeing one week drops unlike any experienced since March.
And then there is today in which all three indices continued to slide lower as did those in the major European markets. The Nikkei and Shanghai indices, however, were unchanged. But that’s not saying my much given the downward spiral that they’ve been on.
Europe and China aside, there is one guy who is taking this all in stride and happens to think the second half this year could be great.
Tom Lee, co-founder of Fundstrat Global Advisors, a New York-based boutique research firm that’s only been around since 2014, used history as his guide. He pointed out that the last time the first two quarters of a year have had no gains back-to-back was 111 years ago in 1904.
What happened after that six months of nothing? Kaboom.
In an interview last week on CNBCs “Trading Nation”, Lee said after that 1904 flat six month beginning, “the market surged 41 percent in the second half. We are not saying 2015 is a repeat of 1904, but it goes to show, ‘never short a dull market.”
Albeit, the stock market a century ago was a much different animal than it is today. Investor habits, however, haven’t changed all that much. Some are bullish. Some are bearish. Some are long term investors, others short term.
What matters is performance and nobody has ever been able to call that correctly.
As for ETFs and hedge funds, ETFs appear to be winning the money game. Perhaps that’s because they offer a whole lot of investment choices and strategies—including shorting the market-—and are whole lot cheaper to invest in.
Comparing the cost of ETFs with hedge funds, Tim Edwards, senior director of index investment strategy at S&P Dow Jones Indices, found the fees on most ETFs are less than 0.5 percent (sans buying and selling commissions) while hedge funds still follow the “2 and 20” formula: 2 percent annual fees and 20 percent on returns.
As any seasoned investor will tell you, when it comes to performance, fees matter. Oh, and so do holding periods.
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