Blog

Extreme uncertainty is driving investor sentiment as we approach the 2020 elections, and this uncertainty may be driven by more than the voting outcome. A view of the implicit volatility curve on the S&P 500 options demonstrates that Wall Street is pricing in this volatility after the elections and well into December. The reader may draw their own conclusions about what this means, while remembering that the stock market likes neither uncertainty nor constitutional crises.

Covid-19 has put an end to the economy’s expansion at a time when the nation is deeply in debt. According to the Wall Street Journal, “borrowing spurred by years of low interest rates adds up to $64 trillion in ...

Read more

Investors wondering why the stock market continues to rise as we face the worst economic conditions since the Great Depression need only look at the Federal Reserve’s balance sheet, which has increased in size by $3 trillion since February.


That represents printed money which the Fed is using to purchase Treasury bonds, mortgage bonds, corporate bonds, and asset backed securities, which brings the total amount of printed money to $7 trillion. In doing so, they have driven bond yields down, which justifies a higher multiple for stocks.
This is currently the only reason for a rising stock market. Markets have become completely divorced from reality, and stocks in particular are ignoring th...

Read more

The coronavirus has thrown the world into chaos over the last quarter, and its impact on the economy was swift and devastating. It has been a health and financial crisis like no other, with substantial uncertainty and many unpredictable variables. The peak-to-trough decline in U.S. and European GDP is likely to be more than double the decline during the global financial crisis, or roughly -10%. The stock market slide experienced between February and
March was the steepest decline in the S&P 500 ever, even steeper than in 1929.

Since 1870, downturns of this magnitude have happened mostly because of either world wars or depressions, taking on average, five years for output to regain its peak. Ou...

Read more

Stock market indices have shrugged off Iran, and begun the year by moving higher. Unless Iran chooses to somehow disrupt the supply of oil to the West, it is unlikely to have much of an impact.

There has been consistent selling in the U.S. by retail investors in 2019. Flows have been drifting out from retail investors and into the hands of companies buying back their own shares. Assuming that there is no recession in 2020, and assuming that Donald Trump is re-elected, retail investors may experience FOMO, or a fear of missing out. Historically, the period of mid-October through May is a good period for stocks, but January is, on average, particularly good for small cap stocks. The relative pe...

Read more

In September, Trump tariffs were imposed on $112 billion more of Chinese imports. Trump now threatens to increase this to $550 billion. As a result, the World Trade Organization has now slashed its forecast for 2019 trade growth to 1.2% from 2.6%. The Chinese, Indian, Japanese, and U.S. economies are slowing. The European economy is slowing dramatically, and is now seen growing at zero in 2019. Germany is slowing because as Chinese companies export less to the U.S., they purchase less German machinery. This, plus the uncertainty of Brexit, has German companies nervous about investing.

In the U.S., the ISM manufacturing index, an important indicator for the health of the economy, contracted in...

Read more

The New York Federal Reserve now sees a risk of recession at 33% in the next twelve months. When this indicator rises above 30%, a recession typically follows, although sometimes with a delay of 12-24 months.

The global economy is slowing nearly everywhere, but the U.S. is perceived by many as being in great shape, particularly if measured by the stock market. However, signs of a slowdown are looming in housing, construction, automobiles, and the industrial sector, in the latter case due to trade tensions between the U.S. and China. Purchasing manager Indicators are slowing, both in services and manufacturing, and the rest of the world is cause for concern, with Chinese, South Korean, Japanes...

Read more

The first quarter of 2019 was the best for stock prices since 1998, to such an extent that some caution may be advised in the short term. While the stock market has been climbing, Wall Street analysts have been lowering earnings estimates for the first quarter. In fact median EPS estimates have fallen by 7.2%, which are some of the largest cuts to S&P 500 earnings estimates in years. This is a source of concern.


It’s often a good exercise to be mindful of “the dark side”, even when the market is rising. Fully 1/4 of all the Russell 3000 index, which represents 98% of all US stocks, operate at a loss. Last year, 83% of all IPOs came to the market with negative earnings. Real ...

Read more

2019 is likely to be volatile, but it is unlikely that the U.S. falls into recession. The one thing that could change that is if the partial U.S. government shutdown lasts long enough.

The shutdown is becoming more expensive than the very reason for the shutdown. The U.S. President signed legislation this week promising back pay for Federal workers when the shutdown ends. The problem is that the American taxpayer will then be paying for services which never took place at a rate of $200 million per day, or around $5 billion so far, which equates to the price of the border wall. Economists estimate the partial government shutdown is costing 0.1% of GDP growth to the U.S. every two weeks. We are...

Read more

By most measures, there is great strength in the economy at the moment, due in part to government stimulus measures, of tax cuts and increased government spending. The U.S. GDP grew at 3.2% in the first half of 2018. U.S. corporates earned record high profits in the first two quarters of 2018. For the third quarter, total earnings of S&P 500 companies are likely to be up by 17.8% on 7.1% higher revenues.


The unemployment rate has dropped to 3.7 percent, the lowest rate since December 1969, and it is likely to fall even further. For close to two-thirds of the US population, this is the lowest unemployment rate in their lifetime.
Leading indicators, manufacturing indices, CEO confidence, and con...

Read more

In the first quarter of 2018, we have begun to see what happens when the liquidity that has driven markets for the past ten years begins to dry up.
The Fed is raising interest rates while shrinking its balance sheet. The “Paul Ryan” tax cut has created a $1.3 trillion hole in the government’s finances, which means that $1 trillion or more of Treasury debt will be issued this year, and in coming years, twice the normal amount.
The unpredictable announcements made by the U.S. president concerning tariffs have raised concerns over a tit-for-tat trade war with our major economic partners. Wall Street recognizes that tariffs tend to be damaging to the economy, just as they were wh...

Read more

CONTACT US

keep in touch

METIS CAPITAL MANAGEMENT LLC

411 Theodore Fremd Avenue, Suite 206 South,
Rye, NY 10580
Phone. 914-315-6850

Click to Login to your account.

Click to Login to your account.