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Valuations

Ask Cadence: How will current and future geopolitical issues affect the markets?

By Blog

It’s rational to assume that negative developments like social unrest, violence, and wars would roil the markets, but that’s not necessarily how things have played out historically. To the degree that investors feel confidence in markets rising, and the profitability of certain sectors of the market, financial assets can weather more societal turbulence than we’d think. The real issue for markets, especially from already lofty valuations at the end of a lengthy expansionary cycle, are those two factors just mentioned – confidence and corporate profitability. It’s really not until those two things are disturbed enough that markets go down and…

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Investor or Speculator – Which Are You?

By Blog

Speculative manias are incredibly difficult to navigate without injury. For every millionaire produced by the technology bubble of the late 1990’s, there are countless stories of people losing their life savings or worse. Fast-moving markets that are well beyond any reasonable assessment of fair value can reverse course without warning, reason, or sympathy for the investors who don’t have the good fortune to exit the game before the music stops. This is the problem with speculation: because, like moths to a flame, we’re attracted to those assets that are rapidly going up in price and garnering enthusiastic praise, there is…

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Ask Cadence: When Will Stocks Look Attractive Again?

By Blog

When we look back 100 years at the relationship between the size of the stock market and the underlying economic fundamentals either by way of gross domestic product (GDP) or the amount of “stuff” that corporations produce (Gross Value Added), there are two things we can learn. First, stocks tend to rise with economic output. Makes perfect sense. Corporations do well, people do well, the economy does well, stock prices go up. The second observation however, which is far more important to investor performance over time, is that stock prices tend to rise faster than economic output when times are…

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