OmniDivitia Wealth Management, Inc. - ODWM Blog #Bob FarrellOmniDivitia Wealth Management, Inc. - ODWM Blog #Bob Farrellhttps://www.omnidivitia.com/blogs/tag/bob-farrellSun, 12 Apr 2026 16:07:58 -0700http://zoho.com/sites/<![CDATA[A Lot Can Change in Two Months]]>https://www.omnidivitia.com/blogs/post/a-lot-can-change-in-two-monthsThe outlook for the markets & economy are quite different in August than they were in June.]]>

"It's The Economy, Stupid!"

The last two months have been a roller coaster, to put it mildly. 

  • 6/27 = Biden/Trump Presidential debate
  • 6/30 = S&P 500 ends 1H24 up just shy of 15%.
  • 7/13 = Assassination attempt of former President Trump
  • 7/19 = Crowdstrike cybersecurity crash 
  • 7/21 = Biden pulls out of the Presidential race
  • 7/24 = Kamala Harris becomes the Democratic nominee
  • 7/26 = Paris Olympics begin
  • 8/4 = S&P 500 drops over 6% since the beginning of July
  • 8/11 = Paris Olympics end
  • 8/21 = S&P 500 recovers, gaining about 8% from the 8/4 low, now up just under 17% YTD.
  • 8/23 = Federal Chairman Jerome Powell indicates that rate cuts are on the way.

Despite everything that has occurred, the remainder of the year will still be focused on... (you guessed it)... the economy.

Economy & Markets

Through 6/30/24, the Russell 1000 index, which covers large-cap stocks, was up 14.24%.  Since then, after rising a little further, it dropped approximately 8%, and then recovered to be up about 18.33% as of 8/23/24..  The Federal Reserve's focus has shifted from the fight against inflation to supporting the labor market as recent data points toward a slowdown.  In fact, the Bureau of Labor Statistics recently revised employment downward by 818,000 as of March, possibly meaning that the economy may not be as strong as figures have appeared in recent months.


In August 2022 at Jackson Hole, Fed Chairman Powell famously said "While higher interest rates, slower growth and softer labor market conditions will slow down inflation, they will also bring some pain to businesses and households."  Two years later, at the most recent Federal Reserve retreat, he stated "The time has come for policy to adjust.  The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balancing of risks.  We will do everything we can to support a strong labor market as we make further progress toward price stability.  ...there is good reason to think that the economy will get back to 2 percent inflation while maintaining a strong labor market."  In other words - THE SOFT LANDING.


It's also clear that there is a market rotation away from the large growth stocks that have brought the market along to new highs.  However, overall valuations are still quite high, and there may be a desire for opportunities with more reasonable valuations, or with reduced risk, especially as interest rate cuts may be ahead.

Political Noise through Year End

Joe Biden's decision to drop out of this year's Presidential Election sent a shock wave  throughout the United States.  Recent polls, even with the revised matchup, show that the election will likely be quite close.  Polls by ABC News/FiveThirtyEight.com show the Biden/Trump pairing to be in Trump's favor 43.5% vs 40.2% as of July 21st.  However, as of August 25th, the ticket of Vice President Kamala Harris & Gov. Tim Walz now leads the former President Donald Trump/Senator J.D. Vance ticket by more than 3% (47.2% vs 43.7%).


The political discourse is likely to be loud through the year end.  However, the saying "It's the economy, stupid!" will likely dominate the conversation as November 5th approaches. Candidates' fiscal plans will certainly be scrutinized by both individual voters and the business community, especially with the background of a slowing economic backdrop.


]]>Mon, 26 Aug 2024 06:00:00 -0500<![CDATA[Fundamentals vs. the Fed]]>https://www.omnidivitia.com/blogs/post/fundamentals-vs-the-fedEarnings may be a sign of where markets are heading.]]>

Earnings May Start to Get More Attention

Our focus has been on the Federal Reserve's tightening cycle for some time, and on COVID stimulus prior to that.  A fundamental aspect of investing has gotten lost in the meantime, but it may start to get more attention in the near future - EARNINGS.  At a base level, when we invest in stocks we become equity owners of that company.  Owners want their companies to make money, both as top line revenue, and more importantly, as bottom-line earnings.  It seems that we have lost sight of how important earnings are, especially regarding fundamental valuations.

S&P 500 Forward Earnings Estimates Have Begun to Turn Over

Fed rate increases take time to work through the economy to have an impact.  The first post-COVID increase occurred in March 2022 at 0.25%.  However, S&P 500 forward earnings per share (EPS) estimates did not peak until June, and began to decline in July. I believe that the decline in estimates still has a way to go.  If that turns out to be the case, and if P/E ratios approach historical norms, it could be a bumpy ride for a while. 


This would be a classic example of one of Bob Farrell's Rules of Investing, as I've quoted in previous posts: "Bear markets have three stages - sharp decline, reflexive rebound, and a drawn out fundamental downtrend.

With an increased focus on fundamentals, higher rates, and considering the Fed is still taking money out of circulation, a continued market pullback is certainly possible in 2023.  However, the Fed also understands the tightrope they are walking: slowing down the economy just enough to tame inflation compared to pushing it into recession.  Asset depreciation may be a casualty of their efforts, but only time will tell.

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]]>Tue, 17 Jan 2023 16:00:00 -0600<![CDATA[10 Rules for Investing]]>https://www.omnidivitia.com/blogs/post/10-rules-for-investing10 Rules for Investing as guideposts for your journey]]>

Trust your Training in Times of Trouble...

When I entered the financial services industry in 1996, I just wanted to absorb as much information as possible.  One of the first pieces of information I came across was by Wall Street legend Bob Farrell, who was the Chief Market Analyst for Merrill Lynch.  Mr. Farrell worked for "Mother Merrill" from 1957-2002, and was one of the first to use "sentiment" analysis in his work.  Given the unusual times we find ourselves in, and the increasing market volatility, I thought it would be helpful to revisit Bob Farrell's "10 Rules for Investing", which have been shared throughout Wall Street firms for decades.  Enjoy!


1. Markets tend to return to the mean over time.

2. Excesses in one direction will lead to an opposite excess in the other direction.

3. There are no new eras - excesses are never permanent.

4. Exponentially rapid rising or falling markets usually go further than you think, but they do not correct by going sideways.

5. The public buys the most at the top and the least at the bottom.

6. Fear and greed are stronger than long-term resolve.

7. Markets are strongest when they are broad and weakest when they are narrow to a handful of blue-chip names.

8. Bear markets have 3 stages - sharp down, reflexive rebound, and a drawn-out fundamental downtrend.

9. When all the experts and forecasts agree, something else is going to happen.

10. Bull markets are more fun than bear markets.

If you are following our posts on LinkedIn or Facebook, you may see how some of these rules are currently playing out.  For a more personalized analysis, schedule a call to discuss your concerns by clicking the button below.

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