May 4, 2014 Stock Market Capitulation Defined by Simon Constable Wall Street Journal
Sometimes there comes a point in battle where one army just gives up. It's called a capitulation.
The same thing occasionally happens in investing, and it can arrive in the form of panic selling.
"It's when the towel gets thrown in," says Vinny Catalano, chief investment strategist of New York-based Blue Marble Research. There are a lot of times when selling by investment professionals is rooted in pressure from clients wondering why you're losing money or not beating the market, he says. If the pressure is great, then you'll get a lot of stocks being dumped all at once. A great example of a capitulation came in 2008. Over the first eight months of the year the major indexes lost about 11% as problems in the banking system became apparent. By September investors were clearly agitated, and the S&P 500 index plunged from 1,255 on Sept. 19 to under 900 by Oct. 10. That also coincided with historically high trading volume, but elevated volume isn't a necessary aspect, Mr. Catalano says. He points out that a temporary rally in stocks often comes within a few months before the real "bottom" is set. After that plays out, a rally can really get going again, as was the case in 2008-09. The great thing about capitulations is that there is an opportunity to find bargains. "I live for those days," Mr. Catalano says, but "they don't happen often." The recent selloff in biotechnology stocks likely isn't a capitulation, but rather just profit-taking within a bull market, he says. One clue is that people haven't given up on the biotech sector. Mr. Constable is the host of the News Hub show at WSJ Live online. Email him at email@example.com.
October 10, 2011 Pledge To Help European Banks Ignites Global Rally By TRANG HO Investors Business Daily "Despite the strong rally, the market's overall longer-term trend looks bearish, says Vinny Catalano, president and global investment strategist with Blue Marble Research. "With earnings season starting this week, there is every reason to expect the optimistic bottom-up projections will follow the macroeconomic forecasts for the third quarter, which were well below economists' expectations," he wrote in his blog Monday." Aug. 31, 2011 What can Alan Krueger do for investors? Commentary: Policy decisions more important than this top economist by Robert Powell, MarketWatch But as much of a jobs expert as he is, none of that may be enough to change the course of mighty rivers, nor will he bend steel in his bare hands. “Krueger’s input should be helpful,” said Vinny Catalano, a CFA charterholder, and president and global investment strategist with Blue Marble Research. “But the key questions remain: What is the vision and where is the leadership? Krueger can only advise. He cannot dictate. And economists, as a rule, are not visionaries nor are they leaders.” Catalano said the policy actions taken in the next few months will be far more important and will determine if the economy can avoid another and far more severe recession. (President Obama is expected to call for another extension of unemployment insurance benefits which are available for nearly two years.) “As you might guess, I am not optimistic his appointment will mean anything meaningful,” said Catalano. Catalano is not alone in that outlook. August 29, 2011 ETFs Rally Across The Board By TRANG HO INVESTOR'S BUSINESS DAILY Vinny Catalano, president with Blue Marble Research in New York, believes the market is undergoing a countertrend rally in a bear market that started this summer. "We entered this bear market in the most unusual fashion," Catalano said. "Bear markets usually start from markets that were overvalued market to begin with. But this one started from a regularly valued market. This is the first time it's ever happened." Catalano expects the S&P 500 to fall to 1000 to 800, down 17% to 33%, from Monday's close. Strong corporate profits and low interest rates justify the market rising higher, he says. January 8, 2011 Barrons MarketWatch A Tale of Two Halves Sectors and Styles Strategy Report by Blue Marble Research P.O. Box 216 New York, N.Y. 10276 Jan. 3: This is likely to be a year of two halves. The first half will probably be fine, with global growth in decent shape, albeit with a continuation of what the International Monetary Fund calls a "multispeed" growth environment. The second half is far more problematic, and is contingent on how effective U.S. stimuli will be. If U.S. government stimuli plus global growth overwhelm the still unresolved longer-term structural problems (imbalances, mainly due to excess debt), then the economic recovery in developed economies will morph into a self-sustaining, private-sector-driven economic expansion lifting corporate profits further into record territory, and with it a stock market that, in the case of the Standard & Poor's 500, should challenge its historic highs (i.e., above 1500). However, if the stimuli fail to enable the U.S. economy to reach what economists call "escape velocity," political and economic forces will almost certainly restrain the U.S. government from being able to provide another round of stimulus, with the consequences tilted heavily toward another, possibly, worse, crisis…. Given the fact that stocks tend to rise in early January (new money, mainly in retirement accounts, comes into the market, thereby lifting stocks), it is reasonable to expect 2011 to get started on the positive side. However…it is very likely that the early burst stocks may experience to start the year will fade into a market pullback (3% to 5%) and possibly even a correction (5% to 10%). -- Vinny Catalano January 4, 2011 Earnings Season Kicks Off By Josh Lipton, Minyanville “I would imagine that, in 2011, corporate profits will be quite good due to massive monetary and fiscal stimulus along with no real disruptions for the global growth story,” says Vinny Catalano, president of Blue Marble Research. “However, in the second half of the year, the growth rate will slow down. The key will be whether the US economy is able to wean itself off these government programs. I remain doubtful.” Catalano continues to eyeball opportunity across the pond. He invests in global materials through iShares S&P Global Materials (MXI) as well as global utilities through iShares S&P Global Utilities (JXI), a sector which he’s betting will benefit from continued spending by emerging market governments. Health care companies are expected to see earnings growth of 7.1%. Catalano, at least in the near-term, is a fan of this space given its attractive valuation along with his prediction of an M&A pickup in the sector.
President and Global Investment Strategist with Blue Marble Research Advisory Services and author of "Sectors and Styles" (Wiley 2006).
A leading investment strategist and asset manager, Mr. Catalano appears regularly in the media (Bloomberg TV & Radio, foxbusiness.com, BNN TV, CNBC, New Delhi TV, CCTV - America), is frequently quoted in various professional publications (Wall Street Journal, Barrons, Financial Times, Reuters), and is a guest speaker at various major forums. Vinny also produces and conducts timely topical and educational programs with many CFA Societies and other groups, including the highly acclaimed "Market Forecast Series".
Previously, Catalano was a Senior Financial Advisor with Merrill Lynch providing investment advice and counseling to high net worth individuals. During this time, he also provided educational and informational instruction to senior and mid level corporate executives of publicly-traded and privately held companies.
Vinny is a past president of the New York Society of Security Analysts, chair of its "Global Thematic Committee", and a Nonresident Senior Fellow at the Information Technology and Innovation Foundation.