Saturday, 3 December 2016

S&P 500 flat despite positive jobs number

Markets were mostly lower on Friday.

In the US, the S&P 500 was flat but the Dow Jones Industrial Average fell 0.1 percent.

European stocks fell, with the CAC 40 in particular falling 0.7 percent and the FTSE 100 falling 0.3 percent.

In Asia, the Nikkei 225 fell 0.5 percent while the Hang Seng slumped 1.4 percent.

The US employment report on Friday showing an increase of 178,000 jobs in November had little impact on markets. While the headline number was positive, the report also showed fewer people looked for work and hourly wages fell.

Indeed, bond prices rose. The yield on the US 10-year Treasury note fell to 2.39 percent from 2.45 percent on Thursday.

Oil continued to rally. US crude rose 1.2 percent while Brent rose 1 percent.

Friday, 2 December 2016

Markets mixed but oil rises again

Markets were mixed on Thursday.

The Dow Jones Industrial Average rose 0.36 percent to another record high but the S&P 500 fell 0.35 percent.

The STOXX Europe 600 fell 0.3 percent but the MSCI Asia Pacific Index rose 0.6 percent.

Oil rose again on Thursday. Brent crude surged more than 4 percent while West Texas Intermediate jumped 3.3 percent.

Gene McGillian, manager of market research for Tradition Energy, sees WTI crude "reaching the 2016 highs near $52 and even pushing above that" while Goldman Sachs forecast an increase in prices to $55 for WTI and $56.50 for Brent.

Thursday, 1 December 2016

Markets mixed, oil surges after deal on output cut

Markets were mixed on Wednesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 was flat.

Crude oil surged after the Organization of the Petroleum Exporting Countries agreed to cut production levels. West Texas Intermediate crude jumped 9.3 percent while Brent rose 8.8 percent.

Michael Matousek, head trader at US Global Investors Inc., said: “The deal is taking people by surprise, so they’re desperately buying futures now.”

However, Stuart Samuels, a London-based sales trader at Oppenheimer Europe, said that while oil had driven pushed European stocks up on Wednesday, “I’d be inclined to take some profits” with Sunday’s Italian referendum on constitutional reform looming.

Wednesday, 30 November 2016

Stocks rise, US market "pricey" but "bullish"

Stocks mostly returned to winning ways on Tuesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Shanghai Composite Index rose 0.2 percent. However, the Nikkei 225 fell 0.3 percent.

Further gains could be hampered by high valuations, especially for US stocks.

"I'm a little concerned that we're getting a little pricey, a little rich," Erin Gibbs, equity chief investment officer at S&P Global, told CNBC on Monday.

Nevertheless, Ari Wald, head of technical analysis at Oppenheimer, told CNBC on Monday that "the longer-term trend here is bullish for the S&P 500".

David Kelly, chief global strategist at JPMorgan Asset Management, agrees.

"So long as rates move up slowly, the Fed raises rates slowly, the bull market continues on," he said at a media briefing on Tuesday.

Tuesday, 29 November 2016

US and European stocks fall but Japanese stocks gaining favour

Markets mostly fell on Monday.

At the start of the day, Asian stocks rose, with the MSCI Asia Pacific Index rising 0.8 percent.

However, European stocks failed to follow through, with the STOXX Europe 600 declining 0.8 percent.

US stocks also fell. The S&P 500 declined 0.5 percent.

The fall in the US stock market ended a four-day winning streak and comes as analysts warn that valuations may be getting stretched.

John Reese, co-founder at Validea Capital Management, is one of those who think that US stocks may be overvalued.

In a CNBC article, Reese wrote that the current market cap/GDP ratio of nearly 125 percent is “the highest it has been...since the market went over a cliff in 2000”.

Indeed, some analysts now think that Japan's stock market may be a better bet.

“Japan is now our top pick in global equity regions, replacing the U.S.,” Jonathan Garner, Morgan Stanley's chief Asia and emerging market equity strategist, said in a note on Sunday.

Monday, 28 November 2016

S&P 500 at record high but prospective returns over the long term look “paltry”

US stocks ended at a record high last week.

The S&P 500 rose 1.4 percent over the week to end at a record high of 2,213.33. The index has now risen for three consecutive weeks.

However, Wayne Kaufman, chief market analyst at Phoenix Financial Services, said that the following week “could see some softness”.

“The three indicators I look at—market breadth, sentiment, and valuation—are all in areas where the market typically runs into some headwinds,” Kaufman said. “Investors are hopeful that valuations are justified given the incoming administration.”

However, John Coumarianos thinks that US stock valuations are suggesting that returns over the next decade are likely to be “paltry”.

“A 5% real annualized return from the S&P 500 may not be impossible, but it’s highly improbable from the market’s current Shiller valuation of 26,” he wrote. “The long term average is 16.”

Coumarianos wrote that Research Affiliates has projected future 10-year annualised real returns for the S&P 500 and the Barclays US Aggregate at 1.1 percent and 0.50 percent respectively.

John Hussman also has low expectations for US stock returns. In his latest article, Hussman wrote that the US stock market is “at a level consistent with expectations of S&P 500 12-year nominal total returns averaging less than 1% annually.”

Hussman thinks that the recent marginal highs are more consistent with a “blowoff” than a “breakout” and expects “the S&P 500 to surrender its entire total return since 2000 over the completion of the current market cycle”.