Monday, 18 January 2021

Risk tolerance increases with rising bubble fears

Eric Rosenbaum at CNBC wrote on Sunday that the wealthy are investing like a market bubble is here, or at least near.

However, Rosenbaum noted that these investors remain invested according to a survey by E-Trade Financial.

“In fact, amid rising bubble fears these same investors say their risk tolerance has increased, significantly, in the first quarter of 2021, and the majority expect stocks to end Q1 with more gains,” he wrote.

Mohamed El-Erian, the president of Queens College at Cambridge University and the Chief Economic Adviser to Allianz, appears to agree with these investors' stance.

In an interview with Yahoo Finance Live, El-Erian said: “If we were to see another 20 basis point move in yields, that would be bad news.”

However, he added that the Federal Reserve is unlikely to raise rates soon.

“To be clear, the path of least resistance right now is higher,” El-Erian said.

Saturday, 16 January 2021

Markets fall, Biden’s COVID-19 relief plan “priced in”

Markets fell on Friday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 1.0 percent and the Nikkei 225 fell 0.6 percent.

The announcement of US President-elect Joe Biden’s COVID-19 relief plan on Thursday did little to lift markets.

Tom Essaye, founder of The Sevens Report, said the proposal was “being met by a ‘sell the news’ reaction as markets already priced in most of what was included”.

Indeed, David Neuhauser, managing director of hedge fund Livermore Partners, went further, warning that the market “will eventually start to see factors of inflation take hold” and that could “ultimately pop the epic bubble”.

Friday, 15 January 2021

Markets mixed, Fed rate hikes “no time soon”

Markets were mixed on Thursday.

The S&P 500 fell 0.4 percent and the Shanghai Composite fell 0.9 percent.

However, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.8 percent.

US president-elect Joe Biden unveiled his stimulus plan in a speech on Thursday night that includes sending additional US$1,400 payments to Americans following the US$600 second stimulus checks that were recently deployed.

While additional fiscal stimulus raises the prospects for higher interest rates, Federal Reserve Chairman Jerome Powell said on Thursday that the time for the Fed to raise interest rates “is no time soon”.

Another encouraging news for investors came on Wednesday when trial data showed that Johnson & Johnson’s one-dose COVID-19 vaccine is safe and generates a promising immune response.

CNBC’s Jim Cramer raised the possibility that the vaccines bring the pandemic under control sometime this year, suggesting that the “market has not priced it in”.

Thursday, 14 January 2021

Markets rise, could “take more of a breather” soon

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 1.0 percent.

Mark Hackett, chief of investment research at Nationwide, noted that “sentiment and risk indicators continue to reflect investor optimism, with credit spreads at their tightest level since before the pandemic, fear & greed indicators at elevated levels, and the put/call ratio near historic lows.”

“In 2021, the U.S. economy should experience strong tailwinds from additional fiscal and monetary stimulus coupled with an end to the pandemic’s impact on the economy,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management.

Some analysts, however, have expressed concern over the speed of the market rally so far this year.

“These benchmark moves had even long-term bulls like us wondering if the stock markets are climbing the proverbial ‘wall of worry’ too fast for this early in a year,” said John Stoltzfus, Oppenheimer Asset Management’s chief investment strategist.

Goldman Sachs Chief Economist Jan Hatzius said that US stocks and bond markets could possibly “take more of a breather” in the near term.

Wednesday, 13 January 2021

Markets flat as rising rates “raises questions about valuations”

Most markets were little-changed on Tuesday.

The S&P 500 closed flat, as did the STOXX Europe 600.

However, the Shanghai Composite surged 2.2 percent.

“Markets have shifted in mindset as the Democratic ripple is digested short-term,” wrote Gregory Faranello, head of US rates at AmeriVet Securities. “The focus is now turning to growth and inflation and perhaps a combination of both.”

The US 10-year note yield briefly traded at 1.187 percent, its highest level since March, before easing back to 1.13 percent.

“When you think about the 10-year gradually working higher after spending most of last year below 1%, it raises questions about valuations, especially as it pertains to technology,” said Art Hogan, chief market strategist at National Securities.

Tuesday, 12 January 2021

Markets fall, at “extraordinarily high valuations”

Markets fell on Monday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.7 percent and the Shanghai Composite fell 1.1 percent.

Markets fell as investors became increasingly concerned that stocks are entering the manic, exuberant bull market stage.

“At extraordinarily high valuations is where we are, and its being supported by massive amounts of stimulus,” Jeffrey Gundlach, founder and CEO of DoubleLine Capital, told CNBC on Monday.