Saturday, 25 February 2017

Markets mixed but Dow hits another record high

Markets ended mixed again on Friday.

US stocks rose, with the S&P 500 gaining 0.2 percent and the Dow Jones Industrial Average closing at a record high for the 11th consecutive day.

However, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.45 percent.

“Markets are reacting to the risk of delay in fiscal stimulus and unwinding some of the recent optimism that followed President Trump's phenomenal tax package remarks,” said Ric Spooner, chief market analyst at CMC Markets.

Nevertheless, Lawrence Glazer, managing partner at Mayflower Advisors noted that “there are still significant inflows, because now even the pessimists want a piece of the action”.

“It’s momentum driven, not fundamentally driven,” he added.

Friday, 24 February 2017

Dow ekes out 10th straight record but Europe looks more affordable

Markets were mixed on Thursday.

In the US, the Dow Jones Industrial Average rose 0.2 percent to a tenth consecutive record close but the S&P 500 was flat.

Elsewhere, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.4 percent.

“It would appear investors are unwilling to go against the rally, but at the same time, there’s little conviction in it either,” said Craig Erlam, senior market analyst at Oanda. “At some point, in the absence of details on Trump’s tax and stimulus plans, the rally may run out of steam.”

However, Kevin Marder at MarketWatch said that the rally “will likely continue until higher-volume selling comes into the averages or leading stocks come undone technically”.

In the meantime, he suggested: “Don't fight the tape.”

For investors nervous about the US market, Jeff Reeves at MarketWatch suggested investing in Europe instead.

Reeves noted that “many European stocks are doing great in 2017” while “trading for much more affordable valuations than stocks elsewhere in the developed world”.

Thursday, 23 February 2017

Markets mixed as Fed seen ready to raise brick wall

Markets were mixed on Wednesday.

The S&P 500 slipped 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent to hit another record high.

Elsewhere, both the STOXX Europe 600 and the Nikkei 225 were flat.

Stocks were held back by concerns that US interest rates will rise after minutes of the Federal Reserve meeting earlier this month showed that many Fed officials indicated support for higher rates if the economy strengthened.

“A rate increase in March is most likely on the table even though the minutes don’t necessarily indicate that and it seems the Fed is prepping the market for it,” said Bob Pavlik, chief market strategist at Boston Private Wealth.

“Although we recognize that rates are below normal, the fact is that when the tightening process begins, the ‘full speed ahead’ of climbing stocks will run into a brick wall,” said Peter Cardillo, chief market economist at First Standard Financial.

Wednesday, 22 February 2017

US stocks hit record high again

Markets rose on Tuesday.

The S&P 500 rose 0.6 percent to close at another record high.

The STOXX Europe 600 rose 0.6 percent to its highest since 2 December 2015.

Asian markets were also mostly higher, with the Nikkei 225 rising 0.7 percent.

Analysts have mixed views on whether the rally in stocks will be sustained.

“The rally is getting long in the tooth, and once the euphoria wears off we will need to know when we’ll get policies and how they will impact corporate profits,” said Katrina Lamb, head of investment strategy and research at MV Financial.

“Those waiting for the other shoe to drop can be waiting for a long time,” said Karyn Cavanaugh, senior market strategist at Voya Financial. “Economic data is coming in on the upside, global growth is accelerating, there’s an increase in M&A, and optimism is higher, so the good outweighs the bad until we get anything that changes that scenario.”

Tuesday, 21 February 2017

Japanese stocks flat but increased disbursment of cash may benefit investors

Markets rose on Monday.

The STOXX Europe 600 rose 0.2 percent while the Shanghai Composite rose 1.2 percent.

The Nikkei 225 was flat though after Japan reported a bigger-than-expected trade deficit in January.

However, Bloomberg reported that a quiet revolution may be underway in the Japanese stock market.

Japan’s companies have for years sat on record piles of cash... The issue has been deploying those funds for shareholder benefit.

A key part of Abenomics has been sharpening the focus on return on equity, and now --through a mix of carrots and sticks -- some investors see change on the horizon...

“I have been in this industry 25 years but I have never seen this kind of approach before,” Yasunori Iwanaga, the Tokyo-based chief investment officer at the Japan unit of Amundi, which manages more than $1 trillion globally, said in an interview this month. “Reactions we have seen over the last few years are increasing dividend payouts or buybacks. This trend should continue over time.”

Monday, 20 February 2017

S&P 500 at new high but may be facing more risk

The S&P 500 rose 1.5 percent last week to end at another record high.

Indeed, a Bloomberg report early in the week had noted: “Investors haven’t been this optimistic on the global economy since 2011.” It cited a survey from Bank of America Merrill Lynch that showed that 23 percent of investors expect an outright “boom” while the number predicting negligible growth over the next 12 months has fallen by more than half to 43 percent.

“Macro optimism is surging,” wrote the team.

However, in his latest article today, John Hussman reminds us: “It’s precisely when economic optimism is strongest, when caution is seen as misguided, and when bullish enthusiasm is most exuberant, that the stock market reaches its speculative apex and becomes most vulnerable to collapse.”

Hussman added that with the degree of overvaluation in the market, a mere retreat to historical levels would mean a market loss of 60 percent.

Robert Naess, portfolio manager at Nordea Bank, is similarly cautious.

“There’s too much optimism,” he said in an interview with Bloomberg last week.

Naess said that companies missing earnings growth estimates pose the biggest risk to stock markets.

Naess also said that investors are putting “too little weight” on potential risks from US President Donald Trump's policies. “There’s more risk now than before.”