Monday, 25 September 2017

S&P 500 to continue rising — or not

Analysts are divided on the outlook for the US stock market for the rest of 2017.

In an interview with MarketWatch last week, Laszlo Birinyi, president of Birinyi Associates, thinks that the US stock market has more room to run before 2017 is over.

Birinyi explained that “none of the things that concern us about the beginning of a bear market are currently in existence, like exuberance”.

At the same time, he said that there is still plenty of cash around, with “a lot of money looking to make money”.

In contrast, TIAA Investments' Brian Nick sees US stocks ending the year below current levels.

“We are going to see a leveling off in the trajectory of how fast these gains could come — especially given the fact that the price this year of the S&P 500 has grown faster than earnings have grown,” he said.

However, Nick remains optimistic for next year and thinks the S&P 500 will hit 2,600 by the end of 2018.

Saturday, 23 September 2017

US stocks shrug off N Korea, in "bubble territory"

Markets were mixed on Friday.

The S&P 500 rose less than 0.1 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 fell 0.3 percent.

Asian markets fell amid continued tension over North Korea but some analysts think that markets will be able to shrug it off as long as there is no military action from either side.

That is not to say that there is nothing for investors to worry about.

Howard Ma, chief investment officer at Meritocracy Capital Partners, thinks that the US stock market is at its fourth most expensive level ever.

"This puts the U.S. stock market smack-dab at the heart of bubble territory,” he said.

Friday, 22 September 2017

Markets mixed amid both optimism and warnings

Markets were mixed on Thursday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 rose 0.2 percent but the Shanghai Composite fell 0.2 percent.

“Valuations are getting a little stretched, and it seems like there is some complacency in the markets,” said Wade Balliet, chief investment strategist at Bank of the West.

Indeed, Jeremy Siegel sees more gains for stocks in the remaining days of the year.

“I would say corporate tax reform could add another 10 percent to the market even this year,” said Siegel.

In contrast, Robert Shiller is “warning against complacency” as he sees signs of a possible bear market.

“[T]he US stock market today looks a lot like it did at the peaks before most of the country's 13 previous bear markets,” he wrote.

Thursday, 21 September 2017

Markets mixed as Fed announces start of asset unwind

Markets were mixed on Wednesday.

The S&P 500 edged up less than 0.1 percent while the STOXX Europe 600 was flat and Asian stocks were mixed.

The US 10-year Treasury yield rose to 2.27 percent after the Federal Reserve ended its monetary policy meeting by announcing that it would start to shrink its assets in October.

“The unwinding of the balance sheet will dominate markets for at least the next two years and cements our outlook for higher rates,” said Bryce Doty, senior portfolio manager at SIT Investments.

“Even though this is a slow and deliberate and thoughtful unwind plan, it is not without its potential to rattle markets,” said Kristina Hooper, global market strategist at Invesco.

The impending drawdown in Fed assets comes after a renewed surge of optimism among US investors, with the Wells Fargo/Gallup Investor and Retirement Optimism Index rising from +124 in the second quarter to +138 in the third quarter, its highest level since September 2000.

Wednesday, 20 September 2017

US stocks at new highs as investors await Fed meeting

Markets were mixed on Tuesday.

The S&P 500 edged up 0.1 percent to another record high while the STOXX Europe 600 was flat and Asian markets were mixed.

“With investors still re-evaluating the Federal Reserve’s ability to raise U.S. interest rates in December, attention will be directed towards Janet Yellen and her thoughts on the recent inflation trends in the U.S.,” said Lukman Otunuga, research analyst at FXTM, as the Fed kicked off a two-day monetary policy meeting on Tuesday.

In the meantime, Karyn Cavanaugh, senior market strategist at Voya Financial, said that markets “are paying attention to what they should be paying attention and that is earnings growth”.

Still, with US stocks at all-time highs, Bloomberg reported that “investors holding the priciest ones are starting to get uneasy”.

JC O’Hara, an analyst at FBN Securities Inc., wrote in a note to clients that “there are a few warning signs that have started to appear”.

Tuesday, 19 September 2017

S&P 500 hits another record high despite overvaluation

Markets rose on Monday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.3 percent and the MSCI Asia Pacific ex-Japan index rose 1.1 percent.

While Monday's gain took the S&P 500 to another record high, Brad McMillan, chief investment officer at Commonwealth Financial Network, told CNBC that the stock market is way overvalued.

“The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan.

However, McMillan does not think a pull-back is imminent.

“Right now, a recession is a good ways away. And that's the engine for bear markets,” said McMillan.

On the other hand, CNBC noted that the S&P 500 has traded lower 70 percent of the time during the last two weeks of September since 1980, suffering an average loss of 1.3 percent.

Monday, 18 September 2017

S&P 500 at record high leaves valuations stretched

Markets rose last week, with the S&P 500 closing above 2,500 for the first time.

In a report highlighting some of the statistics behind the rally, Bloomberg noted that US stocks have not had a 5 percent correction in more than 400 days. In addition, the S&P 500’s 269 percent rally since the 2009 low is the third strongest ever.

However, in the process, US stocks have become expensive. Bloomberg noted that at 19 times forecast earnings, the S&P 500 is trading at the most expensive level since the dot-com era.

A quarterly review by the Bank for International Settlements published on Sunday noted the same.

“Equity market investors used record amounts of margin debt to lever up their investments, even though price/earnings ratios indicated that equity valuations might be stretched by historical standards,” the BIS reported.

The BIS added: “And there were some signs of search for yield in debt markets: issuance volumes in leveraged loan and high-yield bond markets rose while covenant standards eased.”

Saturday, 16 September 2017

Markets shrug off N Korean missile launch, “can go a lot higher”

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent and the Nikkei 225 rose 0.5 percent but the STOXX Europe 600 fell 0.3 percent.

Markets largely shrugged off North Korea's launch of a missile over Japan.

Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company, said that investors ignored events in Korea after previous incidents did not produce lasting declines and have “learned to buy on the dips”.

“Valuations are stretched, but I don’t believe we’re in bubble territory. The market can go a lot higher,” added Morris.

European stocks fell after Bank of England dove Gertjan Vlieghe said that “we are approaching the moment when bank rate may need to rise”.

Friday, 15 September 2017

Markets mixed as China data disappoint

Markets were mixed on Thursday.

In the US the S&P 500 fell 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent.

Elsewhere, the STOXX Europe 600 rose 0.1 percent but in Asia, the Nikkei 225 fell 0.3 percent and the Shanghai Composite fell 0.4 percent.

Disappointing economic data out of China held back stocks. Value-added industrial output slowed for a second straight month in August while growth in investments was the slowest in almost 18 years.

The data came even as some analysts see better prospects for Asian and emerging market stocks.

Analysts at Societe General said that Asian stocks have been beating global stocks and that the outperformance has only just begun.

Analysts at Bank of America Merrill Lynch said that emerging market stocks could double in two years and suggest that “a substantial overweight in Asia/EM equities is warranted”.

Thursday, 14 September 2017

Markets mixed, US stocks gain despite “very high” valuations

Markets were mixed on Wednesday.

The S&P 500 rose less than 0.1 percent but still closed at another record high.

The STOXX Europe 600 was flat as gains in Germany and France were offset by falls in the UK.

Asian markets were mixed. The Nikkei 225 rose 0.5 percent but most of the other Asian markets fell.

“The U.S. stock market is exhibiting positive short- and long-term momentum, and breadth has expanded enough to lift the S&P 500 to a new all-time high,” said Katie Stockton, chief technical strategist at BTIG Research.

However, Maris Ogg, president at Tower Bridge Advisors, said that markets “are fully valued now, so earnings will need to catch up to prices”.

Indeed, Julian Robertson Jr, founder of Tiger Management, said at the Delivering Alpha conference presented by CNBC and Institutional Investor that stock market valuations are “very high” and that low interest rates “are creating a bubble”.

And another investor at the conference said that the high yield debt market is even more overvalued. Saba Capital's Boaz Weinstein said that for high yield debt, “the reward isn't there” given the risk.

Wednesday, 13 September 2017

US stocks hit record highs, could rise further on momentum

Markets rose on Tuesday.

In the US, the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all rose 0.3 percent to hit record highs.

Elsewhere, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 jumped 1.2 percent.

Many analysts expect further upside for stocks.

“Buying begets more buying,” said Quincy Krosby, Prudential Financial chief market strategist.

“Unless we get some different headlines, the path of least resistance is higher,” said Scott Redler, partner with T3Live.com.

However, Paul LaRosa, chief market technician at Maxim Group, said: “Unless I see a big improvement in the breadth of the market, I'm not expecting a broad-based rally to develop.”

Tuesday, 12 September 2017

Markets rose on Monday as risk appetite returned after Hurricane Irma wreaked less damage in the US than forecast and North Korea refrained from aggravating tensions.

The MSCI All-Country World Index rose 0.8 percent. The S&P 500 rose 1.1 percent to a record high, the STOXX Europe 600 rose 1 percent and the MSCI Emerging Market Index rose 0.7 percent.

Oil rose, with West Texas Intermediate crude rising 1.2 percent.

Bonds fell. The US 10-year Treasury yield rose eight basis points to 2.13 percent, the German 10-year yield rose two basis points to 0.33 percent and the UK 10-year yield rose five basis points to 1.04 percent.

Gold fell 1.1 percent.

Monday, 11 September 2017

Investors worry about Irma and bubbles

While many investors are focused on Hurricane Irma and its potential impact on the stock market, others are concerned about bubbles in asset markets.

From Bloomberg:

From Alan Greenspan and the current Federal Reserve staff to fund managers hoarding cash, people feel queasy about asset prices.

Euro high-yield debt is trading in line with U.S. Treasuries for the first time ever. Tajikistan is selling Eurobonds as yields on the junkiest emerging markets drop below 6 percent. An exchange-traded fund for betting on low volatility has more than doubled in size this year. And let’s not get started on the bitcoin rally.

Asset prices are getting “more bubbly” than in past periods of effervescence, analysts at Bank of America Merrill Lynch warn...

Saturday, 9 September 2017

Markets mixed as funds pour into bonds and non-US stocks

Markets were mixed on Friday.

The S&P 500 fell 0.2 percent and the Nikkei 225 fell 0.6 percent. However, the STOXX Europe 600 rose 0.2 percent.

Investors were cautious ahead of a possible missile test by North Korea and Hurricane Irma’s arrival on the Florida coast over the weekend.

However, investors had been showing caution throughout the week. Weekly flows into global mutual funds showed that investors have been putting funds into bonds and gold, according to Bank of America Merrill Lynch research.

For stocks, investors have moved funds to non-US equities, with the past week marking the 11th out of the past 12 weeks of net outflows for US equities.

Friday, 8 September 2017

Markets mixed, bank stocks fall

Markets were mixed on Thursday.

The S&P 500 was flat, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.2 percent.

Bank stocks fell in the US and Europe after the ECB left interest rates unchanged on Thursday but Barclays thinks that the time is right to pick up European bank shares.

In a research note published on Wednesday, Barclays wrote that European stocks have the potential to push higher through the end of 2017, and with the euro rising, banks, transports and materials are likely winners while staples and health care are the likely losers.

Thursday, 7 September 2017

Markets mixed but stock rally may have “years to run”

Markets were mixed on Wednesday.

The S&P 500 rose 0.3 percent and the STOXX Europe 600 rose 0.1 percent. However, the Nikkei 225 slipped 0.1 percent.

“The same old political uncertainties surrounding North Korea haven’t gone away, but for now traders are becoming immune to all the bluster,” said David Madden, market analyst at CMC Markets, in a note.

Indeed, Carol Pepper, chief executive officer at Pepper International, thinks that stocks have plenty of room to rise.

“I think we are mid-way through the game,” said Pepper. “You could say we have 5, 6 years to run.”

Wednesday, 6 September 2017

Markets fall but risk-off sentiment remains “at the margin”

Markets fell on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.6 percent.

Ian Winer, head of the equities division at Wedbush Securities, said: “People are getting a little more nervous on the margin—not just the geopolitical stuff—over whether tax reforms and pro-business policies will get done.”

However, National Australia Bank Director of Economics David de Garis noted that risk off sentiment has not become obvious as moves back to safe haven or risk-off currencies “have been very much at the margin”.

Indeed, Oppenheimer analysts now see the “next leg” of the stock market rally ahead and expects “new highs” for the S&P 500 over the coming weeks.

Tuesday, 5 September 2017

Markets falls after North Korean nuclear test

Markets fell on Monday.

The STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.9 percent.

The US stock market was closed for a holiday.

Markets fell after North Korea conducted a nuclear test on Sunday.

“While this is the sixth nuclear test, it is the first since Trump took office, so the market will see this as a clear escalation of tensions,” said Chris Weston, chief market strategist at IG Group.

“Unfortunately, there is unlikely to be any end in sight for this current standoff with North Korea, with few options seemingly on the table to demilitarize the regime,” said IG market analyst Josh Mahony in a note.

Monday, 4 September 2017

Are US Treasuries headed higher?

Some traders think that US Treasuries are likely to rise, pushing yields down.

Chad Morganlander, portfolio manager at Washington Crossing Advisors, told CNBC that the 10-year yield could fall below 2 percent over the next four to six months.

He said that economic growth in the US and globally will begin to “modestly decelerate”, which would lead to a depression in yields.

Meanwhile, Todd Gordon, founder of TradingAnalysis.com, told CNBC that there is potential to gain from more upside in a Treasury bond-tracking exchange-traded fund.

He said that while bonds and stocks usually move inversely, the iShares 20+ Year Treasury Bond TLT ETF has been rallying in tandem with the S&P 500-tracking SPY ETF.

“That's telling me that bonds are either moving higher because of coming risk aversion or the Fed is really just behind this market and not going to take their foot off the gas pedal,” he said.

Saturday, 2 September 2017

Markets rise as US employment rises less than expected

Markets rose on Friday.

The S&p 500 rose 0.2 percent, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 rose 0.2 percent.

A report on Friday showed that the US economy added 156,000 jobs in August, less than the 170,000-180,000 expected by economists.

“This report just kind of pushed back every expectation about a rate hike,” said Mike Antonelli, equity sales trader at Robert W. Baird & Co.

Indeed, a CNBC report noted that in the past, when the employment report fell short of expectations by between 20,000 to 30,000 jobs, the Nasdaq tended to lead other indexes higher, gaining an average of almost 1.7 percent for the next month and trading positively 67 percent of the time.

Friday, 1 September 2017

Markets rise on economic momentum

Markets rose on Thursday.

The S&P 500 rose 0.6 percent, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.7 percent.

Cristina Ulang, head of research at First Metro Investment Corp, said that US and China data “support the outlook that the global recovery is gaining ground and the growth is on a strengthening trajectory that will be good for corporate earnings and exporters to these two markets”.

“In an environment where the economy and earnings continue to grow, markets will also climb. Geopolitics shake up markets from time to time, but usually do not have long-lasting impact,” said Arian Vojdani, investment strategist at MV Financial.

Indeed, Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC on Thursday that for investors, “really good economic momentum” in the US and around the globe means that “the trend is still up”.