Monday, 31 December 2018

S&P 500 weekly rise seen as bear market rally

The S&P 500 rose 2.9 percent last week, its first weekly rise since the end of November.

Ralph Acampora, director of technical research at Altaira Capital Partners, told CNBC on Friday: "The rally continues here. That's the good news."

However, he added: "The bad news is that when we get up there we're going to run into a little overhead supply. I think it's premature to say we have seen the final low."

Indeed, Peter Boockvar, the chief investment officer at Bleakley Advisory Group, told CNBC on Thursday: "We are in a bear market, and a bear market is not just going to end in a couple of months considering the ten years of a bull market."

Saturday, 29 December 2018

Paulsen bets on no recession, time to buy the dips

Markets were mixed on Friday.

The S&P 500 dipped 0.1 percent and the Nikkei 225 fell 0.3 percent but the STOXX Europe 600 surged 2.0 perrcent.

Eric Wiegand, senior portfolio manager at US Bank Wealth Management, suggested that the stock market is experiencing “selling fatigue” after several sessions of “indiscriminate selling”.

However, Lukman Otunuga, research analyst at FXTM, wrote in a note that “it is certainly too early for any celebrations” and said that “global equity markets remain vulnerable to downside shocks”.

Still, Jim Paulsen, chief investment strategist at Leuthold, said that it is time to “buy the dips”.

“I'm betting we don't have a recession,” he told CNBC. “I think sometime in 2019, if you buy down here in this area, you'll probably be happy.”

Friday, 28 December 2018

Markets mixed, Boxing Day rally may be “no more than a wicked bear trap”

Markets were mixed on Thursday.

The S&P 500 reversed early losses to close 0.9 percent higher while the Nikkei 225 surged 3.8 percent.

However, the STOXX Europe 600 tumbled 1.7 percent.

Meanwhile, some analysts are not impressed by the US stock market's 5 percent rally on Wednesday.

“Such rallies are not uncommon in troubled times, and we have experienced many of them in past bear markets,” said Hussein Sayed, market strategist at FXTM, in a note.

Russ Mould, investment director at AJ Bell, noted that historically, gains of 5 percent or more usually came during bear markets.

Mould said “there is still a risk that this year’s Boxing Day bonanza could be no more than a wicked bear trap set to lure investors into more trouble”.

Jeff deGraaf, chairman of Renaissance Macro, said that while it is possible that stocks set a tactical low on Wednesday, it remains unlikely that an “ultimate low” has been established.

Thursday, 27 December 2018

Markets rebound, "close enough to bottom"

Markets were mostly higher on Wednesday.

The S&P 500 surged 5.0 percent while the Nikkei 225 rose 0.9 percent. Most European markets were closed.

Scott Minerd, Guggenheim's head of investing, told CNBC on Wednesday: "We're close enough to a bottom [in the equity market] that investors should be stepping in."

Other analysts think that a recovery in stocks could take a while to come.

Nick Colas, Data Trek Research co-founder, said that there have been many issues hitting the market towards the end of the year and that "there's no horizon to see any one of these individual topics to resolve themselves in the next 20, 30, 40, 50 days".

UBS economist Rob Martin said that this could be a "short-lived temporary shock" but expects a pick-up in economic growth in the second half of next year.

Washington Crossing Advisors senior portfolio manager Chad Morganlander said that there is still money to be made in 2019 but expects "deceleration" and suggests that "one has to be a little bit more cautious".

In contrast, Charles Bobrinskoy, portfolio manager at Ariel Investments, thinks that "we're going to have earnings growth next year, which is why we just think this market is attractive".

Wednesday, 26 December 2018

US and Japanese stocks plunge, time "to nibble at some stocks"

It was not a merry Christmas for investors.

On Monday, the S&P 500 plunged 2.7 percent while the STOXX Europe 600 fell 0.5 percent.

Then on Tuesday, the Nikkei 225 dived 5.0 percent, leaving it 21 percent lower than its high in early October and confirming a bear market for the index.

While the S&P 500's decline on Monday left it 19.8 percent lower than its record close on 29 August, some investors remain undaunted.

On Friday, Leuthold Group chief investment strategist Jim Paulsen told CNBC that the market is "getting close to the bottom".

On Monday, David Tepper, president of Appaloosa Management, told CNBC that the sharp sell-off presented an opportunity "to nibble at some stocks".

Monday, 24 December 2018

S&P 500 closing in on bear market

The S&P 500 fell 7 percent last week. It's fall since its last high brings it just about 2 percentage points from the 20 percent decline that is considered to be a bear market.

The Nasdaq Composite is already in a bear market, having fallen 22 percent from its high after another 8.4 percent tumble last week.

A CNBC report noted that after trading in a range of 2,600 to 2,800 for four months, the S&P 500 quickly fell out of it all the way to 2,400.

"The next level traders would like to see tested is 2,250 to 2,300," said Scott Redler of T3Live.com.

For the near term, investors could be focused on the partial government shutdown in the US after Congress failed to pass spending bills ahead of the deadline amid disagreement over funding of President Donald Trump's proposed border wall.

Mark Cabana, head of US short rate strategy at Bank of America Merrill Lynch, said that the disagreement is "a signal about just how difficult things will ultimately be".

However, for next year, the key concerns are trade and monetary policy.

"If we moved into 2019 and all tariffs were implemented, that would very quickly outweigh all stimulus we have coming into 2019," Wilmington Trust chief economist Luke Tilley said.

On Friday, the US stock market briefly rallied when New York Fed President John Williams said the Fed is willing to reconsider its policy depending on the economy and conditions.

Still, Cabana said that "rates could be higher" and while the 10-year Treasury yield fell to 2.78 percent on Friday, he thinks a yield of "3 percent is reasonable".

Friday, 21 December 2018

Markets fall, “investors lose all hope”

Markets fell on Thursday.

The S&P 500 plunged 1.6 percent, the STOXX Europe 600 tumbled 1.5 percent and the Nikkei 225 dived 2.8 percent.

“Investors have lost all hope as Powell was really the last opportunity in ’18 that could possibly trigger an uptick in willingness to put risk back on,” wrote Joel Kulina, an analyst with Wedbush Securities, in a note.

Indeed, many analysts expect further declines for stocks.

Julian Emanuel, chief equity and derivatives strategist at BTIG, said: “It is entirely possible that looking out over the next three to six moths this correction turns into what you would call a bear market because of the fact that the Fed really didn't show sufficient sensitivity to the affect of policy tightening on the speed of asset price changes to the downside.”

“We already have rates that are high enough to push us into at least a growth recession,” said Ed Keon, QMA chief investment strategist and portfolio manager.

Still, some remain hopeful of a rebound next year.

“I still expect a positive year next year, but maybe something like 5 percent,” said Keon.

Michael Arone, chief investment strategist at State Street Global Advisors, said “fundamentals will support reasonably high stock prices in 2019”.

Thursday, 20 December 2018

US stocks fall as Fed lowers growth forecast

Markets were mixed on Wednesday.

The S&P 500 tumbled 1.5 percent and the Nikkei 225 fell 0.6 percent.

However, the STOXX Europe 600 rose 0.3 percent, with the FTSE MIB jumping 1.6 percent after the European Commission reached a deal with Italy over its 2019 budget, avoiding disciplinary steps against it.

US stocks fell after the Federal Reserve proceeded with its fourth rate hike of the year. However, its policy statement noted that it may be less aggressive in raising rates next year.

“The big takeaway for markets is that the Fed lowered its growth and inflation forecasts” for 2019 and beyond, said Matthews Bartolini, head of SPDR Americas research at State Street Global Advisors.

Peter Berezin, senior vice president of global investment strategy at BCA research, said that the Fed's statement is “dovish” but it still appears set to “take monetary policy into restrictive territory”, where “usually you get a recession”.

Wednesday, 19 December 2018

Markets mixed as investors turn bearish even as forecasts for S&P 500 at most bullish since 2009

Markets were mixed on Tuesday.

The S&P 500 was flat while the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 plunged 1.8 percent.

Oil plunged on Tuesday. West Texas Intermediate crude fell 7.3 percent while Brent fell 5.6 percent.

While the US stock market was steady on Tuesday, Larry Benedict, CEO of the Opportunistic Trader, said that the current downtrend “has a lot further to go”.

Similarly, Yousef Abbasi, global market strategist with INTL FCStone, said that “it is hard to imagine this market rallying with any sort of fervor and retaining those gains”.

“It would be very surprising to see it sort of stabilize here, and then take off,” former Federal Reserve chairman Alan Greenspan said in an interview with CNN.

Indeed, professional money managers have turned sharply bearish in their outlook for the stock market and the economy, according to Bank of America Merrill Lynch’s December survey of more than 240 professional investors.

53 percent of those surveyed see the global economy deteriorating over the next twelve months, up from 44 percent in November, the highest share of those surveyed since October 2008.

And yet, forecasts for the S&P 500 next year are more optimistic than ever. “Wall Street sees a big rally of 17% from Monday’s close,” MarketWatch noted. “That’s the biggest bull call since 2009.”

Tuesday, 18 December 2018

Markets fall as Santa rally looking elusive

Markets were mostly lower on Monday.

The S&P 500 plunged 2.1 percent while the STOXX Europe 600 fell 1.1 percent.

Earlier, however, the Nikkei 225 rose 0.6 percent.

“The ‘Santa rally’ which had been hoped for has proven to be frustratingly elusive, and now markets are quite happy, if not desperate, for at least a dovish line to be thrown by the FOMC,” said Vishnu Varathan of Mizuho Bank.

“Anybody hoping for a Santa Claus Rally this year will be disappointed,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

“People have been buying the dips, but it’s just not working, and at a certain point that will lead to a buyer’s strike,” said Alec Young, managing director of global markets research at FTSE Russell.

Indeed, William Watts at MarketWatch noted that there has been no sign of panic selling to suggest a market bottom while Tomi Kilgore also of MarketWatch suggested that the S&P 500's recent pattern of lower recovery highs indicates that the primary trend is now down.

Monday, 17 December 2018

S&P 500 at lowest since April as investors pull money out of stocks

The S&P 500 fell 1.9 percent on Friday to close at 2,599.95, its lowest finish since 2 April.

Markets have fallen as investors pulled money out of stocks. Data compiled by the Lipper team at Refinitiv showed investors pulled $46.2 billion from US equity mutual funds and exchange-traded funds in the week ending 12 December.

In its latest quarterly review, the Bank for International Settlements said that the latest market declines "took place amid mixed signals from global economic activity and the gradual, yet persistent, tightening of financial conditions" and "reflected the ebb and flow of ongoing trade tensions and heightened political uncertainty in the euro area".

However, Federated Investors' Steve Chiavarone told CNBC on Friday that "things are stable".

Chiavarone noted that price-earnings ratios have fallen 20 percent. "What that tells us is the market is pricing in recession in 2019. We just don't think that is going to happen."

Friday, 14 December 2018

Markets mixed as US recession risk rises

Markets were mixed on Thursday.

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

“Investors are clinging to the recent positive news about trade negotiations, but we won’t see the end of this volatility until there is a concrete agreement in place,” said Patrick Healey, president of Caliber Financial Partners.

Meanwhile, a Reuters poll of economists showed that the risk of a US recession in the next two years has risen to 40 percent.

However, Jeff Saut, chief investment strategist at Raymond James, told CNBC on Thursday that the US economy is not going to slow as much as expected and that the stock market has reached a bottom. “People are underinvested” in stocks, he said.

Also on Thursday, the European Central Bank left interest rates unchanged and affirmed plans to end monthly asset purchases at the end of the month.

Thursday, 13 December 2018

Markets rise on positive trade news but corporate debt levels “concerning”

Markets rose on Wednesday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 surged 1.7 percent and the Nikkei 225 soared 2.2 percent.

“Volatility of late can be blamed on tariffs and trade talks,” said Tatyana Bunich, president of Financial 1 Wealth Management Group.

Dave Lutz, head of ETFs at JonesTrading, noted that the market is in “a good mood”, with the Huawei CFO released on bail and strong market action in Asia on encouraging trade news.

However, meanwhile, Lindsey Bell, an investment strategist at CFRA Research, told CNBC that the level of corporate debt is “concerning” while slowing earnings growth could also become a major market headwind for stocks in 2019.

Wednesday, 12 December 2018

Markets mixed but US stock market “is going to break down”

Markets were mixed on Tuesday.

The S&P 500 was flat and the Nikkei 225 fell 0.3 percent but the STOXX Europe 600 surged 1.5 percent and the Shanghai Composite rose 0.4 percent.

Jeffrey Gundlach, founder and chief executive officer of DoubleLine, thinks that the US stock market “is going to break down” as the economy is showing signs of weakness ahead.

Gundlach said that corporate bonds “remain very overvalued” and “should be avoided”.

Gundlach suggested that investors would do much better with stocks outside of the US.

Meanwhile, though, Nomura analysts recommended caution on China, suggesting that investors “may be unprepared for a significantly worse slowdown in Q2”.

Tuesday, 11 December 2018

US stocks reverse sharp falls, fears of economic downturn “overblown”

Markets were mixed on Monday.

The S&P 500 reversed a sharp fall early in the session to finish 0.2 percent higher. However, the STOXX Europe 600 tumbled 1.9 percent and the Nikkei 225 plunged 2.1 percent.

“Higher volatility and wider intraday and intraweek ranges are likely par for the course these days and momentum can shift without an easily-defined reason,” said Liz Ann Sonders, chief investment strategist, at Charles Schwab & Co.

While the S&P 500 managed to rebound from lows on Monday, almost half of its component stocks are already in a bear market.

Still, Tom Essaye, president of the Sevens Report, said in a note that the majority of the news last week was “net positive”.

Gad Levanon, chief economist of North America at The Conference Board, said that fears of an economic downturn are “overblown” and “the stock market is overreacting”.

“The U.S. economy will gradually slow during 2019 but GDP growth will not drop below 2%,” he wrote.

Monday, 10 December 2018

US stocks may already be in bear market

The S&P 500 fell 4.6 percent last week. It was its biggest weekly decline since March and its worst start to a December since 2008.

Ed Clissold, Ned Davis Research's chief US market strategist, told CNBC last week that US stocks may be experiencing a bear market that is "going to take you down around 20 percent — maybe a little bit more".

Clissold thinks that earnings growth is becoming a "front-burner issue". He thinks it will slow down "more than expected" and that downward earnings revisions are "going to continue to plague the market for a few more months".

However, Clissold does not expect a recession and thinks that the bear market will last until early second quarter next year, "and then we can look for a bottoming process from there".

Doug Gordon, a senior portfolio manager at Russell Investments, does not expect a bear market though. "While you can certainly see a path that could get us to a bear market, I think it's more of a messy correction," he told CNBC last week.

Gordon sees the US-China trade war as a major economic risk and thinks the ceasefire achieved last week is an important marker.

Saturday, 8 December 2018

US stocks plunge, “not a good time to take bold risks”

Markets were mixed on Friday.

The Nikkei 225 rose 0.8 percent and the STOXX Europe 600 rose 0.6 percent but the S&P 500 plunged 2.3 percent.

Vincent Juvyns, global market strategist at J.P. Morgan Asset Management, said that with “so much uncertainty surrounding trade talks, Brexit and Italy”, it is “not a good time to take bold risks”.

A report from the US Labor Department showed that the US economy added 155,000 new jobs in November.

While the employment report was weaker than expected, Martha Gimbel, director of economic research at Indeed Hiring Lab, said the US is still adding “twice the jobs that the economy needs to add each month to keep the unemployment rate steady”.

Eric Winograd, senior US economist at AllianceBernstein, said that “the labor market is strong and continues to get stronger” and thinks that the Federal Reserve “remains likely to raise rates over the course of the next year”.

Friday, 7 December 2018

Markets fall after arrest of Huawei CFO, “bottom isn’t in sight”

Markets fell on Thursday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 plunged 3.1 percent and the Nikkei 225 tumbled 1.9 percent.

Stocks fell on news that Canadian authorities had arrested Meng Wanzhou, the chief financial officer of Huawei Technologies, at the request of US authorities for allegedly violating sanctions against Iran.

However, US stocks rebounded in the afternoon after a report that the Fed may consider a pause after raising interest rates later this month.

Jasper Lawler, head of research at London Capital Group, wrote in a note that the arrest of Meng “has the potential to shatter very fragile U.S.-Sino relations which will weigh further on global trade and growth concerns”, and that “despite recent heavy selloffs, the bottom isn’t in sight and the markets have further to fall”.

Similarly, Art Cashin, UBS director of floor operations at the NYSE, said on CNBC that if stocks “slide through here, then you're going to look to test much deeper lows”.

Thursday, 6 December 2018

European and Asian stocks fall, Brexit "a factor"

Markets fell on Wednesday.

The STOXX Europe 600 fell 1.2 percent, the Nikkei 225 fell 0.5 percent and the Shanghai Composite fell 0.6 percent. The US stock market was closed.

While some of the declines in Europe and Asia were reactions to the sharp decline in the US on Tuesday, some investors would also have been concerned with the developments in the UK, where Prime Minister Theresa May suffered embarrassing defeats on Tuesday at the start of five days of parliamentary debate over her plans to leave the European Union.

Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management, said that while the US economy "is likely to be able to withstand another rate hike or two", the economic outlook is "murkier than before", with Brexit also "a factor in the ongoing risk aversion".

Wednesday, 5 December 2018

Markets fall on US-China trade doubts and recessionary fear

Markets fell on Tuesday.

The S&P 500 plunged 3.2 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 tumbled 2.4 percent.

Analysts are having doubts about whether a permanent trade agreement can be reached between the US and China after noting that the White House, President Donald Trump himself and Chinese officials all described the weekend agreement differently.

“The market is reassessing if anything tangible happened at the Trump-Xi dinner,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.

Adding to investor concerns is a flattening of the US yield curve. The 10-year Treasury note yield fell 6.9 basis points to 2.921 percent. With the 2-year yield falling 2.2 basis points to 2.811 percent, the spread between the 2-year yield and the 10-year rate was about 11 basis points, the narrowest in 11 years.

“Recessionary fear is starting to raise its ugly head,” wrote Stephen Innes at broker Oanda.

Indeed, Mike Wilson, chief US equity strategist at Morgan Stanley, sees an “earnings recession” at some point in 2019.

Tuesday, 4 December 2018

Markets rally on US-China trade war ceasefire but comprehensive agreement seems “impossible”

Markets rose on Monday following the agreement over the weekend by the US and China on a ceasefire in their trade war.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 1.0 percent.

Oil surged, with both West Texas Intermediate crude and Brent crude jumping about 4 percent.

Some analysts remain wary of a resumption of the trade war.

“Reaching a comprehensive agreement on all the outstanding issues in 90 days seems, essentially, impossible,” Nomura analysts wrote of the deadline set for a permanent resolution.

“Who knows, President Xi and the Chinese authorities may pull a rabbit out of the hat through this new negotiating period and promote enough belief that the U.S. trade representatives permanently leave the tariffs on the $200 billion at 10%, but that is a big if,” said Chris Weston, head of research at currency broker Pepperstone, in a note.

Monday, 3 December 2018

Trump, Xi agree on trade war ceasefire

The world heaved a sigh of relief over the weekend after China and the United States agreed to a ceasefire in their trade war on Saturday after talks in Argentina between US President Donald Trump and Chinese President Xi Jinping.

According to Reuters, the White House issued a statement saying that the US will leave tariffs on US$200 billion worth of Chinese imports at 10 percent at the beginning of the new year, agreeing to not raise them to 25 percent “at this time”.

“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,” it said.

The White House said that the two leaders also agreed to immediately start talks on structural changes with respect to forced technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.

Analysts see the agreement as paving the way for more gains for markets.

“It sets a pretty positive tone (and) stocks should have a decent rally into December,” said Nathan Thooft, Boston-based global head of asset allocation for Manulife Asset Management.

Friday, 30 November 2018

Markets mixed as Fed could still “create quite a significant liquidity squeeze”

Markets were mixed on Thursday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.4 percent.

Regarding the fall in US stocks, Ryan Nauman, market strategist with Informa Financial Intelligence, said that investors could have re-evaluated just how dovish Federal Reserve chairman Jerome Powell is, noting that the “Fed could raise rates three times next year and still be within” its estimated range of a neutral rate.

David Rosenberg, Gluskin Sheff chief economist, is even more wary of the Fed, noting that its balance sheet reduction alone could have drastic implications for stocks.

“The Fed doesn't really have to do anything on rates,” he said. “Just the balance sheet alone is going to create quite a significant liquidity squeeze next year.”

Thursday, 29 November 2018

US stocks surge on hopes of dovish Fed

Markets mostly rose on Wednesday.

The S&P 500 surged 2.3 percent and the Nikkei 225 rose 1.0 percent but the STOXX Europe 600 was flat.

US investors were encouraged by Federal Reserve Chairman Jerome Powell’s comment during a speech at the Economic Club of New York that interest rates are “just below the broad range of estimates of the level that would be neutral for the economy”.

Investors have been concerned that rising interest rates will put pressure on stock valuations. A MarketWatch report suggested that even after the recent declines, stocks are not cheap.

“The best we would say is that it’s less expensive than it used to be,” said Willie Delwiche, investment strategist with RW Baird. “But we still consider valuations to be a headwind for stocks.”

“In the long run, changes to multiples are almost always related to interest rates,” said Keith Wibel, president of Foothills Asset Management.

Still, Wells Fargo Securities' Christopher Harvey believes stocks are on the cusp of a sharp turnaround.

“A fair amount of value has been uncovered in the sell-off,” he said. “We think we can work higher from these levels.”

Wednesday, 28 November 2018

US stocks at risk of bear market and "lower returns in the next several years"

Markets were mixed on Tuesday.

The S&P 500 rose 0.3 percent and the Nikkei 225 rose 0.6 percent but the STOXX Europe 600 fell 0.3 percent.

BTIG chief equity and derivatives strategist Julisan Emanuel told CNBC on Tuesday that a full-blown economic cold war between the US and China could send stocks into a bear market.

Also on Tuesday, Vanguard Group CEO Tim Buckley told CNBC that the return of volatility is normal while Vanguard portfolio manager Gerry O'Reilly said to expect more of it.

Over the longer term, Vanguard chief investment officer Greg Davis said to "expect lower returns in the next several years" for the US stock market and expects international stocks to outperform.

Tuesday, 27 November 2018

Markets rise as post-Thanksgiving rally seen

Markets rose on Monday.

The S&P 500 surged 1.6 percent, the STOXXX Europe 600 jumped 1.2 percent and the Nikkei 225 rose 0.7 percent.

“All indications are that the holiday shopping sales are robust, and consumer discretionary is catching a little bit of a break today,” said Art Hogan, chief market strategist at B Riley FBR.

Seasonality could also be helping. A CNBC report said that the US stock market usually rises from Thanksgiving to Christmas.

However, non-US stocks could be even better bets.

Morgan Stanley said that it has upgraded emerging market stocks from "underweight" to "overweight" while downgrading US stocks to "underweight".

Meanwhile, Michael Brush writing at MarketWatch suggested that European bank stocks are looking attractive after having been heavily beaten down. “I think it’s a great buying opportunity,” he quoted Ian Lapey, who manages the Gabelli Global Financial Services Fund, as saying.

Monday, 26 November 2018

Are declines in stocks and oil indicating imminent recession?

Last week, the S&P 500 fell 3.8 percent, its second consecutive weekly decline. It is now in negative territory for the year-to-date.

Oil also fell. West Texas Intermediate crude fell 10.6 percent, its seventh consecutive weekly decline.

With both stocks and oil in a downtrend, is a US recession imminent? Derek Thompson at The Atlantic suggested not.

If you’re going to worry, you should worry about three things: exports, China, and maybe the looming shadow of corporate debt. But nothing in the economy seems to predict an imminent recession.

Thompson quoted Larry Kudlow, the director of the National Economic Council, on the possibility of an imminent recession.

“I’m reading some of the weirdest stuff [about] how a recession is right around the corner. Nonsense,” he said. “Recession is so far in the distance, I can’t see it.”

Not that Kudlow's remark is likely to be very useful.

In December 2007, Larry Kudlow, then a talking head for the business network CNBC, proclaimed, “There’s no recession coming. It’s not going to happen.” That same month, the economy plunged into the worst economic downturn since the Great Depression.

Saturday, 24 November 2018

Stocks mixed, oil plunges

Markets were mixed on Friday.

The S&P 500 fell 0.7 percent while the Shanghai Composite plunged 2.5 percent but the STOXX Europe 600 rose 0.4 percent.

Chinese stocks fell as US-China trade tensions were fuelled by a report that the US has been trying to persuade its foreign allies to avoid using China’s Huawei Technologies Co.’s telecoms equipment because of security concerns just ahead of next week's trade talks between the two countries.

“The trade tension story has moved past the point of a quick resolution,” said Jasper Lawler, head of research at London Capital Group. “We expect this risk to continue to be a theme in 2019 which will continue to weigh on appetite for riskier assets.”

Oil fell sharply. West Texas Intermediate crude plunged 7.7 percent and Brent tumbled 6.1 percent.

“The market continues to be worried about slowing global growth,” said Karyn Cavanaugh, senior market strategist at Voya.

However, Cavanaugh thinks the US economy remains healthy and that consumers are “out there spending money”.

Friday, 23 November 2018

Markets mixed amid waning impact of US stimulus and "serious issues" in Europe

Markets were mixed on Thursday.

The STOXX Europe 600 fell 0.7 percent but the Nikkei 225 rose 0.6 percent. The US stock market was closed for a holiday.

Daniel Gradwell from ANZ Research noted that "sentiment remains fragile".

"There seems a greater appreciation that with the impact of US fiscal stimulus waning, the US economy could slow like other major economies have," he wrote in a note. "That leaves the market less forgiving of poor news."

Indeed, some analysts suggested that the US stock market's failure to sustain its rally through Wednesday could signal another wave of selling.

"I think it's a fake out, rather than a break out," said Samuel Stovall, chief investment strategist at CFRA.

Meanwhile, Naeem Aslam writing at Forbes said that in Europe, there are some serious issues that suggest that the stock market downtrend "may continue its downtrend till the end of the year and this can spill into Q1 of next year".

Thursday, 22 November 2018

Markets rebound amid “promising signs” of bottom

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.3 percent and the STOXX Europe 600 rose 1 percent. However, the Nikkei 225 fell 0.4 percent.

A report on Wednesday showed that orders for US durable goods fell 4.4 percent in October.

Neverthless, Kevin Divney, senior portfolio manager at Russell Investments, said “we don’t see a broad, systemic reason why the market has been selling off” and “we expect to continue to see stock-specific buyers out there, taking advantage of compressed valuations”.

Tom Essaye, president of the Sevens Report, wrote in a note that “yesterday had some of what we look for when trying to identify selling capitulation”.

Similarly, Andrew Adams, analyst at Raymond James, pointed to a host of other observations that he said offer “promising signs that have prevented us from losing all hope” that the market has bottomed.

In contrast, Jeffrey Gundlach, founder of DoubleLine Capital, said: “We don’t have anything resembling a panic low ... which means stocks have further to go.”

Wednesday, 21 November 2018

Morgan Stanley: Bear market sign irrefutable

Markets fell sharply on Tuesday.

The S&P 500 plunged 1.8 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 1.1 percent.

Oil fell. West Texas Intermediate crude plunged 6.6 percent while Brent fell 6.4 percent.

“The broader financial market complex was roiled by weakness in tech stocks and the seemingly hard-to-bridge rift between the U.S. and China, at least as far as trade is concerned,” said consulting firm JBC Energy.

Morgan Stanley thinks that the US stock market is now in a bear market.

“The technical damage is irrefutable,” wrote the bank’s analysts.

Tuesday, 20 November 2018

US stocks plunge with homebuilder confidence

Markets mostly fell on Monday.

The S&P 500 plunged 1.7 percent while the STOXX Europe 600 fell 0.7 percent.

Earlier on Monday, the Nikkei 225 had risen 0.7 percent.

“Trade war concerns with China weigh on the global supply chain for large technology companies while global growth fears worry many that future earnings will be lower,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, in a research note.

“Today’s housing data was pretty bad,” said Jim Smigiel, chief investment officer of non-traditional strategies at SEI Investments, referring to a report that showed that the National Association of Home Builders’ monthly confidence index plunged eight points to 60 in November.

Jefferies economists are sanguine though, writing after the NAHB release that housing “appears to be settling into a plateau”, with “no signs of threatening excesses such as inventory overhangs and a surge in delinquencies”.

Monday, 19 November 2018

US investors ignoring strong earnings

The S&P 500 fell 1.6 percent last week.

The US stock market has been falling despite strong earnings growth. According to a MarketWatch report, earnings for S&P 500 companies grew by 25.8 percent in the third quarter, the strongest performance since the third quarter of 2010.

However, from the start of earnings season to the close of trade last Friday, the S&P 500 has fallen 2.7 percent.

“Wall Street doesn’t care what you’ve done in the past. It’s all about what you’re going to do next quarter,” said Michael Arone, chief investment strategist at State Street Global Advisors.

“The market knows that earnings growth has peaked, and so earnings growth can’t be a reason any longer to ignore the macro picture,” said Tom Essaye, president of the Sevens Report.

Indeed, Bert Dohmen, president of Dohmen Capital Research, suggested in a Forbes article that central bank tightening and stock market overvaluation could push stocks down as much as 35-40 percent just to “normalize”.

Saturday, 17 November 2018

Markets mixed, oil steady as “negative news priced in”

Markets were mixed on Friday.

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

Earlier in Asia, the Nikkei 225 fell 0.6 percent but the Shanghai Composite rose 0.4 percent.

Oil was steady, with West Texas Intermediate crude unchanged and Brent gaining 0.2 percent.

The Energy Information Administration had reported on Thursday that US crude supplies rose by 10.3 million barrels for the week ended 9 November, an eighth consecutive increase.

“Price reaction to the U.S. inventory data shows that negative news is now largely priced in,” said Carsten Fritsch and the commodities team at Commerzbank in a note.

Friday, 16 November 2018

Markets mixed amid concerns over trade tension and Brexit

Markets were mixed on Thursday.

The S&P 500 jumped 1.1 percent to end a five-day losing streak but the STOXX Europe 600 tumbled 1.1 percent. Earlier in Asia, the Nikkei 225 fell 0.2 percent but the Shanghai Composite jumped 1.4 percent.

Despite the rebound in US stocks, some analysts see continued headwinds for the market.

Lindsay Bell, investment strategist at CFRA, said that concerns over US-China trade tensions “will continue to intensify as we grow closer to January, when tariffs will jump from 10% to 25%”.

Mark Esposito, president of Esposito Securities, said that the UK's exit from the European Union is having second-order effects on the US economy. “Brexit doesn’t help the European economy, and it’s helping to drive up the dollar, which weighs on earnings and means fewer people will come here to buy our goods,” he said.

Thursday, 15 November 2018

Stocks fall but oil rises as “macro demand concerns likely overdone”

Markets fell on Wednesday.

The S&P 500 fell 0.8 percent and the STOXX Europe 600 plunged 2.2 percent. Earlier in Asia, the Nikkei 225 rose 0.2 percent but the Shanghai Composite fell 0.9 percent.

Oil prices stabilised though, with West Texas Intermediate crude rising 1 percent to end a 12-session losing streak.

Jeffrey Currie and the commodities team at Goldman Sachs wrote in a note that “the macro demand concerns from October were likely overdone”.

Nevertheless, Jameel Ahmad, global head of currency strategy & market research at FXTM, said that “traders are waking up to the significant threat that slowing global growth in 2019 will weaken demand for commodities like oil”.

While oil's gain provided some relief for stocks on Wednesday, the stock market is still experiencing “a continuation of the selling pressure that began in early October”, according to Robert Pavlik, chief investment strategist at SlateStone Wealth.

“We're still working through this corrective phase a little bit and I think that could take some time,” said Jeffrey Mills, co-chief investment strategist at PNC Financial Services Group.

Wednesday, 14 November 2018

Oil plunges, Goldman bear market indicator flashes red

Markets were mixed on Tuesday.

The S&P 500 fell 0.2 percent while the STOXX Europe 600 rose 0.7 percent. Earlier in Asia, the Nikkei 225 plunged 2.1 percent but the Shanghai Composite rose 0.9 percent.

Oil fell, with West Texas Intermediate crude plunging 7.1 percent.

“The topside optimism the markets experienced after getting through the US midterms relatively unscathed has quickly reverted back to concern over trade issues between the US and China and the affect that tariffs and protectionist policies have had on overall global growth,” said Rakuten Securities Australia in a note.

“The real struggle for equity prices now are the highly visible potential for policy errors,” said Eric Wiegand, senior portfolio manager at US Bank.

Bob Doll, Nuveen Asset Management's chief equity strategist and senior portfolio manager, noted that stocks have yet to successfully retest the October lows.

“I don't think we're going to see a new high this year,” he said. “We're going to bounce around with a lot of side-wise volatility.”

Meanwhile, Goldman Sach's bear market indicator is "flashing red". Goldman chief global equity strategist Peter Oppenheimer said that the indicator is at a level where historically, “a correction followed by a rally is more likely to be followed by a bear market than when these indicators are low”.

“We remain bearish, as investor positioning does not yet signal 'The Big Low' in asset markets,” said Michael Hartnett, BofAML's chief investment strategist, in a statement.

However, the November BofAML fund manager survey indicated some optimism, with cash balances falling from 5.1 percent of portfolios to 4.7 percent.

Tuesday, 13 November 2018

Markets fall, oil in record losing streak

Markets mostly fell on Monday.

The S&P 500 plunged 2.0 percent while the STOXX Europe 600 fell 1.0 percent. Asian markets had risen earlier in the day.

Oil fell on Monday even after Saudi Arabia said over the weekend that it would cut its oil production. West Texas Intermediate crude fell for the 11th consecutive session, its longest losing run on record.

Michael Schoonover, portfolio manager at Catalyst Funds, said that “we are seeing the inevitable repricing of stocks that were artificially boosted by flows into passive, low-fee products”.

Craig Callahan, president and founder of Icon Advisors, said oil’s bear market has weighed heavily on the market in general, but that has created buying opportunities for value investors. “I’m considering adding to my holdings in the energy sector,” he said.

Monday, 12 November 2018

“Inevitable” China recession to hit rest of world

Kenneth Rogoff, professor of economics and public policy at Harvard University and former chief economist of the International Monetary Fund, wrote last week that a growth recession in China is inevitable and that it is likely to have a major global impact.

“A recession in China, amplified by a financial crisis, would constitute the third leg of the debt supercycle that began in the US in 2008 and moved to Europe in 2010,” he wrote.

Rogoff added that “a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere”.

In the US, this could “cause debt service to crowd out needed expenditures in other areas”.

Dick Bove, chief financial strategist at Rafferty Capital Markets, also said last week that higher interest rates could cause a recession in the US, but suggested that it would be mainly due to the Federal Reserve's interest rate hikes.

However, Sri Kumar, president of Sri-Kumar Global Strategies, said that it is too late for the Fed to change course. “It is already baked in in terms of the future outlook of the economy,” he said.

“The Chinese developments with respect to debt, with respect to the trade war, are going to have a much bigger impact on 2019 than the Fed anticipates,“ he said.

Saturday, 10 November 2018

Stocks fall, oil in bear market

Markets fell on Friday.

The S&P 500 fell 0.9 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 1.1 percent.

“Though the mid-term elections are over, worries that the U.S.-China trade war will drag on for the long term are lingering,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Oil fell. West Texas Intermediate crude fell 1.7 percent, its ninth consecutive decline, leaving it 20.6 percent below its recent peak and in bear market territory.

“Oil being down could be a sign that the global economy is in a tough spot,” said Willie Delwiche, investment strategist at RW Baird.

And it is not just oil. Gasoline, copper and platinum have also been declining.

“When you get these signals, it's hard to see equities continue to move up on their own,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies.

Friday, 9 November 2018

Markets mixed as Fed leaves rates unchanged

Markets were mixed on Thursday.

The S&P 500 fell 0.3 percent while the STOXX Europe 600 rose 0.2 percent. Earlier in Asia, the NIkkei 225 surged 1.8 percent but the Shanghai Composite fell 0.2 percent.

The Federal Reserve left interest rates unchanged at its monetary policy meeting on Thursday.

Charlie Ripley, senior investment strategist at Allianz Investment Management, called the Fed meeting a “non-event”.

Meanwhile, Michael O’Rourke, chief market strategist at JonesTrading, said that the Wednesday rally “has the hallmarks of bear-market rally­­­ — a strong move on light volume thanks to a hollow catalyst”. “Other market headwinds will be reasserting themselves soon enough,” he said.

William Watts at MarketWatch suggested that the “smart money” is not buying into the rally in November.

Watts cited analyst Brian Reynolds of Canaccord Genuity as saying that the so-called smart index, which compares stock-market flows in the first half-hour of trade versus flows in the last half-hour, remains weak and indicates “a retest of the recent lows before stock prices fully regain their uptrend”.

Thursday, 8 November 2018

Markets rise after US elections leave Congress divided

Markets were mostly higher on Wednesday.

The S&P 500 surged 2.1 percent and the STOXX Europe 600 rose 1.1 percent but the Nikkei 225 fell 0.3 percent.

US stocks rose after midterm election results showed the Democratic party gaining control of the House of Representatives even as the Republican party strengthened its grip on the Senate, leaving a divided Congress.

Mark Decambre at MarketWatch looked at the ways that the election results may affect markets.

Wednesday, 7 November 2018

Markets mixed but “to head higher into early next year”

Markets were mixed on Tuesday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.3 percent.

Earlier in Asia, the Nikkei 225 jumped 1.1 percent but the Shanghai Composite fell 0.4 percent.

Some analysts see optimistic signals in the charts.

John Kosar, the chief market strategist at Asbury Research, said an increase of put option volume compared with call option volume is reversing from a level that indicates maximum bearishness to one that represents a more upbeat outlook for US stocks.

According to Kosar, this is one of the clearest signals that a bottom in the market has been achieved.

Jonas Elmerraji said that negative Octobers tend to be followed by big rallies in the months that followed, so last month's selloff “could actually set the stage for a path to new highs in the months ahead”.

Similarly, JP Morgan's head of global fixed income and U.S. equity technical strategy Jason Hunter said “this is a late-cycle correction and not a bear market” and is “confident that the market is going to head higher into early next year”.

Tuesday, 6 November 2018

Global stocks face bear market risk as Fed drains balance sheet

Markets were mixed on Monday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 plunged 1.5 percent.

“Investors face a wall of worry,” said Peter Bye, portfolio manager at UBS Asset Management, who noted “increasing evidence of pressure on tech leaders”.

Meanwhile, Richard Suttmeier wrote that the stock market will not rally for long with the Federal Reserve cutting its blance sheet.

“Between October 26 and November 2, the yield on the 10-year note rose from 3.06% to 3.224% as the Federal Reserve drained a massive $33 billion off its balance sheet,” he said. “Another $50 billion is scheduled to be the reduction each month through the year 2020. This risks a bear market for stocks around the globe.”

Monday, 5 November 2018

Hussman: October decline a mild warning shot

Last week, the S&P 500 rose 2.4 percent, rebounding after recent declines and sending it back into positive territory for 2018.

However, John Hussman does not think the worst is over. In his latest article, he wrote: “Let’s be clear. October’s market decline was a rather mild warning shot.”

“The advance of recent years has produced a toxic combination of extreme valuations in every conventional asset class, coupled with a breathtaking mountain of low-grade debt issued by Wall Street...to satisfy the yield-seeking speculative demand of investors,” he said.

For US stocks in particular, Hussman said that valuations based on “our Margin-Adjusted CAPE, which is substantially better correlated with actual subsequent market returns than Robert Shiller’s raw cyclically-adjusted P/E...have retreated only to the level they reached in November 2017, matched in history only by the 3 weeks surrounding the 1929 market peak”.

While valuations are informative about long-term returns but less so about short term trends, Hussman also noted that market internals, a measure of investor inclination towards speculation or risk-aversion, “shifted to a negative condition on February 2, and have remained unfavorable since then”.

“Presently, neither valuations nor internals are favorable, and that is what opens up a trap door under the market,” he said.

“Over the completion of the current market cycle, I fully expect the S&P 500 to lose close to two-thirds of its value from the recent peak,” he warned.

Saturday, 3 November 2018

US stocks fall as trade concerns return

Markets were mixed on Friday.

The Nikkei 225 soared 2.6 percent and the STOXX Europe 600 rose 0.3 percent but the S&P 500 fell 0.6 percent.

US stocks fell after President Donald Trump's top economic adviser, Larry Kudlow, said the US and China were a long way from reaching a trade deal.

“If the two largest economies in the world can’t agree on trade policy, that’s not great for markets,” said Thomas Hainlin, global investment strategist with US Bank.

A report on Friday showed that the US economy added 250,000 new jobs in October.

“This is a great jobs report,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

The jobs report also showed that year-over-year wage gains rose to 3.1 percent from 2.8 percent, which could fuel inflation concerns.

The US 10-year Treasury yield rose to 3.22 percent after the report.

Friday, 2 November 2018

US stocks jump as manufacturing index falls

Markets were mostly higher on Thursday.

The S&P 500 jumped 1.1 percent and the STOXX Europe 600 rose 0.4 percent. However, the Nikkei 225 fell 1.1 percent.

Jeff Carbone, co-founder of Cornerstone Wealth Group, said that “we’re seeing a bottoming process”.

“White House economic adviser Kudlow said that more tariffs on China are not ‘set in stone’, which may have boosted somewhat further market sentiment,” wrote Charalambos Pissouros, senior market analyst at brokerage and investment firm JFD Brokers, in a note.

A report in the US on Thursday showed that the ISM manufacturing index fell to a six-month low of 57.7 in October from 59.8 in September.

CNBC's Jim Cramer thinks that a slowdown in manufacturing growth could lead the Federal Reserve to pause its interest rate hikes.

“I've been saying that we need to see the Fed or the president blink in their respective battles against inflation and China. Neither one blinked today, but ... we got a glimpse of how things could go right and it sent stocks flying,” said Cramer.

Thursday, 1 November 2018

“Massively oversold” stocks rebound but trend seen “terrible”

Markets rose sharply on Wednesday.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 jumped 1.7 percent and the Nikkei 225 surged 2.2 percent.

Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company, said that “we’re back to looking at the fundamentals, which are very attractive”.

Tom Essaye, president of the Sevens Report, said that the “shock of last week’s earnings disappointment is behind us”.

Tom Lee, managing partner at Fundstrat Global Advisors, said that “we are massively oversold” and that “we would be aggressive buyers”.

Martin Fridson, chief investment officer of Lehmann Livian Fridson Advisors, noted that the high-yield bond market is not showing signs of cracking.

“Perhaps the high-yield market did not pick up recessionary vibes sooner than the stock market did because there were no such vibes,” said Fridson.

However, Jeff deGraaf, chairman of research firm Renaissance Macro Research, called the stock market rebound “uninspiring”.

“These are bounces in terrible trends, and are high probability failures in the near-term, but whether days or weeks is hard to say,” he said.

Wednesday, 31 October 2018

Markets rebound but still “going into a bear market”

Markets were mostly higher on Tuesday.

The S&P 500 surged 1.6 percent and the Nikkei 225 jumped 1.4 percent while the STOXX Europe 600 was flat.

Stocks may not be out of the woods though.

“We are seeing an oversold technical rally before we head even lower,” said Sam Stovall, chief investment strategist at CFRA.

“Unfortunately, I don’t foresee this volatility easing too much over the next few weeks,” said Kristina Hooper, chief global market strategist at Invesco.

“Honestly, I don’t see the low being put in yet and I think we’re going to go into a bear market,” prominent market technician Ralph Acampora told MarketWatch.

In contrast, Hayes Martin, president of advisory firm Market Extremes, said that there is “a tremendous surge in pessimism” and sees “a powerful trading bounce” soon.

Tuesday, 30 October 2018

US stocks reverse gains, “breakdown still intact”

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.9 perccent but the S&P 500 reversed early gains to close 0.7 percent lower. Asian stocks were mostly lower, with the Shanghai Composite in particular plunging 2.2 percent.

A report that President Donald Trump’s administration is prepared to announce tariffs on remaining Chinese imports if talks next month between Trump and Xi Jinping do not yield results renewed concerns over the US-China trade war.

Many analysts see further declines ahead.

Jesse Colombo, economic analyst and registered investment adviser at Clarity Financial, said: “Last week’s important technical breakdown is still intact.”

Stephen Auth, chief investment officer at Federated, said “it’s hard to see a sustained rally for the next few weeks”.

However, some analysts see a renewal of the stock market rally after the near-term decline.

Tony Dwyer, equity analyst at Canaccord Genuity, said that “our positive fundamental thesis...remains in place”.

However, Dwyer does not expect a V-shaped recovery, noting that with no imminent catalyst to push stocks up, “the bottoming process is going to feel awful”.

Monday, 29 October 2018

Nearly half of S&P 500 in bear market

Last week, the S&P 500 fell 8.8 percent. That left it in negative territory for 2018.

CNBC reported on Friday that more than 43 percent of the S&P 500 stocks were in a bear market, having fallen at least 20 percent from 52-week highs.

The report cited Chantico Global CEO Gina Sanchez as saying that a flight to value stocks could be the best way to weather any more turbulence.

“Value has re-established itself finally as a leader in the market, and it's been a very long time since we've seen that, and I actually think that this run has some legs,” said Sanchez.

Not everyone agrees.

John Tobey wrote in Forbes: “This is a bear market.”

He said that “there are now doubts and uncertainties that are causing analysts and investors to rethink fundamental outlooks” and that “value investors and bargain hunters will not step in and buy just because a stock has fallen”.

Saturday, 27 October 2018

Markets resume fall, recovery “will take some time”

Markets fell on Friday.

The S&P 500 plunged 1.7 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.4 percent.

Analysts at Singapore's OCBC Bank said in a morning note that “investors are likely to be still licking their wounds after the recent sell-off so any rebound is likely to be muted barring a fresh catalyst”.

A positive catalyst, however, appears elusive at the moment.

“All the macro issues, from higher interest rates to slowing growth in China are giving us a half-glass-empty situation regarding 2019 earnings,” said Alec Young, managing director of global markets research at FTSE Russell.

Still, some analysts remain undaunted.

“The market’s mood swings have been unsettling, but the underlying conditions that triggered the rout are unlikely to shatter the economic or earnings cycles. We think this will all sort out, but it will take some time,” said Kelly Bogdanova, vice president of portfolio advisory group at RBC Wealth Management.

Friday, 26 October 2018

Markets rebound as some see selling “overdone” but beware “rolling bear market”

Markets mostly rebounded on Thursday.

The S&P 500 rose 1.2 percent and the STOXX Europe 600 rose 0.5 percent.

Earlier, the Nikkei 225 plunged 3.7 percent following the US stock market's rout on Wednesday.

The European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday and reaffirmed its plan to end its asset-buying programme in December provided data shows inflation remains on track to eventually meet its target.

Some analysts remain hopeful for further gains for stocks.

“From a valuation standpoint, the market is very affordable after Wednesday’s declines, and the economic fundamentals remain really solid,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

Tom Essaye, president of the Sevens Report, wrote in a note that “at this point the selling is overdone”.

Michael Brush wrote in his MarketWatch column that “it's too late” to sell.

“Recessions are what normally kill bull markets — and a recession is not likely for at least a year or more,” he said. “So the current sell-off gives you a chance to buy stocks at better valuations.”

Other analysts think the market is likely to be rocked by more waves of selling before reaching a bottom.

“We're a ways from a bounce,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

Indeed, Michael Wilson, Morgan Stanley’s chief US equity strategist, said that current conditions represent a “rolling bear market”. “Risk-reward remains unattractive for us,” he said.

Thursday, 25 October 2018

S&P 500 plunge into red for year

US stocks fell sharply on Wednesday.

The S&P 500 plunged 3.1 percent, its sixth consecutive decline and leaving it in negative territory for 2018. The Dow Jones Industrial Average tumbled 2.4 percent and the Nasdaq Composite sank 4.4 percent.

Elsewhere, the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.6 percent.

According to Craig Johnson, chief market technician at Piper Jaffray, the US stock market could see more weakness ahead.

“I think it's going to be another 5 to 10 percent lower from here and it's probably going to take about 14 to 16 weeks to work out itself out,“ said Johnson.

“The market selloff has taken on a life of its own and selling is begetting more selling, but so far we haven’t seen a capitulation moment, so I’m taking a more cautious approach,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“I think profit growth has topped out and will definitively slow going forward, contributing to the next recession, likely early in the next decade,” Mark Zandi, chief economist at Moody’s Analytics.

However, some analysts remain optimistic.

“Good news in my mind is valuations have become much more attractive here with the S&P 500 trading at about 15 times next year’s estimates,” said Art Hogan, chief market strategist at B. Riley FBR Inc.

Wednesday, 24 October 2018

Markets fall amid signs of “cyclical top”

Markets fell on Tuesday.

The S&P 500 closed 0.6 percent lower despite trimming earlier sharp losses, its fifth consecutive decline.

The STOXX Europe 600 plunged 1.6 percent after the European Commission asked the Italian government to rework its budget.

Earlier in Asia, the Nikkei 225 plunged 2.7 percent while the Shanghai Composite sank 2.3 percent.

Caterpillar and 3M contributed to the early gloom in the US by providing disappointing earnings reports ahead of Tuesday's opening bell.

“It’s industrials like Caterpillar that struggle when you’re at a cyclical top,” said Mike O’Rourke, chief market strategist at JonesTrading.

Brad McMillan, chief investment officer at Commonwealth Financial Network, noted that “almost all the news we see every day is bad”, adding that the “surprise is not that markets are reacting; it is that markets did not react sooner and that they have not reacted harder”.

Similarly, Sam Stovall, the chief investment strategist at CFRA, said that there have been problems with stocks in all of the economically sensitive sectors and that analysts have been slow to react. “They've maintained their optimistic earnings forecasts.”

Jim Paulsen, chief investment strategist at Leuthold Group said that companies are reporting weakening sales and crimping margins. “If those are true then the numbers on 2019 earnings estimates are wrong.”

Paulsen added that if investors “suddenly see the valuation case going away, that certainly is concerning”.

Tuesday, 23 October 2018

China stocks soar but US correction may not be done yet

Markets were mostly lower on Monday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.4 percent.

US and European investors largely ignored gains earlier in Asia. The Shanghai Composite soared 4.1 percent while the Nikkei 225 rose 0.4 percent.

In Europe, investors remained focused on Italy after Moody’s Investors Service downgraded Italy’s sovereign debt rating by one notch to Baa3 late on Friday.

In the US, Michael Wilson, an equity strategist at Morgan Stanley, warned in a report that the recent rebound “was a dead cat bounce”. He added: “We don’t think the correction is done yet”.

In contrast, JC O’Hara, chief market technician at MKM Partners, believes that the bulk of the selling is over. “A close above 2,825 will nullify the bear case,” he said.

However, even the usually-bullish Wharton School finance professor Jeremy Siegel has become less enthusiastic about stocks.

“There are challenges that we face now,” he told CNBC on Monday. “I'm looking flattish” for 2019.

Monday, 22 October 2018

US corporate results show “troubling signs” as global economic outlook downgraded

A MarketWatch article has noted “troubling signs” in the latest US corporate earnings reports.

While about three-quarters of the 140 companies that have reported third-quarter earnings beat Wall Street’s estimates for net profit, Bespoke Investment Group noted that “just 58% of companies have beaten revenue estimates, which would be the weakest reading seen in six quarters”.

“In aggregate, companies are reporting sales that are 0.5% above estimates, which is below the five-year average,” reported John Butters, senior earnings analyst at FactSet.

Meanwhile, Reuters polls of more than 500 economists taken this month has shown that the outlook for 18 of 44 economies polled have been downgraded. The outlook for 23 were unchanged while three were marginally upgraded.

“A U.S. Federal Reserve that is raising interest rates to prevent the U.S. economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying,” wrote Janet Henry, global chief economist at HSBC.

Neil Shearing, group chief economist at Capital Economics, said that the global trade war “would inflict lasting damage to growth and cause a permanent loss of output”.

“The dominant downside risk to the global outlook remains the Trump Administration’s attempt to rebalance trade with China through tariff policy,” said Jean-Fran├žois Perrault, chief economist at Scotiabank.

Saturday, 20 October 2018

US market flat, China surges but bull market may have “peaked”

Markets were mixed on Friday.

The S&P 500 was flat while the STOXX Europe 600 dipped 0.1 percent.

Earlier in Asia, the Nikkei 225 fell 0.6 percent but the Shanghai Composite surged 2.6 percent.

The rebound in the Chinese stock market came just a day after it hit a four-year low, when it closed 30 percent below its 52-week high.

The bearish trend in China does not bode well for the US stock market. According to a CNBC article, US stocks are more often weaker when the declines in Chinese stocks are large.

“Everyone accepts that earnings growth will slow next year and that interest rates are going to rise,” said Alec Young, managing director of global markets research at FTSE Russell. “I think there’s a chance that the bull market has peaked.”

Friday, 19 October 2018

Markets tumble but analysts look for year-end rally

Markets fell on Thursday.

The S&P 500 tumbled 1.4 percent and the STOXX Europe 600 fell 0.5 percent. Earlier in Asia, the Nikkei 225 fell 0.8 percent and the Shanghai Composite plunged 2.9 percent.

While many analysts see continued volatility ahead, some remain sanguine for the longer term.

Bruce Bittles, chief investment strategist at Baird, said that “so far this looks to be a correction that could carry further, setting up the possibility for a year-end rally later on”.

Ryan Detrick at LPL Research said: “Importantly, markets can be jittery ahead of major events like elections. Once the uncertainty is resolved in November, solid fundamentals and strong seasonals could take over for a nice year-end rally.”

Analysts at JP Morgan led by Dubravko Lakos-Bujas wrote in a note that an earnings-related pause in corporate stock buybacks is contributing to the stock market’s October selloff. “With the largest one-way buyer returning in size to the market post earnings, we expect liquidity to improve and equities to move higher,” they wrote.

Other analysts are less optimistic.

Steve Grasso, director of institutional sales at Stuart Frankel, said that if growth stocks continue to fall, “that's the end of the bull market right there”.

Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments, said: “Cash is still in the running to be king, if not this year, certainly next.”

Thursday, 18 October 2018

Stocks may see another sell-off but “bonds are the bubble”

Markets were mixed on Wednesday.

The Nikkei 225 jumped 1.3 percent following the surge in US stocks on Tuesday but later on Wednesday, the STOXX Europe 600 fell 0.4 percent and the S&P 500 closed little-changed.

Jeff Carbone, co-founder of asset management firm Cornerstone Wealth Group, said that “when you look at the fundamentals of the economy and the market, we expect the market to ultimately move upward”.

In the meantime, though, many analysts think that stocks could see another sell-off.

“This is the second decline of this year of 5 percent or more and two out of every time we had more than one decline in a year, the second decline was sharper than the first,” said Sam Stovall, chief investment officer at CFRA.

“I don't think we're going to hit any new highs this year, and I do expect a lot of turbulence,” said Kristina Hooper, chief global market strategist at Invesco.

However, Leon Cooperman, CEO of Omega Advisors, said that the US economy is, “if anything, too strong”, and that the “conditions that normally lead to a big decline just aren't present”.

“My world is cash and stocks. I think bonds are the bubble, not stocks,” Cooperman told CNBC.

Wednesday, 17 October 2018

Markets jump but “strongest gains behind us”

Markets rose sharply on Tuesday.

The S&P 500 soared 2.2 percent, the STOXX Europe 600 surged 1.6 percent and the Nikkei 225 jumped 1.2 percent.

Jim Smigiel, chief investment officer of absolute return strategies at SEI, said that “the strongest gains in equity markets are behind us” and that “chances of a surprise on the upside are lower than on the downside”.

Howard Gold wrote in MarketWatch that the recent sell-off is just another pullback or correction but warned that if it turns into a 10 percent decline, “this nearly decade-old bull market is really in trouble”.

Meanwhile, Urban Carmel, the writer behind the Fat Pitch blog and ex-president of UBS Securities in Asia, thinks that a “topping pattern” is under way for the S&P 500 and that the recent selloff has not entirely run its course.

However, Carmel also said that a bear market is “the least likely outcome”.

Tuesday, 16 October 2018

Markets mixed as pullback seen having further to go

Markets were mixed on Monday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 plunged 1.9 percent.

While many analysts remain sanguine, some think that the current stock markett pullback has further to go.

“More time and downside tests may be needed for a firm market low,” said Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch.

“We find it unlikely there will be a V bottom given the sharpness and breadth of the correction,” said Tony Dwyer, chief market strategist at Canaccord Genuity.

Michael Santoli at CNBC said that “the pain trade is to the downside — or, perhaps most diabolically, up first and then down harder”.

Santoli quoted Jeff deGraaf of Renaissance Macro Research as saying that “the playbook would be to see equities bounce further, challenge a new high (if not make one) before puking again”.

Monday, 15 October 2018

US stock market trend “likely to remain up”

The S&P 500 fell 4.1 percent last week, its worst weekly performances since March.

Despite the sharp sell-off, some analysts remain sanguine.

“Investors shouldn't panic,” said Christopher Smart, head of macroeconomic and geopolitical research at Barings. He said that the latest sell-off “has the feel of a temporary correction”.

Analysts at Amundi said that the “bear checklist is not yet flashing red”.

Shane Olivier, head of investment strategy at AMP Capital, said: “A US recession still looks a long way off and this in turn suggests that the trend in earnings and hence share markets is likely to remain up beyond the near term pull back.”

Ned Davis Research's chief US strategist Ed Clissold said that strong quarterly earnings and guidance should help support the market.

“We still think we can get a year-end rally once we get through this weakness here,” he said.

Other analysts agree that earnings will be key.

“There's a credible possibility the biggest cause of the near-term jitters is fear of where guidance goes in the fourth quarter,” said Art Hogan, chief market strategist at B. Riley FBR.

David Lefkowitz, senior Americas equity strategist at UBS Global Wealth Management's Chief Investment Office, said there could be a hit to earnings from the trade tariffs which could be causing a “higher-than-normal degree of uncertainty”.

However, he added: “If we do see a little bit of a normal decay in the earnings growth estimates, the market should be able to digest that.”