Wednesday, 31 January 2018

Markets fall but pullback a “buying opportunity”

Markets fell on Tuesday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.7 percent.

“Concerns are starting to enter the market that inflation could be catching up and higher interest rates could pour cold water on the bull run,” said Jasper Lawler, head of research at London Capital Group, in a note.

Other analysts remain sanguine.

“Despite the hiccup in the market, the bigger picture remains positive: The economy is finally growing faster than in the previous nine years, and businesses, especially job-creating small businesses, are doing well,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

Joshua Mahony, market analyst at IG, said that with Treasuries “selling off throughout the beginning of 2018, there is reason to believe that market confidence will not be gone for long, as investors shift away from bonds amid improved economic and corporate performance”.

Indeed, while some analysts attribute the market declines to a fear of rising interest rates, Tom Lee, co-founder and head of research Fundstrat Global Advisors, said that “it's good for rates to go up because it creates reflation expectations which is good for nominal growth”.

Oppenheimer technical analyst Ari Wald expects only a brief pullback of about 3 to 5 percent and concluded: “We think the assumption is the bull market is intact and the pullbacks are a buying opportunity.”

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