Monday, 6 August 2018

US economy “chugging along” but stock market risks “are elevated”

Markets were mixed last week. The S&P 500 rose 0.8 percent for a fifth consecutive weekly gain but the STOXX Europe 600 fell 0.7 percent to end a run of four consecutive weekly gains.

The US stock market shrugged off a weaker-than-expected employment report on Friday. July's nonfarm payrolls report showed that 157,000 jobs were created compared to an expected 195,000.

“The latest jobs reports means that the economy is chugging along, we are still adding jobs this late in the cycle while we had double-digit revenue and earnings growth,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Antonelli said that the risk from trade wars has been priced in, adding that “if we get some kind of resolution with China, then markets will rip higher”.

Indeed, some think the S&P 500 will hit a new all-time high this week.

However, Michael Brush thinks “risks are elevated”.

Brush said that “the elevated mood of stock investors right now is not a great sign” while “market internals look sick” and valuations are “rich”.

“This isn’t a time to put new money into stocks, have dubious trades on, or own stocks on margin,” he warned. “There may be trouble ahead.”

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