After sharp falls, stocks may still have more downside

Markets fell sharply last week as the COVID-19 coronavirus outbreak expanded globally.

The S&P 500 plunged 11.5 percent last week, putting it in correction territory.

While some investors may be tempted to buy stocks after the decline, BK Asset Management’s managing director of FX strategy Boris Schlossberg said that buying the dip could get very nasty for investors.

“If you have a couple of failed buy-the-dip situations going forward this year, it’s going to really create a very sour sentiment and you’re going to have much steeper declines than people believe,” he said.

Schlossberg added that the drop in earnings estimates could be “much worse than people think.”

Craig Johnson, senior technical research analyst at Piper Sandler, said that while he thinks the secular bull market is intact, “market internals have gotten weaker, and we continue to see some of our proprietary market timing gauges flip into sell positions, so this can be a little bit more downside that’s going to have to get played out”.

Similarly, Wharton School professor Jeremy Siegel said that the coronavirus outbreak is “a very severe one-year shock” but added that the subsequent bounce back “could be extremely rigorous”.

Even more optimistic is Thomas Lee, founder of Fundstrat Global Advisors. Lee said in a research report on Friday that “markets are bottoming this week”.

Both Siegel and Lee think that a Federal Reserve rate cut could help markets but Paul R La Monica at CNN thinks it will have little impact on the economy.

He wrote last week that “rate cuts, tax cuts and other stimulus won't stop a virus and the ultimate economic impact it will have”.

“There is all kinds of evidence on epidemics to suggest that we will get through this. But no amount of monetary or fiscal stimulus will have any effect whatsoever,” KC Mathews, chief investment officer of UMB Bank, was quoted as saying.

Markets fall, declines “most probably not over yet”

Markets fell on Friday.

The S&P 500 fell 0.8 percent and the STOXX Europe 600 tumbled 3.5 percent.

Earlier in Asia, both the Shanghai Composite and Nikkei 225 plunged 3.7 percent.

Analysts at UniCredit Bank said that with no sign that the COVID-19 outbreak is levelling off, the decline in markets “is most probably not over yet”.

US stocks managed to recover partially from earlier heavy losses after Federal Reserve Chairman Jerome Powell said on Friday that the central bank is “closely monitoring developments and their implications for the economic outlook”.

Indeed, some analysts see the likelihood of a rate cut from the Fed soon.

“It’s definitely a signal of a March cut,” said Julia Coronado, a former Fed staffer and now president of MacroPolicy Perspectives.

Bank of America sees a half percentage point cut in March “to stem the panic in markets and support economic sentiment.”

Markets plunge, “a miracle if we avoid a recession”

Markets fell sharply on Thursday.

The S&P 500 plunged 4.4 percent, the STOXX Europe 600 tumbled 3.8 percent and the Nikkei 225 sank 2.1 percent.

David Madden, market analyst at CMC Markets UK, wrote in a note that the number of confirmed cases of COVID-19 “is on the rise, and so is the number of countries that have infections”. This could reduce economic activity “as lockdowns will disrupt the business world”.

MUFG chief economist, Chris Rupkey said that “it will be a miracle if we avoid a recession”.

Markets dragged down as COVID-19 continues to spread

Markets were mostly lower on Wednesday.

The S&P 500 fell 0.4 percent and the Nikkei 225 fell 0.8 percent. The STOXX Europe 600 ended flat.

The COVID-19 outbreak dominated concerns on Wednesday as cases continued to rise outside of China.

“We’ll see a second drop in the equity markets once the number of infected in these countries with single-digit infections start bumping up after the incubation period of 14 days,” wrote Dec Mullarkey, a managing director of investment strategy at SLC Management, in a note.

“Investors have largely been caught off-guard by the serious and far-reaching economic consequence of the coronavirus,” said Nigel Green, founder and chief executive of the deVere Group, a financial services and advisory company.

Markets tumble, El-Erian says don't buy the dip

Markets fell sharply for a second day on Tuesday.

The S&P 500 plunged 3.0 percent, the STOXX Europe 600 fell 1.8 percent and the Nikkei 225 sank 3.3 percent.

Markets fell as the number of worldwide cases of COVID-19 rose to 80,238 with at least 2,700 deaths.

Becky Liu, head of China macro strategy at Standard Chartered Bank, said that China’s first quarter GDP is expected to deteriorate “very materially” to only 2.8 percent.

Federal Reserve Vice Chairman Richard Clarida said on Tuesday that while it was still too soon to tell what the impact on the US economy might be, the central bank will “respond accordingly.”

Indeed, many economists think that the Federal Reserve will be forced to cut interest rates soon.

“Sitting still would be seen as being tone-deaf,” said Carl Tannenbaum, chief economist at Northern Trust.

Others, though, point out that a rate cut may not be the answer as it primarily addresses demand shock.

“Because of its genesis in China, coronavirus is both a demand and a supply shock to the global economy,” said Brian Nick, chief investment strategist at Nuveen, in a Tuesday note.

Erik Nielsen, group chief economist at UniCredit Bank, said that markets have reacted in “a rather casual, and inconsistent, way” because of “apparent confusion about the nature of demand versus supply shocks and the (limited) effectiveness of policy stimulus in these circumstances”.

Indeed, Allianz chief economic advisor Mohamed El-Erian told CNBC that “this is different” and “I would continue to resist, as hard as it is, to simply buy the dip”.

Markets plunge as COVID-19 spreads

Markets plunged on Monday.

The S&P 500 lost 3.4 percent and the STOXX Europe 600 lost 3.8 percent.

In Asia, the Shanghai Composite lost just 0.2 percent but the KOSPI plunged 3.9 percent.

Markets fell as the spread of the COVID-19 virus beyond China led to worries that the outbreak will hit economies harder than previously expected.

“Markets were betting that the coronavirus was going to be contained in China, and that we would see some V-shaped recovery. But as headlines on the virus spread have come out, there’s uncertainty how far this will go,” said Keith Lerner, chief market strategist for SunTrust Advisory Services.

COVID-19 looking more like a pandemic

Markets fell last week, with the S&P 500 falling 1.3 percent after two consecutive weeks of gains.

The spread of the COVID-19 epidemic from China to the rest of the world was a driver of the falls as the outbreak looks increasingly like a pandemic.

As of Sunday, there were 602 cases in South Korea, the most outside China. In response, the country has been put on its highest alert level for the disease.

Iran has reported 28 cases, including 5 deaths, and cases with links to Iran have already turned up in Canada and Lebanon.

Outside Asia, Italy has the largest number of cases at 132, with two deaths.

“When several countries have widespread transmission, then spillover to other countries is inevitable,” said Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases.

“I don’t think the answer is shutting down the world to stop this virus. It’s already out,” said Michael Osterholm, director of the University of Minnesota’s Center for Infectious Disease Research and Policy. “I think we have to expect there are going to be many locations around the world that will experience what China is experiencing.”

Markets fall as COVID-19 leads to “increase in recession probabilities”

Markets were mostly lower on Friday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.4 percent.

The Shanghai Composite rose 0.3 percent amid indications that the spread of the COVID-19 virus in China may be slowing but concerns about its spread elsewhere and the likely impact on the global economy kept markets down.

“The coronavirus outbreak contains a significant likelihood of impact to the global economy and the potential to become a black-swan type event,” warned Bank of America Global Research rates strategist Bruno Braizinha, in a note on Friday. “The uncertainty has been reflected in the market and has naturally led to an increase in recession probabilities.”

“Nobody has a really good handle on just what the impact is on supply chains,” said Luke Tilley, chief economist of Wilmington Trust. “It’s understandable that some investors are moving to a risk-off mode.”

Markets mixed as People's Bank of China cuts interest rates

Markets were mixed on Thursday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.9 percent.

Earlier in Asia, though, the Nikkei 225 rose 0.3 percent and the Shanghai Composite jumped 1.8 percent after the People's Bank of China cut interest rates again. The one-year loan prime rate was reduced from 4.15 percent to 4.05 percent and the five-year rate was reduced from 4.80 percent to 4.75 percent.

Concerns over the COVID-19 outbreak returned after South Korea reported its first death from the disease amid a jump of 53 new confirmed cases.

“I think investor are starting to question the idea that the economic impact of the epidemic is going to be only transitory,” said Adam Phillips, director of portfolio strategy at EP Wealth Advisors.

Goldman Sachs’ chief global equity strategist Peter Oppenheimer said that “the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high”.

Markets rise as COVID-19 outbreak seen ebbing

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.5 percent to end at another record high, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.9 percent. However, the Shanghai Composite fell 0.3 percent.

Fears over the COVID-19 outbreak took a back seat on Wednesday as Chinese officials said the rate of new cases has begun to ebb.

Still, some remain cautious.

“The global economic outlook remains mired in uncertainty at this point in time, with coronavirus-related warnings emanating out of Apple and corporate America,” said Han Tan, market analyst at FXTM, in a research report.

However, Mark DeCambre at MarketWatch noted that everything is rising, not just stocks. Gold, the US dollar and bond-pegged ETFs have also been rising.

“It’s almost as if investors putting money to work this year can’t lose, and that setup has caused some confusion among strategists, investors and analysts,” he wrote.

Markets fall as Apple warning brings back coronavirus concerns

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 1.4 percent.

Markets fell after Apple warned that it will not meet its second-quarter financial guidance because the COVID-19 outbreak in China is affecting its suppliers’ production.

“We haven’t really heard of any peak levels, that’s what’s beginning to sink into investors’ minds,” said Peter Cardillo, chief market strategist at Spartan Capital Securities, of the economic impact of the coronavirus outbreak.

“It took something like a warning from Apple that investors weren’t willing to ignore,” said Connor Campbell, analyst at financial spread better Spreadex.

Markets mixed as Japan faces recession while China gets monetary support

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite surged 2.2 percent but the Nikkei 225 fell 0.6 percent. The US stock market was closed for a holiday.

Japanese stocks fell after the government announced that the economy contracted at a 6.3 percent annualised rate in the last quarter.

ING said in a report that Japanese consumer spending “slumped following the tax hike in the fourth quarter of 2019” and “will now struggle to do anything except contract further in the first quarter as the impact of Covid-19 weighs on consumer sentiment”.

ING added that “further government spending ... will not stop what started off as a technical downturn from evolving into a full-blown recession”.

The death toll in China from the COVID-19 epidemic jumped to 1,868 on Tuesday after 98 more people died but on Monday, Chinese stocks gained from news that the People’s Bank of China is cutting its one-year medium-term lending rate from 3.25 percent to 3.15 percent as well as injecting liquidity through securities purchases.

Stocks shrug off COVID-19 outbreak fears even as Japanese economy shrinks

The death toll from the COVID-19 epidemic in China jumped to 1,770 after 105 more people died, the National Health Commission said on Monday.

Outside mainland China, Taiwan reported the island's first death from the coronavirus, bringing the number of deaths outside the mainland to five.

Despite the COVID-19 crisis, stocks around the world have been rising. Julia Horowitz at CNN reported that the S&P 500 rose 1.6 percent last week, the STOXX Europe 600 rose nearly 1.5 percent and even the Shanghai Composite managed to rise 1.4 percent.

"Why do stocks continue to rise in the face of anxiety about the coronavirus? Ongoing support from the Federal Reserve, a stable outlook for corporate earnings and fear of missing out may have something to do with it," Horowitz suggested.

"I think the stock market is just under this belief that no matter what comes our way the Fed is going to save us," Peter Boockvar, chief investment officer at Bleakley Advisory Group, was quoted as saying.

Still, things could get worse.

At least it appears to be getting worse in Japan. The number of infections there has more than doubled since Thursday from 29 to 59 on Sunday night. And that is not counting the 355 cases on the Diamond Princess cruise liner off Yokohama.

Health Minister Katsunobu Kato on Sunday said that several cases have not been traceable to the source of infection. He added: "We are now in a new phase and must anticipate a spread of infections."

The coronavirus outbreak will add to problems for Japan's economy, which reportedly shrank at an annualised rate of 6.3 percent in the October-December quarter, the fastest rate of decline in six years.

Markets mixed as coronavirus death toll rises again

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent to another all-time high but the STOXX Europe 600 fell 0.1 percent.

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

US economic data on Friday were mixed. The University of Michigan consumer sentiment index rose to 100.9 in February from 99.8 last month but industrial production fell 0.3 percent in January, the fourth decline in the past five months.

Meanwhile, the China coronavirus, now officially known as COVID-19, claimed another 121 lives and 5,090 new cases, according to the latest report from China.

Rob Subbaraman, head of global macro research at Nomura, sees a possibly deep downturn in the economy. “The economic data we start getting for February could be a lot worse than people think,” he said.

Indeed, Singapore, with one of the highest reported number of confirmed cases outside China, sees a possible recession.

And Japan, which has reported fewer cases, may actually be experiencing a “stealth outbreak”, with new cases being found to have no connection with China, suggesting transmission within Japan's borders.

Markets fall as coronavirus cases spike

Markets mostly fell on Thursday.

The S&P 500 fell 0.2 percent and the Shanghai Composite fell 0.7 percent while the STOXX Europe 600 was flat.

Markets fell as the coronavirus outbreak in China continued to wreak havoc in the country, with 254 new deaths and a spike in new cases of 15,152, although the latter was partly due to a change in method in counting infections.

Meanwhile, Vietnam reported that a commune of 10,000 residents northwest of the capital Hanoi was put in lockdown due to a cluster of cases there.

Stocks hit new highs as Powell talks of more debt-buying

Markets rose on Wednesday.

The S&P 500 rose 0.7 percent to a new all-time high, the STOXX Europe 600 rose 0.6 percent to also hit a record high and the Shanghai Composite jumped 1.6 percent.

China reported 2,015 new cases of coronavirus infection and 97 deaths on Wednesday.

However, Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said in a note that the “market seems to be pricing in a virus that will be at least somewhat contained in the nearer term”.

The market could also be counting on the Federal Reserve to help maintain the rally.

In testimony before the Senate Banking Committee on Wednesday, Fed Chairman Jerome Powell the central bank would fight the next economic downturn by buying large amounts of government debt to drive down long-term interest rates.

Stock markets hit record highs, coronavirus hit on Chinese economy “will be limited”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.9 percent to also hit a record high, and the Shanghai Composite rose 0.4 percent.

Even as the death toll from China's coronavirus outbeak continues to rise, Mike Loewengart, vice president of investment strategy at E-Trade, said that some investors “brave enough are stepping back into the market as they feel the selloff was overdone at the start of the situation”.

Indeed, Shane Oliver, head of investment strategy and chief economist at AMP Capital Investor, said that based on available data, “the hit to the Chinese economy in the current quarter will be limited”.

In contrast, Richard Grace, senior currency strategist and head of international economics at Commonwealth Bank of Australia, said that the “risk of a larger downgrade in Chinese GDP growth over Q1 20 and 2020 as a whole is gaining momentum” and therefore, “the risk of a larger downgrade to global growth is clear”.

Markets rise but spread of coronavirus outside China could yet accelerate

Markets mostly rose on Monday.

The S&P 500 rose 0.7 percent and the STOXX Europe 600 rose 0.1 percent but the Nikkei 225 fell 0.6 percent.

The Shanghai Composite rose 0.5 percent as factories in China reopened, although many are expected to remain shut for a while more as a result of the coronavirus outbreak.

“Earnings seem to be the story,” said Sahak Manuelian, managing director of equity trading at Wedbush Securities, noting that they have been “fairly strong” in the US.

Still, with the World Health Organization warning on Monday that the spread of the China coronavirus to people who have not visited China could be “the spark that becomes a bigger fire”, coronavirus fears “remain at the top of investors’ minds”, said Arnim Holzer, macro strategist for EAB Investment Group.

Indeed, Asian economies in particular are vulnerable to supply chain disruptions in China.

“Most Asian economies import 20-30% of their intermediate goods from China,” wrote analysts at Singapore’s DBS Group Research.

Coronavirus death toll surges but so do markets on hope Fed will “save the day”

The number of deaths from China's coronavirus outbreak surged past 900 in mainland China on Monday while the number of confirmed cases rose to over 39,800.

So far, though, global markets have been able to shrug off fears over the impact of the outbreak, with the S&P 500 for example jumping 3.2 percent last week.

William Watts at MarketWatch said that the resilience of the market suggests that “investor faith in the central bank backstop looks pretty solid”.

“I think investors have learned over a very long time that central banks and the Fed, in particular, will be there to save the day,” Michael Arone, chief investment strategist at State Street Global Advisors, was quoted as saying.

However, Watts cited a warning by Pavilion Global Markets analysts that with China keeping factories closed for extended periods, there could be disruptions to supply chains.

Victoria Fernandez, chief market strategist at Crossmark Global Investments, does not think that will happen though. “I think we’re going to see things start to turn around over the next couple months,” she said.

Markets fall, strong US jobs report lowers Fed rate cut hopes

Markets mostly closed lower on Friday.

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

However, the Shanghai Composite rose 0.3 percent even as the number of deaths from China's coronavirus epidemic hit 722 on Saturday. The number of confirmed infections in China now exceeds 34,500.

In contrast, US stocks fell despite a better-than-expected jobs report for January, with 225,000 new jobs being added.

Liz Ann Sonders, chief investment strategist at Charles Schwab, said that the market may have been rallying in response to central bank easing elsewhere in reaction to the coronavirus and may “see a stronger-than-expected jobs report as reason to believe the Fed won’t cut rates, putting pressure on the market”.

Similarly, Alec Young, managing director of global markets research at FTSE Russell, said that “stocks are overbought after a huge rally, some of which has been predicated on hopes for a June Fed rate cut, which now seems highly unlikely”.

Markets rise as China cuts tariffs on US imports

Markets rose on Thursday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.4 percent and the Shanghai Composite jumped 1.7 percent.

The coronavirus outbreak that started in China has now hit 28,256 cases globally and at least 565 deaths but virus concerns took a back seat on Thursday as China announced that it will start cutting tariffs on US imports on 14 February.

“China cutting tariffs is a driver of today’s gains,” said J.J. Kinahan, chief market strategist at TD Ameritrade.

UOB Private Bank’s Francis Tan, though, said that “a lot more important...is that there’s ample liquidity in the market”.

Meanwhile, though, some analysts are sounding words of caution.

“The odds that the next 10% move is to the downside versus the upside, I think, are much higher,” said Miller Tabak + Co.’s lead strategist Matt Maley, who noted that the market has been “priced for perfection” for a while, making it harder to rally much higher from here.

Citigroup’s chief US equity strategist Tobias Levkovich said in a recent note that nearly “every client we talk to wants to buy the dip, and that is not comforting”, adding that “we are reticent to think that impact [of the coronavirus] is behind us now”.

Markets rise with coronavirus death toll

Markets rose on Wednesday.

The S&P 500 rose 1.1 percent to a record high, the STOXX Europe 600 jumped 1.2 percent and the Shanghai Composite rose 1.3 percent.

“Today’s rebound is being driven by rumors about some progress made on the virus, vaccines that are being worked on and efforts to slow down the spread,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

Nevertheless, with the number of infected cases and death toll from the coronavirus originating from China still rising globally, there appears to be a disconnet between the financial markets and science.

“People are still willing to hang onto equities because they haven’t been scared enough,” said Nate Thooft, global head of asset allocation at Manulife Asset Management.

As an example, Scott Ladner, chief investment officer for Horizon Investments, said that “we don’t think the impact is going to be long-lasting or so severe that there can’t be governmental policies to help blunt the impact”.

In the meantime, though, health authorities are taking the virus outbreak seriously.

“We’re preparing as if this is a pandemic,” said Dr. Nancy Messonnier of the Centers for Disease Control and Prevention.

Markets rebound after People's Bank of China injects liquidity into markets

Markets rose on Tuesday.

The S&P 500 jumped 1.5 percent, the STOXX Europe 600 surged 1.6 percent and the Shanghai Composite rose 1.3 percent.

“It’s just the stimulus out of China adding to confidence today,” said Willie Delwiche, investment strategist at Baird, after the People's Bank of China injected 1.7 trillion yuan on Monday and Tuesday to stabilise markets.

Still, with more than 20,000 people in China infected and 465 deaths so far, the coronavirus outbreak is likely to remain a concern for investors.

Markets mixed, coronavirus outbreak could yet form “a big enough shock”

Markets were mixed on Monday.

The Shanghai Composite plunged 7.7 percent as the Chinese stock market opened for its first day of trading after the Lunar New Year holiday but the S&P 500 rose 0.7 percent and the STOXX Europe 600 rose 0.3 percent.

Boosting stocks in the US was a report showing that the Institute for Supply Management's manufacturing index rose to a six-month high of 50.9 in January.

Meanwhile, the Markit/Caixin manufacturing PMI for China came in at 51.1 for January at 51.1, down from 51.5 in December.

The coronavirus outbreak in China, though, remains a potential threat.

“Overall, the economic data is still okay, and not likely to change for another month or two,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “Then, we might see some impact of the virus work its way through the data.”

Indeed, Neal Shearing of Capital Economics said that market participants who are looking to the 2002-2003 outbreak of severe acute respiratory syndrome, or SARS, as a guide to how the current situation will unfold may be too sanguine.

“First, given the size and importance of China’s economy, the impact on the global economy is likely to be more significant than in previous epidemics (including SARS),” Shearing wrote. “The steps to contain the virus – rather than the virus itself – are causing most of the economic damage.”

“The SARS virus hit at a time when global stock markets were starting to bottom out following the bursting of the dot-com bubble,” he added. “The potential for the virus to trigger a significant market correction is much greater now than it was back then.”

Similarly, Mohamed El-Erian, the chief economic adviser to Allianz, said the effects of the outbreak are substantial in China and will slow global growth. With the gap between elevated asset prices and weaker economic conditions “increasingly unsustainable”, the outbreak could form “a big enough shock that fundamentally shifts sentiment”.

China's stock market plunges as death toll rises

China's stock market plunged on restarting trading today after an extended Lunar New Year holiday.

While the Chinese stock market was closed, other markets had fallen on concerns over the coronavirus outbreak in China, with the S&P 500 plunging 1.8 percent on Friday to erase gains for the year.

The virus continues to spread, with the death toll hitting 360 in China on Monday, exceeding the country’s death toll from the 2002-03 Sars outbreak. The total number of infections has passed 17,200.

The first death from the virus outside China was reported on Sunday in the Philippines.

US stocks plunge as Trump declares public health emergency

Markets were mostly lower on Friday.

The S&P 500 plunged 1.8 percent while the STOXX Europe 600 fell 1.1 percent. However, the Nikkei 225 rose 1.0 percent.

Markets fell after US President Donald Trump declared a US public health emergency on Friday in response to the coronavirus outbreak in China.

“It’s certainly the virus concerns,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

However, Chris Gaffney, president at EverBank World Markets, said that “investors should hold tight”, with “some opportunity in some big names as they trade off”, although he cautioned that volatility is likely to remain high until there is a clearer sign of containment of the virus.

Markets mixed as concerns over China coronavirus linger

Markets were mixed on Wednesday.

The S&P 500 fell 0.1 percent but the STOXX Europe 600 rose 0.4 percent.

In Asia, the Hang Seng plunged 2.8 percent on its first day of trading after the Lunar New Year holiday but the Nikkei 225 rose 0.7 percent.

Better-than-expected results from blue-chip companies in the US were offset by lingering concerns over China’s coronavirus outbreak.

“Even if this strain of Coronavirus may be deemed less potent than SARS, there is no excuse for complacency given risks that proliferation is likely amplified by far more extensive travel in and out of China compared to (the) SARS period,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a Wednesday note.

The Federal Reserve held its benchmark fed funds interest rate steady in a range between 1.5 percent and 1.75 percent on Wednesday, saying the US economy remained on a moderate growth path.

“While the economic environment is not particularly strong, investors will become comfortable that the longer-term outlook remains favorable, albeit subdued,” said Byron Wien, vice chairman for private wealth solutions at Blackstone.

Markets mixed as China virus death toll rises

Markets were mixed on Tuesday.

The Nikkei 225 fell 0.9 percent but the S&P 500 rose 1.0 percent and the STOXX Europe 600 rose 0.8 percent.

While Chinese authorities on Tuesday said deaths from the coronavirus epidemic rose to at least 106 and the number of confirmed cases in China rose to more than 4,500, some analysts think the impact on markets may be limited.

JP Morgan chief of global research Joyce Chang said that “the Chinese government has taken serious actions much faster this time” compared to the SARS outbreak in 2003 and “the mortality rate of the current coronavirus outbreak is 2-3% compared to +10% for SARS”.

Market tumble on virus fears may turn out to be “buying opportunity”

Markets took a beating on Monday, with the S&P 500 falling 1.6 percent and the STOXX Europe 600 and Nikkei 225 both plunging around 2 percent.

Markets sold off on concerns that the coronavirus outbreak in China will have a significant impact on the economy.

However, Robert Pavlik, chief market strategist at SlateStone Wealth, said that the selling “is going to turn out to be an overreaction”.

Indeed, a JPMorgan team led by Mislav Matejka wrote on Monday that past outbreaks served as “buying opportunities, rather than the reasons for sustained selling”.

How badly will China virus outbreak hit markets?

The coronavirus outbreak in China continued to spread over the weekend, with 2,051 cases of infection confirmed as of 26 January and the death toll at 56.

“According to recent clinical information, the virus' ability to spread seems to be getting somewhat stronger,” said China's National Health Commission Minister Ma Xiaowei.

While the S&P 500 fell 1 percent last week amid concerns over the outbreak, Mark DeCambre at MarketWatch noted that past outbreaks have not caused extensive losses in global stock markets.

DeCambre said that based on data from Charles Schwab, the MSCI All Countries World Index gained an average of 0.4 percent in the month after an epidemic, 3.1 percent in the ensuing six months and 8.5 percent a year later.

However, other analysts expect a more substantial impact on Asian markets, based on experience during the SARS outbreak in 2003/

Morgan Stanley analysts said the MSCI Hong Kong and Korea indices underperformed by 10 percent and 11 percent respectively as SARS escalated.

“The lesson from SARS suggests that the turning point for sentiment will come only after the number of new infections starts falling,” said Larry Hu, head of China economics at Macquarie Capital.

Some analysts say a significant impact on the US market cannot be ruled out.

“In a stock market where the dominant factor is price momentum, the impact of a change occurring in an external risk vector or a natural risk phenomenon is intensified,” said David Kotok, chairman and CIO at money manager Cumberland Advisors.

Markets mixed as concerns grow over China coronavirus

Markets were mixed on Friday.

The S&P 500 fell 0.9 percent but the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 rose 0.1 percent.

There were some positive economic data on Friday, for example, the IHS Markit US composite PMI hitting a 10-month high of 53.1 in January.

However, the spread of the coronavirus in China and to other countries continued to weigh on markets, with the former confirming 830 cases of infection and 26 deaths as of Friday.

Edward Moya, senior market analyst at brokerage Oanda, said that “concerns are growing that the travel bans in place will start to have a major impact on the economy”.

However, Venkateswaran Lavanya, an economist at Mizuho Bank, suggested that “panic is premature as evolving impact of the coronavirus remains to be seen”.

Markets mixed, WHO says China virus outbreak not yet a global health emergency

Markets were mixed on Thursday.

The S&P 500 rose 0.1 percent but the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 fell 1 percent.

Worries about the China virus outbreak worsened after Beijing quarantined two cities but the World Health Organization said it is not declaring the outbreak a global health emergency yet.

The European Central Bank concluded its monetary policy meeting on Thursday with no change in interest rates.

It also launched a strategic review that will encompass “quantitative formulation of price stability, monetary policy toolkit, economic and monetary analyses and communication practices”.

Markets mixed, “correction overdue”

Markets were mixed on Wednesday.

Asian markets rebounded from Tuesday's losses, with the Shanghai Composite rising 0.3 percent and the Nikkei 225 gaining 0.7 percent.

However, the STOXX Europe 600 fell 0.1 percent after US President Donald Trump threatened to impose high tariffs on imports of cars from the European Union.

US stocks were flat.

While China’s National Health Commission confirmed more than 500 cases of the deadly coronavirus, including 17 fatalities, Bethel Loh, macro strategist at ThinkMarkets, suggested that markets are considering the likelihood that “the situation will eventually return to normal, as it has historically”.

Nevertheless, Morgan Stanley said that “a correction is overdue, but will likely be contained to 5%”.

Markets fall as new virus spreads but “cash is trash”

Markets fell on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.1 percent and the Shanghai Composite tumbled 1.4 percent.

Markets fell after Chinese health authorities confirmed that a new virus that has killed four people so far in the country can spread through human contact just ahead of the Lunar New Year holiday.

“The ultimate fear is that this may spread with the tremendous human flow during the holiday,” said Alex Wong, managing director at Ample Finance in Hong Kong.

Declines in US and European markets were limited though.

“The reaction in markets suggests that the virus fears aren’t necessarily going to be the main story... not enough that good news wouldn’t break through and help them reduce losses,” said Connor Campbell, analyst at British financial spread better Spreadex.

Indeed, on Monday, the International Monetary Fund announced that it forecasts world economic growth to accelerate to 3.3 percent in 2020 from 2.9 percent last year, while fund managers in January were the most optimistic on global growth in nearly two years as they kept their cash positions at the lowest level since 2013, according to a Bank of America survey.

Bridgewater Associates founder Ray Dalio went so far as to say on Tuesday: “Cash is trash.”

Markets mixed, “steady-ish” US growth could keep stocks rallying

Markets were mixed on Monday.

Asian stocks mostly rose, with the Shanghai Composite up 0.7 percent and the Nikkei 225 up 0.2 percent.

However, the STOXX Europe 600 dipped 0.1 percent.

The US stock market was closed for a holiday.

Meanwhile, Michael Gapen, head of US economics research at Barclays, said that the US stock market rally is likely to continue.

“We’re kind of sitting at a trend-like outlook where growth is around 2% this year,” he said. “Our steady-ish as she goes trend-like outlook would be consistent, with say, equity market performance of around 8% to 9% this year given where we expect earnings growth to be.”

S&P 500 at record high as market in “euphoric mood”

The S&P 500 closed at another record high of 3,329.62 on Friday. It is now up 3.1 percent year-to-date.

As US stocks continue to rally, some think that they have become detached from reality.

“People are getting too optimistic in the short-term,” said Tom Essaye, founder of The Sevens Report. “We keep pricing in all this really good stuff that’s going to happen, but it has not shown up yet.”

“It just seems obvious to me that we’ve had a situation where earnings have gone nowhere and the markets have gone straight up,” said Matt Maley, chief market strategist at Miller Tabak. “I don’t want to call it a bubble yet but it’s moving in that direction.”

“The primary driving force behind the advance is increased liquidity/money flows — massive injections of funds into their systems by central banks,” said David Rosenberg, chief economist and strategist of Rosenberg Research.

“It appears to us that the market is letting itself slide back into a euphoric mood,” said Masanari Takada, macro and quant strategist at Nomura.

“Shorter-term sentiment is extremely optimistic,” said Ned Davis, senior investment analyst and founder of Ned Davis Research.

US stocks hit another record high as housing starts surge

Markets rose on Friday.

The S&P 500 rose 0.4 percent to another record high, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.5 percent.

US economic data released on Friday were mixed.

Industrial production fell 0.3 percent in December and the University of Michigans consumer sentiment index fell to 99.1 in January from 99.3 in December.

However, housing starts rose 16.9 percent in December, the fastest pace since 2006.

Mike Loewengart, vice president of investment strategy at E-Trade, said that the housing starts figure “blows expectations out of the water” and suggested that “it’s hard to argue that this expansionary phase can’t keep going”.

However, George Mateyo, chief investment officer at KeyBank, noted that the forward price-to-earnings ratio for the S&P 500 has reached 18.8, well above the historical average.

“We’re getting into thin air, so we might get a pullback,” Mateyo said.

As S&P 500 hits another record high, investors start to look elsewhere

Markets were mostly higher on Thursday.

The S&P 500 rose 0.8 percent to another record high, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.1 percent.

US investor sentiment was boosted by positive economic data released on Thursday.

Retail sales rose 0.3 percent last month, claims for unemployment benefits fell last week for the fifth consecutive week and the Philadelphia Fed's gauge of business activity rose to 17 in January from 2.4 last month.

The National Association of Home Builders' confidence index fell one point to 75 in January from the previous month but remains near its highest reading since 1999.

A MarketWatch report said that “optimism is lingering for now”, and quoted Ciovacco Capital Management founder and chief executive Chris Ciovacco as saying that “the stock market made a cyclical low in 2018 within the context of a secular trend” and that “the secular trend could push stocks higher for another five to 15 years”.

Some analysts, though, note the high valuation for the US stock market.

According to Bank of America, the price-earnings to growth ratio sits at 1.8, its highest level since the firm started tracking it in 1986, while the price-earnings ratio is at 18.4 times, the highest since 2002.

“The S&P 500 is running on fumes,” said Bank of America equity and quant strategist Savita Subramanian.

This is leading some analysts to suggest looking elsewhere for investments.

“We would be looking more at international and emerging markets,” said Gary Hager, president and CEO of Integrated Wealth Management.

Markets mixed as US and China sign trade deal

Markets were mixed on Wednesday.

The S&P 500 rose 0.2 percent to another record high but the STOXX Europe 600 was flat and the Nikkei 225 fell 0.5 percent.

Investors were encouraged by the signing of a preliminary trade deal between the US and China on Wednesday.

Wayne Wicker, CIO of Vantagepoint Investment Advisers, said that “while there’s a lot of room to go with additional discussions with China, what is happening today is a real positive step”.

US corporate earnings for the fourth quarter have also been coming in better than expected, with 77 percent of companies having exceeded earnings estimates so far, according to Michael Arone, chief investment strategist at State Street Global Advisors.

However, Arone also noted that “expectations bar has been lowered so much that it doesn’t take a significant amount of effort for companies to overstep it”.

US stocks pull back amid “elevated valuations”

Markets were mixed on Tuesday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.7 percent.

US stocks fell back after early gains following strong earnings reports from JPMorgan Chase and Citigroup.

Some analysts are warning of an overvalued US stock market, with the five biggest stocks dwarfing the rest of the market.

According to Goldman Sachs, the equity market cap-to-GDP ratio is above 200 percent and at an all-time high.

“Such elevated valuations in past periods have weighed on equity returns over the subsequent five years and lowered the odds of positive outcomes,” Goldman Sachs Investment Strategy Group CIO Sharmin Mossavar-Rahmani said in the group’s 2020 outlook.

Nevertheless, Goldman Sachs’ chief global equity strategist Peter Oppenheimer said the valuation expansion that drove the strong gains in 2019 should, based on history, lead to more gains this year.

In contrast, Doug Kass, president of Seabreeze Partners Management, said that 2020 could be when “the notion of mean reversion of returns finally surfaces”.

S&P 500 at another record high “experiencing lighter version of 1999 lunacy”

Markets were mixed on Monday.

The S&P 500 rose 0.7 percent to another record high while the China CSI 300 rose 1 percent. However, the STOXX Europe 600 fell 0.2 percent.

Arun Bharath, chief investment strategist at Bel Air Investment Advisors, said that the planned signing of a partial trade pact between the US and China is “a step in the right direction”.

He added that in the meantime, risk-on investments “are primarily being driven by a surge of global liquidity driven by central banks”.

Still, with the S&P 500 on a record-breaking run, many analysts are becoming concerned.

Last week, Lance Roberts at Real Investment Advice wrote that the market has been “overbought, extended, and complacent” over the last couple of weeks. He said “this is nuts” and reported taking profits out of portfolios on Friday.

A MarketWatch report noted that other analysts are saying similar things.

“The bullish sentiment we’re getting now has reached the uncomfortable stage,” Jeff deGraaf, chairman of Renaissance Macro Research, was quoted as saying.

Vitaliy Katsenelson, chief investment officer at Investment Management Associates, wrote in a MarketWatch article that the stock market is currently “experiencing a lighter version of the 1999 lunacy”.

Modest upside seen for US stocks, “excellent time” to move elsewhere

The S&P 500 rose 0.9 percent last week, touching another record high on Thursday.

Despite the high stock prices, analysts expect further gains ahead.

“The worst thing that clients and investors can do with the market at current levels is pull the plug and go underweight equities,” PNC Financial’s Amanda Agati told CNBC on Friday. “We still think there’s room for this market to move higher.”

Most, though, see only modest upside for US stocks this year.

“Tech, Health Care, Utilities, Financials, and Consumer Staples are all less than 5% below their price targets, which is a stark difference from last year when stocks were anywhere from 10 to 20% below their price targets,” Bespoke Investment Group said in a note to clients.

There may be better opportunities elsewhere though.

“If your asset allocation has significant domestic exposure and little-to-no international equity exposure, we think now is an excellent time to make a shift,” Bespoke Investment Group said.

Markets fall as US reports slower wage growth

Markets were mostly lower on Friday.

The S&P 500 fell 0.3 percent and the STOXX Europe 600 fell 0.1 percent. However, the Nikkei 225 rose 0.5 percent.

A report on Friday showed that the US economy added 145,000 new jobs in December, fewer than the 266,000 gained in the previous month.

“While disappointing on the headline, today’s payroll miss is unlikely to change the outlook for the U.S. economy as the results are consistent with economic output chugging along at trend pace,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Similarly, Ulas Akincilar, head of trading at online trading platform INFINOX, said that “at this stage of the economic cycle, the U.S. is still enjoying an impressively strong pace of job growth”.

However, he also noted a “slowing pace of wage growth” and said that “could steadily become a brake on the wider U.S. economy”.

Markets rise as investors focus on positive factors

Markets rose on Thursday.

The S&P 500 rose 0.7 percent to a record high, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 2.3 percent.

Jack Janasiewicz, portfolio manager at Natixis Advisors, said that factors helping to boost markets include the US-China “phase-one deal that sounds like it’s going to be signed next week, global growth numbers that have been OK and highly accommodative central banks around the world”.

Oliver Renick said that economic data “are beating expectations by the biggest gap since early 2018 and on the longest win-streak since mid-2017” and that stocks ”remain resilient around risk-off events”.

Meanwhile, Nigam Arora said that popular technology stocks in particular are outperforming broader indices, and this outperformance is supported by positive money flows.

Early gains by S&P 500 bodes well for 2020

The S&P 500 rose 0.5 percent on Wednesday, bringing the gains of the first five days of 2020 to about 0.7 percent.

US stocks rose despite Iran firing more than a dozen missiles at US military bases in Iraq on Tuesday.

“Much of this market serenity is owed to both sides signaling they don’t want to escalate matters any further,” suggested Marios Hadjikyriacos Investment Analyst at XM.

In the meantime, the five-day gain at the start of 2020 bodes well for stocks for the rest of the year.

When stocks finish that period higher, the S&P 500 has been positive 82 percent of the time at year-end with an average gain of 13.6 percent, according to the Stock Trader’s Almanac and CNBC calculations.

Markets mixed as S&P 500 faces “several market corrections”

Markets were mixed on Tuesday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 1.6 percent.

“We’re not surprised to see a bit of a pullback from the standpoint that through December the market got really overbought,” Bob Phillips, managing principal of Spectrum Management Group.

“A healthy domestic backdrop, coupled with the Fed on hold for the year, means that investors should buy any Iran-induced equity sell-off, barring a war that closes the Strait of Hormuz,” wrote BCA Research analysts in a Tuesday note.

Indeed, Blackstone’s Byron Wien thinks that easy monetary policy will help push stocks higher in 2020.

“Even though some observers believe valuations are stretched, a surge in investor enthusiasm pushes the Standard and Poor’s 500 above 3,500 at some point during the year,” he wrote.

Nevertheless, Wien said he expects “several market corrections” of at least 5 percent in the coming year.

Francois Trahan, head of US equity strategy for UBS, is more circumspect.

“We expect a V-shaped year for the S&P 500,” Tranhan said in a note, with the index dropping as much as 16 percent by May before recovering in the second half of the year.

Markets mixed but “bullish case does remain”

Markets were mixed on Monday.

The S&P 500 reversed early losses to close 0.4 percent higher but earlier, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 1.9 percent.

Investors in the US shrugged off continuing tension in the Middle East, with Sahak Manuelian, managing director of equity trading at Wedbush Securities, suggesting that investors are “really focusing on stock fundamentals”.

Also, Kristina Hooper, chief global market strategist at Invesco, said that the Federal Reserve is likely to continue to provide monetary policy support.

“The fact that the Fed is being very accommodative, in maintaining three insurance rate cuts, even though it looks like we are going to get a ‘phase one’ trade deal [with China] soon, suggests a very accommodative monetary policy in 2020,” she said.

Indeed, Lance Roberts at Real Investment Advice wrote recently: “The bullish case does remain as both fiscal and monetary stimulus remains excessively abundant.”

“This is why, despite excessive technical deviations, extraordinary complacency, and extreme bullishness, we remain allocated toward equity risk in portfolios currently,” he added.

Momentum driving S&P 500 but divergences and fundamentals pose concerns

The S&P 500 fell 0.2 percent last week, dragged down by a 0.7 percent decline on Friday after oil prices rose following a US airstrike on Iran.

However, Nigam Arora said that oil should not be the main concern for investors.

“The real danger to investors is not a war with Iran but the simple fact that this stock market is controlled by the momo (momentum) crowd,” he said. “The momo crowd is fickle and can easily start selling if momentum reverses.”

In the meantime, though, momentum in the market may be building. Ben Breitholtz, a data scientist at Arbor Research, analysed commentators on financial Twitter and found that typically pessimistic commentators are becoming less so.

Still, others have noticed that momentum is concentrated in the mega-cap technology stocks like Facebook, Apple, Amazon, Alphabet and Microsoft while the small-cap Russell 2000 index has underperformed.

“It is clear that the market’s idea of investing in 2020 is for all dollars to flow into the same five names,” wrote Mike O’Rourke, chief market strategist at JonesTrading, on Thursday.

This divergence between the top and bottom performers may be a cause for concern. John Hussman, president of Hussman Investment Trust, noted in his latest article that uniformity of gains among various market segments “is a hallmark of robust bull market periods” while a loss of uniformity “is the hallmark of a market that is losing its engines”.

Hussman also pointed out that market valuations are nearly three times the levels that have historically generated normal long-term returns.

Indeed, a CNBC article over the weekend said that high stock valuations are among risks for the market and quoted Societe Generale analyst Albert Edwards as saying: “The US equity market has become totally detached from underlying profitability.”

The article also noted that analysts have cut earnings estimates, companies are “piling on debt” and recession remains a risk.

Markets fall after US airstrike on Iran and manufacturing contraction

Markets mostly fell on Friday.

The S&P 500 fell 0.7 percent and the STOXX Europe 600 fell 0.3 percent. Asian markets were mixed.

Oil prices rose after a US airstrike in Iraq killed Qassem Soleimani, leader of the foreign wing of Iran’s Islamic Revolutionary Guard Corps, and raised geopolitical tension. Brent crude rose 3.6 percent and West Texas Intermediate rose 3.1 percent.

“We believe that an Iranian retaliation is almost certain,” said Paul Sheldon, chief geopolitical risk analyst at S&P Global Platts.

Also weighing on markets on Friday was a report from the Institute for Supply Management showing that its US manufacturing index fell to 47.2 in December, its lowest since June 2009, from 48.1 in November.

While the ISM's manufacturing index has now shown six consecutive months of contraction, Nigam Arora does not think that the latest jump in oil prices will add much to the economy's woes.

“The lifeblood of the modern economy is semiconductors more than oil is,” he wrote on MarketWatch.

US stock market hits another record high as China eases

Markets rose on Thursday, with the S&P 500 rising 0.8 percent to hit another record high.

Markets rose after the People's Bank of China announced a 0.5-percentage-point cut in the reserve requirement ratio for commercial banks.

“The update from the PBOC helped Chinese stocks, and that positive sentiment spilled over to Europe,” said David Madden, market analyst at CMC Markets.

Alec Young, managing director of global markets research, said that “this is a liquidity-driven momentum rally” and “Chinese easing overnight has gotten it kicking into high gear”.

US economy “less recession-prone”?

A CNBC article reports that Goldman Sachs is saying that the US economy is nearly recession-proof.

“Overall, the changes underlying the Great Moderation appear intact, and we see the economy as structurally less recession-prone today,” Goldman economists Jan Hatzius and David Mericle wrote.

The article did note that in late 2007, Goldman predicted double-digit percent gains for the stock market in 2008; instead, the S&P 500 tumbled 37 percent.

In contrast, the article reported that Philipp Carlsson-Szlezak, chief economist at AB Bernstein, said that “tight labor markets, easy policy, institutional risk tolerance, as well as potential further fiscal stimulus and certain debt growth” provide “fertile conditions for structural risks to build in the medium-term”.

The article suggested that investors “could be excused for getting a little nervous over such calls, as optimism also was heavy in late 2007, just as the economy was about to enter the worst of the financial crisis”.

Indeed, in his latest article, John Hussman, president of Hussman Investment Trust, reminded us that former US President Herbert Hoover had said in 1929 that “the fundamental business of the country is on a sound and prosperous basis” just before the Great Depression.

In contrast to the sanguine view of Goldman, Hussman thinks that with market valuations nearly three times historical levels, a market collapse is “baked in the cake”.

S&P 500 rises but starts 2020 “on perilous footing”

Markets were mixed on Tuesday.

The S&P 500 rose 0.3 percent, the Shanghai Composite rose 0.3 percent but the STOXX Europe 600 slipped 0.1 percent.

The S&P 500 ended the year up 28.9 percent, its best gain since 2013.

“While market volumes are predictably light, investors continue to strike a year-end cautionary tone as December optimism is gradually giving way to 2020’s uncertainty,” Stephen Innes, a market strategist at AxiTrader, wrote in a note.

Indeed, while many analysts see the market continuing to rise in 2020, most predict a weaker performance than in 2019.

In fact, Datatrek’s Nicholas Colas suggested that “by any objective measure US large-cap stocks start 2020 on perilous footing”.

“Valuations are rich. Corporate debt levels are at record highs. We have not seen any earnings growth in 4 quarters,” he wrote in a note.

Markets fall, S&P 500 rally pauses

Markets were mostly lower on Monday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.8 percent.

“The market is taking some time to catch its breath,” said John Conlon, senior portfolio manager and director of equity strategy at People’s United Advisors. “We’ve been setting records for several days, so it seems like a good time to take some money off the table and reassess what’s going on.”

US stocks in record-breaking run, “nobody is worried anymore”

US stocks continued on their record-breaking run last week.

The S&P 500 closed at 3,240.02 on Friday, another record high. It is now up 29.25 percent for 2019.

Edward Yardeni, president of Yardeni Research, sees further gains for the S&P 500 next year.

“Looking at 2020, I’m expecting earnings to be up 4% to 5%, which isn’t fabulous,” he told CNBC on Friday. “But it should be enough to get the market up to 3,500 by the end of next year.”

However, Yardeni also noted that the market is not cheap and suggested that it could fall 10 to 20 percent if the rise is too rapid.

“Bull markets do best when you’ve got a wall of worries,” Yardeni said. “What I’m worrying about is nobody is worried anymore.”

Similarly, Lance Roberts at Real Investment Advice said that markets are “extremely deviated from long-term trends”. Combined with “the extreme complacency and excess bullishness”, a “fairly decent 5-10% correction is likely over the next couple of months”.

Markets mixed, “S&P 500 looks to have entered a bubble”

Markets were mixed on Friday.

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

“The path of least resistance appears to be higher,” said Jeffrey Kravetz, regional investment director at US Bank Private Client Reserve.

However, with just two trading days to go for the year and the main US stock indices potentially putting in their best annual performances since 1997, not everyone is sanguine about next year.

Cresset Capital’s chief investment officcer Jack Ablin is telling investors to brace for stocks to drop at least 15 percent in early 2020.

“Valuations are pretty stretched,” he told CNBC on Thursday.

Clem Chambers, CEO of stocks and investment website ADVFN, wrote on Forbes that the “S&P 500 looks to have entered a bubble”.

US stocks hit record highs again

Markets rose on Thursday.

In the US, the S&P 500 rose 0.5 percent to another record high. The Dow Jones Industrial Average and Nasdaq Composite also hit record highs, rising 0.4 percent and 0.8 percent respectively.

in Asia, the Nikkei 225 rose 0.6 percent and the Shanghai Composite rose 0.9 percent.

European stock markets were closed.

“Stocks look like they just wont quit. The rally is for real,” Chris Rupkey, chief financial economist at MUFG, said in a note Thursday. “The economy’s engines continue to hum.”

After recovery from last year's low, stocks seen continuing rally into next year

Mark DeCambre at MarketWatch recalled how the S&P 500 hit a low on Christmas Eve last year.

“On Christmas Eve last year, the S&P 500 index had fallen nearly 20% for the year and was on the verge of a bear market,” DeCambre wrote. “But this year’s rally has seen the S&P 500 index recover and return 37% when the market closed for Christmas Eve on Tuesday.”

DeCambre noted that some analysts think that stocks could continue to climb higher into next year.

“The strength in long-term internal trends not only signifies an improving market but helps build a more sustainable backdrop as levels of technical support strengthen and multiply, creating more reasons to buy dips,” wrote Jeff DeGraaf, chairman of Renaissance Macro Research, in a Tuesday research note.

“In 2019, expanding valuations drove gains for stocks, but in 2020, we expect earnings to do the heavy lifting,” wrote John Lynch, Chief Investment Strategist for LPL Financial, in a note on Tuesday.

Indeed, BTIG’s chief equity and derivatives strategist Julian Emanuel believes stocks could surge another 22 percent next year.

“We think confidence will ultimately translate into the public getting this enthusiasm for stocks which could cause prices to move as high as 3,950,” he told CNBC on Monday.

US stocks could go higher in “silly season in risk assets”

Markets were mixed on Tuesday.

The S&P 500 lost a point and the Nikkei 225 rose marginally but the Nasdaq Composite and the STOXX Europe 600 both gained 0.1 percent to hit record highs.

Some analysts think that US stocks could see losses in January due to tax-related selling.

Still, optimism remains high, with Ivan Martchev, an investment strategist with Navellier and Associates, saying that US stocks will go higher in 2020, the economy will strengthen, emerging markets will get more attractive and President Donald Trump will get re-elected.

However, Scott Minerd, chief investment officer at Guggenheim Partners, warned that we may be near a Minsky moment.

In a fourth-quarter market outlook, Minerd said that the Federal Reserve rate cuts this year has produced a “silly season in risk assets”, noting that “risks are building in various areas of the fixed-income credit markets, particularly in corporate credit”.

US stocks hit record high but China stocks slump

Markets were mixed on Monday.

The S&P 500 rose 0.1 percent to another record high but the STOXX Europe 600 was flat and the Shanghai Composite tumbled 1.4 percent.

“The bigger catalyst for Mainland China’s slump was news out right after the open that the China Integrated Circuit Industry Investment Fund was reducing its ownership of three Mainland publicly traded semiconductor stocks to under 1%,” wrote Brendan Ahern, chief investment officer at Kraneshares, in a note.

More supportive of markets was an announcement by China on Monday that it will lower import tariffs on over 850 products, including frozen pork, from 1 January, as well as some information technology products starting 1 July.

Tom Martin, senior portfolio manager at Globalt, said that China’s actions “are a positive indicator for the de-escalation of tensions” and adds to other positive news on trade that “may help the market continue to drift higher”.

US economic data on Monday were mixed. Orders for durable goods fell 2 percent in November, the biggest decline since May, but new home sales increased 1.3 percent.

S&P 500 at record high but reflation trade “doomed”

The S&P 500 ended last week at a record high of 3,221.22 amid encouraging US economic data and optimism over an impending US-China trade agreement.

However, with the S&P 500 now up 28.55 percent year-to-date, maybe it's time to start worrying about euphoria in US stocks.

“The bulls have broken out and the bears have gone into hibernation,” wrote strategists at RBC Capital Markets. “If the market keeps grinding higher in the very near-term, these are likely to be important sign posts that will eventually help mark the top.”

“Typically, there is euphoria before pullbacks,” noted Aron Pataki, a portfolio manager at Newton Investment Management.

Indeed, Zero Hedge says that the reflation trade is doomed.

Citing analysis by Masanari Takada, cross-asset quantitative strategist at Nomura Securities, Zero Hedge said that “without a Chinese pillar of support, without validation from CTAs, and with the Fed's 'NOT QE' set to end in April, the reflation trade is nothing more than another Fed-created headfake, and has at most another 4 months before financial gravity, and a record $255 trillion in global debt, unleash the deflation trade”.

Backbone of US economy “rock solid”, 2020 to be “super year” for stocks

Markets were mostly higher on Friday.

The S&P 500 rose 0.5 percent to another record high and the STOXX Europe 600 rose 0.8 percent. However, the Nikkei 225 fell 0.2 percent.

While a report on Friday showed that the estimate of US third-quarter GDP growth was unchanged at an annualised 2.1 percent, another report showed that US consumer spending rose 0.4 percent in November, the biggest increase since July.

“Despite the late start to the holiday season, U.S. consumers were in a festive mood, suggesting the backbone of the economy remains rock solid,” said senior economist Sal Guatieri of BMO Capital Markets.

“Overall, the bottom line is that the economic numbers keep coming in strong,” said Joe Saluzzi, partner, co-head of Equity Trading at Themis Trading.

MUFG chief economist Chris Rukey said that with core consumer inflation low, “you can bet your bottom dollar, the Federal Reserve is going to keep enough punch in the punch bowl to make sure that 2020 is going to be a super year for stocks”.

Markets rise, Merrill Lynch sees further 20 percent gain

Markets were mostly higher on Thursday, with the S&P 500 in particular rising 0.5 percent to another record high.

While the US House of Representatives voted to impeach US President Donald Trump on Wednesday, markets appeared unfazed.

“The market is suggesting right now that it’s meaningless,” said Kent Engelke, chief economic strategist at Capitol Securities Management.

“With the reduction in risks from the uncertainty that the American trade war produced in 2019, we’re keeping our fingers crossed that the economy will get some more wind in its sails in 2020 to extend its longest winning run in history,” said MUFG chief economist Chris Rupkey.

“The trend is your friend. We’re very bullish on the market right now,” Merrill Lynch’s Andy Sieg told CNBC on Thursday. “There’s an upside scenario that could see the market up 20% from these levels.”

Stocks could surge in 2020 but corporate debt a concern

Markets fell on Wednesday.

The S&P 500 fell marginally to end its five-day rally while the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.6 percent.

Despite the pause in the rally on Wednesday, Federated Investors’ chief equity market strategist Phil Orlando believes the S&P 500 could surge 10 percent and hit 3,500 by spring as the economy reaccelerates.

“We’ve seen the downturn. Now, we’re going to start to reaccelerate we think over the course of calendar 2020,” he said.

Similarly, Leuthold Group’s chief investment strategist Jim Paulsen sees a re-acceleration in the global economy. He thinks that the S&P 500 could rise another 15 percent in 2020 but also that “emerging markets will be the big winner of 2020”.

In contrast, UBS strategist Francois Trahan thinks that the surge in corporate debt could pressure stocks in 2020.

“Leaving aside our biases for markets and the economy, LEIs of credit markets point to a deterioration of ratings throughout 2020,” said Trahan in a note.

US stocks eke out another record but European stocks fall

Markets were mixed on Tuesday.

The S&P 500 rose marginally to eke out another record high while the Shanghai Composite jumped 1.3 percent.

However, the STOXX Europe 600 fell 0.7 percent over concerns about the prospect of a hard Brexit following reports that UK Prime Minister Boris Johnson will introduce a legal provision to bar an extension of trade negotiations beyond a year.

“We’ve not resolved Brexit or trade or tariff issues, but we’ve got more clarity,” said Jennifer Ellison, principal at San Francisco-based BOS.

Edward Moya, senior market analyst at Oanda, wrote that while a US-China phase one trade deal is expected to be finalised in the first week of January, “this deadline could get pushed even further as not all the terms have been agreed upon”.

US and European stocks set records, risk assets heading for “melt-up”

Markets mostly rose on Monday.

The S&P 500 rose 0.7 percent to a record high. The STOXX Europe 600 jumped 1.4 percent to also close at a record high. In Asia, the Shanghai Composite rose 0.6 percent but the Nikkei 225 fell 0.3 percent.

Some analysts see the stock market on the brink of a record-breaking run.

UBS Global Wealth Management Chief Investment Officer Mark Haefele said that the partial US-China trade deal struck last week is a bullish factor. “This could unlock further upside for equity markets, driven by an improvement in business confidence and a recovery in investment,” he wrote.

Meanwhile, analysts at Bank of America Merrill Lynch, led by strategists Michael Hartnett, see the market as “primed for Q1 2020 risk asset melt-up”, with the Federal Reserve and the European Central Bank providing ample support.

Recession fears fading but not gone

A Washington Post article states that the US economy has shaken free of recession fears.

“The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession,” the article said.

“Some of the obstacles to growth, including the Fed and trade uncertainties, are being removed, and that will have a powerful positive impact on the economy,” said Larry Kudlow, US President Donald Trump’s top economic adviser.

However, Nicholas Spiro, a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm, wrote in a South China Morning Post article that there remain reasons to be concerned about the global economy.

“Survey data on the euro zone published last week showed the bloc’s manufacturing sector remaining deep in contraction territory,” he noted.

“Even the optimism surrounding America’s economy may be misplaced,” he said. “US political risk is increasing sharply in the run-up to next year’s crucial presidential election, and at a time when US equity valuations are stretched.”

Markets rise on US-China trade deal

Markets rose on Friday.

The S&P 500 rose 0.01 percent to another record high, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 surged 2.6 percent.

The announcement of a trade deal between the US and China, including the cancellation of new tariffs originally set to be implemented on Sunday, helped boost investor sentiment.

US stocks gave up some early gains though amid concerns that the agreement was not substantial enough.

Randy Frederick, vice president of trading and derivatives at Charles Schwab, said that the deal is not as “robust” as some had hoped. “The big question is whether the economic data and earnings are sufficient, plus the promise of no new tariffs, to push the market higher.”

S&P 500 hits record high as US and China near “big deal” on trade

Stocks rose on Thursday, with the S&P 500 rising 0.9 percent to a record high.

Reports of an impending trade deal between the US and China fuelled Thursday's rally, with US President Donald Trump himself saying that they were nearing a “big deal”.

Also on Thursday, the European Central Bank decided to keep its main deposit rate at negative 0.5 percent while maintaining its rate of asset purchases at €20 billion a month.

“We’re in an easy money environment, thanks to Jerome Powell, Christine Lagarde and central bankers around the world,” said Yousef Abbasi, director of US institutional equities and global market strategist at INTL FCStone.

Fed expects no change in interest rates in 2020, good time for stocks

The S&P 500 rose 0.3 percent on Wednesday after the Federal Reserve left interest rates unchanged at its monetary policy meeting and said that it did not expect to change interest rates in 2020.

“Powell was very explicit in guiding that only a ‘persistent, significant’ rise in inflation would lead him to support hikes,” economist Andrew Hollenhorst of Citibank said in a note to clients.

“There are not worrisome deflation undercurrents in this economy and Fed officials do not need to cut interest rates further to boost economic demand,” said MUFG chief economist Chris Rupkey.

According to BCA Research, the Fed's present monetary stance makes it a good time to own stocks.

BCA’s Chief US Investment Strategist Doug Peta said in a note to clients that the three rate cuts this year leaves monetary policy easy.

“A recession can’t begin until the Fed reverses those three cuts and, per our estimate of the equilibrium rate, tacks on at least three additional hikes,” he wrote.

This means there is scope for further gains for the S&P 500.

“Over the last 50 years, the S&P 500 has peaked an average of six months before the start of a recession, and returns heading into the peak have been quite strong,” he wrote.

Markets fall, “QE4 by year-end”

Markets fell on Tuesday.

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

The Federal Reserve kicked off its two-day monetary policy meeting on Tuesday where it is expected to hold steady on interest rates.

“The question will be how dovish is the ‘hold’ that the Fed will deliver tomorrow,” said Jim McDonald, chief investment strategist at Northern Trust.

While not much is expected from the Fed now, Zoltan Pozsar, Credit Suisse’s managing director for investment strategy and research, has suggested that the Fed will be launching another round of quantitative easing in the next few weeks.

“If we’re right about funding stresses, the Fed will be doing ‘QE4’ by year-end,” Pozsar wrote in a note to clients. “The Fed’s liquidity operations have not been sufficient to relax the constraints banks will face in the upcoming year-end turn.”

Recession fears “fading” in US but China's exports fall

Markets were mostly lower on Monday.

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

Friday's strong US employment report lost some of its impact on the market despite relieving some recession fears.

“The recession fears that pervaded much of the year are fading, replaced by a sense that economic indicators are bottoming,” wrote JPMorgan & Co. analysts in their 2020 equity outlook released on Monday.

However, with the 15 December deadline for the imposition of additional US import duties on Chinese goods looming, investors remained focused on trade issues.

Robert Pavlik, chief market strategist at SlateStone Wealth, said there is “a lot of uncertainty” but “people are not running for the hills”.

Still, the impact of the US-China trade war was noticeable on Monday, at least on China, the latter reporting that exports fell 1.1 percent in November from a year earlier, with shipments to the US falling 23 percent.

US reports “blowout” jobs number, recession concerns “squashed”

Markets rose on Friday.

The S&P 500 rose 0.9 percent, the STOXX Europe 600 jumped 1.2 percent and the Shanghai Composite rose 0.4 percent.

Markets were boosted by a report that the US economy added 266,000 jobs in November, the biggest gain since January.

“This is a blowout number and the U.S. economy continues to be all about the jobs,” Tony Bedikian, head of global markets for Citizens Bank, said in a note.

“Today’s job report, more than any other report in recent months, squashed any lingering concerns about an imminent recession in the US economy,” said Gad Levanon, head of the Conference Board’s Labor Market Institute.

Michelle Meyer, Bank of America Merrill Lynch’s chief US economist, said that “the strong employment activity suggests that the economy is in a better spot than previously thought to withstand any potential drag from the US-China trade war and other geopolitical risks in the outlook”.

Another report in the US on Friday showed that the University of Michigan’s consumer-sentiment indicator rose to 99.2 in December from 96.8 in November.

Markets edge up as tariffs deadline nears

Markets were mostly higher on Thursday.

The S&P 500 rose 0.2 percent and the Nikkei 225 rose 0.7 percent. However, the STOXX Europe 600 dipped 0.1 percent.

Investors remained focussed on the trade war between the US and China ahead of the 15 December deadline for the imposition of fresh import tariffs on the latter's goods by the former.

“We see a relatively good chance that there’s a sort of first phase deal and maybe the December tariffs get pushed out or actually even removed,” said Adrian Zuercher, head of Asia-Pacific asset allocation at UBS Global Wealth Management.

Meanwhile, data in the US showed that factory orders rose 0.3 percent in October, the first gain in three months.

Attention now shifts to the US monthly payrolls report.

“Should the jobs report come in reasonably healthy and the trade negotiations keep moving forward, December will also likely be a better month than the headlines at the start of the month suggested,” said Brad McMillan, chief investment officer at Commonwealth Financial Network.