Tuesday, 23 April 2019

Markets “in a happy place” amid “cheap and plentiful money”

Markets were mixed on Monday.

The S&P 500 rose 0.1 percent and the Nikkei 225 rose 0.1 percent but the Shanghai Composite tumbled 1.7 percent. Major European stock markets were closed for a holiday.

Oil prices surged after the US declared it would end waivers for countries to import Iranian oil. West Texas Intermediate crude surged 2.7 percent and Brent jumped 2.9 percent.

“With the S&P 500 forward PE (price-to-earnings) ratio sitting near highs of 16.8 and the index 1.2% below its historic record, investors need convincing results to keep buying equities at their current levels,” said Hussein Sayed, chief market strategist at FXTM.

Chinese stocks fell after the Politburo said on Friday that the government would continue to implement a proactive fiscal policy and a prudent monetary policy that is neither too tight nor too loose. Shen Zhengyang, an analyst at Northeast Securities, said that investors interpreted that to mean that “the government will suspend the easing of monetary policy”.

However, Stephen Innes, head of trading at SPI Asset Management, said that a “positive confluence of events continues to support risk sentiment” and that the markets “should remain in a happy place provided the Federal Reserve stays on the dovish course as indeed cheap and plentiful money has a most soothing effect on equity investors”.

Monday, 22 April 2019

Lifelong learning is key to Warren Buffett's success

Lifelong learning may be the secret to Warren Buffett's success, according to his partner, Charlie Munger.

From Tom Popomaronis at CNBC:

As vice chairman of Berkshire Hathaway, Munger says there's one quality of Buffett's that he holds in especially high esteem: His ability to be a lifelong "learning machine."

"If you take Warren Buffett and watched him with a time clock, I would say half of all the time he spends is sitting on his ass and reading," Munger said in his 2007 commencement speech at the University of Southern California.

Buffett himself thinks that taking care of one's mind and body is important, according to Gillian Zoe Segal at CNBC.

"You have only one mind and one body for the rest of your life," Buffett says. "If you aren't taking care of them when you're young, it's like leaving that car out in hailstorms and letting rust eat away at it. If you don't take care of your mind and body now, by the time you're 40 or 50, you'll be like a car that can't go anywhere."

Saturday, 20 April 2019

Asian markets rise, slowing global growth a risk

Asian markets finished higher on Friday while major western markets were closed for a holiday.

The Nikkei 225 rose 0.5 percent while the Shanghai Composite rose 0.6 percent.

Meanwhile, the stock market rally remains at risk, said Mark Avallone, founder of Potomac Wealth Advisors.

Avallone said that while accommodative central bank policies around the globe are keeping the stock market rally alive, slowing and uneven global growth is a risk to markets.

"Valuations are reasonable, but absent a catalyst for growth, it appears that the majority of 2019 gains have been realized," he wrote.

Similarly, John Tobey said that economic growth has slowed even as the stock market is rallying.

Tobey suggested that if "growth continues to slow, another bear market leg is a real possibility".

Friday, 19 April 2019

Markets mixed as investors wait for catalyst

Markets were mixed on Thursday.

The S&P 500 rose 0.2 percent and the STOXX Euroipe 600 rose 0.2 percent but the Nikkei 225 fell 0.8 percent.

“A lot of good news has already been priced in to the market, and investors are still in search of the next catalyst to drive stocks higher,” said Michael Arone, chief investment strategist at State Street Global Advisors.

As investors wait for the catalyst, trading volumes in the US have been falling.

Dow Jones Market Data showed that total composite trading volume on Monday was the lowest for a full-day session since 10 September.

Thursday, 18 April 2019

Markets mixed as earnings season “not off to a very good start”

Markets were mixed on Wednesday.

The S&P 500 fell 0.2 perent but the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.3 percent.

Tom Essaye, president of the Sevens Report, noted that earnings season in the US “is not off to a very good start”.

Indeed, Lori Calvasina, RBC Capital Markets’ head of US equity strategy, suggested that there may be a little too much euphoria in the US stock market right now.

Calvasina said that “positioning in U.S. equity futures is parabolic, shooting straight up”. She said that peaks in futures contracts last year were followed by selloffs.

“If we’re only getting modest earnings growth this year, S&P 500 only deserves to have modest expansion based on how it is played out the last few times,” said Calvasina.

Wednesday, 17 April 2019

US stocks could see melt-up after turnaround in investor sentiment and fund flows

Markets rose on Tuesday.

The S&P 500 rose less than 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.2 percent.

Some analysts see further gains for stocks.

UBS strategists led by Daniel Waldman said that “markets are priced for growth stabilization, but not for acceleration”, and that “leaves room for stocks to run higher”.

“We have a risk of a melt-up, not a meltdown here. Despite where the markets are in equities, we have not seen money being put to work,” said Larry Fink, CEO of BlackRock.

That could be changing. Recent surveys have shown that individual investors have become more bullish and less bearish, with US equity funds seeing US$4.3 billion in inflows in the week ended 10 April after a US$19.7 billion outflow from the start of the year through 3 April.