Wednesday, 30 November 2016

Stocks rise, US market "pricey" but "bullish"

Stocks mostly returned to winning ways on Tuesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Shanghai Composite Index rose 0.2 percent. However, the Nikkei 225 fell 0.3 percent.

Further gains could be hampered by high valuations, especially for US stocks.

"I'm a little concerned that we're getting a little pricey, a little rich," Erin Gibbs, equity chief investment officer at S&P Global, told CNBC on Monday.

Nevertheless, Ari Wald, head of technical analysis at Oppenheimer, told CNBC on Monday that "the longer-term trend here is bullish for the S&P 500".

David Kelly, chief global strategist at JPMorgan Asset Management, agrees.

"So long as rates move up slowly, the Fed raises rates slowly, the bull market continues on," he said at a media briefing on Tuesday.

Tuesday, 29 November 2016

US and European stocks fall but Japanese stocks gaining favour

Markets mostly fell on Monday.

At the start of the day, Asian stocks rose, with the MSCI Asia Pacific Index rising 0.8 percent.

However, European stocks failed to follow through, with the STOXX Europe 600 declining 0.8 percent.

US stocks also fell. The S&P 500 declined 0.5 percent.

The fall in the US stock market ended a four-day winning streak and comes as analysts warn that valuations may be getting stretched.

John Reese, co-founder at Validea Capital Management, is one of those who think that US stocks may be overvalued.

In a CNBC article, Reese wrote that the current market cap/GDP ratio of nearly 125 percent is “the highest it has been...since the market went over a cliff in 2000”.

Indeed, some analysts now think that Japan's stock market may be a better bet.

“Japan is now our top pick in global equity regions, replacing the U.S.,” Jonathan Garner, Morgan Stanley's chief Asia and emerging market equity strategist, said in a note on Sunday.

Monday, 28 November 2016

S&P 500 at record high but prospective returns over the long term look “paltry”

US stocks ended at a record high last week.

The S&P 500 rose 1.4 percent over the week to end at a record high of 2,213.33. The index has now risen for three consecutive weeks.

However, Wayne Kaufman, chief market analyst at Phoenix Financial Services, said that the following week “could see some softness”.

“The three indicators I look at—market breadth, sentiment, and valuation—are all in areas where the market typically runs into some headwinds,” Kaufman said. “Investors are hopeful that valuations are justified given the incoming administration.”

However, John Coumarianos thinks that US stock valuations are suggesting that returns over the next decade are likely to be “paltry”.

“A 5% real annualized return from the S&P 500 may not be impossible, but it’s highly improbable from the market’s current Shiller valuation of 26,” he wrote. “The long term average is 16.”

Coumarianos wrote that Research Affiliates has projected future 10-year annualised real returns for the S&P 500 and the Barclays US Aggregate at 1.1 percent and 0.50 percent respectively.

John Hussman also has low expectations for US stock returns. In his latest article, Hussman wrote that the US stock market is “at a level consistent with expectations of S&P 500 12-year nominal total returns averaging less than 1% annually.”

Hussman thinks that the recent marginal highs are more consistent with a “blowoff” than a “breakout” and expects “the S&P 500 to surrender its entire total return since 2000 over the completion of the current market cycle”.

Saturday, 26 November 2016

US stocks hit record high as money flows out of bonds, real estate and gold

Stocks rose on Friday.

The S&P 500 rose 0.4 percent to hit another all-time high. The STOXX Europe 600 rose 0.2 percent while the Nikkei 225 rose 0.6 percent.

“Nothing is stopping the market at this point,” said Jonathan Corpina, senior managing partner at Meridian Equity Partners.

However, other markets did not do so well on Friday.

US Treasuries fell. The yield on the 10-year note rose to 2.359 percent, the highest close since July 2015, from 2.355 percent on Wednesday.

Oil fell, with US light sweet crude tumbling 4 percent.

According to fund-tracker EPFR Global, money flowed out of government bonds, US real estate and gold funds and into the US equity market in the most recent week.

Friday, 25 November 2016

Markets mixed amid uncertainty outside US

Markets were mixed on Thursday.

While US financial markets were closed for a holiday, the STOXX Europe 600 rose 0.3 percent and the yield on the 10-year German government bond fell to 0.259 percent from 0.277 percent on Wednesday.

In Asia, the Nikkei 225 rose 0.9 percent but the Hang Seng Index fell 0.3 percent and the KOSPI fell 0.8 percent.

“Uncertainty for the rest of the world outside the U.S. is still hanging high,” said Ameet Patel, analyst at Northern Trust Capital Markets.

“As money is sucked into U.S. stocks, we’ve seen a big selloff in many emerging market currencies and many emerging market assets,” said Jane Foley, currency strategist at Rabobank.

Thursday, 24 November 2016

Markets mixed but some enjoying bull runs

Markets were mixed on Wednesday.

The S&P 500 eked out a 0.1 percent gain to finish at another record high but the STOXX Europe 600 slipped less than 0.1 percent.

In Asia, while Japan's stock market was closed for a holiday, the Shanghai Composite Index fell 0.2 percent but Australia's S&P/ASX 200 jumped 1.3 percent.

Yields on the US 10-year Treasury note rose to 2.355 percent from 2.319 percent on Tuesday.

“This is relief,” said Shannon Saccocia, head of asset allocation at Boston Private Wealth. “We have positive earnings posted, an energy market which has stabilized, and we’ll have fiscal spending that will benefit parts of the market that have lagged.”

And it is not just the US stock market that has gained. CNN noted that many markets around the world have surged by 20 percent or more from recent 2016 lows, with some up more than 30 percent.

Wednesday, 23 November 2016

Dow 50,000?

Markets rose on Tuesday.

The MSCI All Country World Index rose 0.3 percent. The S&P 500 rose 0.2 percent to another all-time high. The STOXX Europe 600 also rose 0.2 percent.

Tim Knight at Slope of Hope calls the latest rally in stocks The Persistent Ascent.

“I don’t see what’s going to slow this down at any point,” he wrote. “Dow 50,000, here we come.”

Tuesday, 22 November 2016

US stocks hit all-time highs on hopes of Trump boost to economy

Markets rose on Monday.

The S&P 500 rose 0.8 percent to an all-time high, the STOXX Europe 600 rose 0.3 percent and the MSCI Emerging Market Index rose 0.3 percent.

Oil surged. West Texas Intermediate crude rose 3.9 percent while Brent jumped 4.4 percent.

Bonds rose. The US 10-year Treasury yield fell four basis points to 2.32 percent.

“There’s optimism that it’s more likely that Trump is going to put us on an economic fast track versus Clinton,” said Terry Morris, managing director of equities at BB&T Institutional Investment Advisors.

However, JPMorgan Chase & Co. is doubtful that president-elect's fiscal plan will have the expected impact.

Michael Feroli, US economist at the bank, wrote on Friday that the “majority of the stimulus is expected to come through tax cuts and, relative to our prior forecast, should boost annualized GDP growth by about 0.25 percentage-point in the second half of 2017 and 2018, leaving the level of GDP about 0.4 percentage points higher at the end of 2018”.

Monday, 21 November 2016

Dow near record high, Nikkei in bull run

Major stock markets have been in rally mode in recent weeks.

The Dow Jones Industrial Average hit a record high of 18,923.06 last Tuesday. Although it pulled back later in the week, it was up 0.1 percent for the week.

Also doing well recently is the Nikkei 225. After declining 18 percent in the first half of the year, the index has risen more than 20 percent from its June low.

Some analysts think that the Nikkei 225's bull run is not over yet.

“A lot of things are lining up for Japanese equities,” said Bryan Goh, chief investment officer of Bordier & Cie. “It looks like the economy is stabilizing and the weak currency is certainly helping. There’s some momentum behind this bull run.”

Naoki Murakami, a market strategist at AllianceBernstein, said that Donald Trump's victory in the US election “is a very big regime change in U.S. economic policy that could be a game-changer for the yen and the Japanese stock market”.

Saturday, 19 November 2016

Markets mixed, bonds continue to fall

Markets were mixed on Friday.

The S&P 500 slipped 0.2 percent and the STOXX Europe 600 fell 0.4 percent.

Asian stocks were mixed. The Shanghai Composite Index fell 0.5 percent but the Nikkei 225 rose 0.6 percent.

Oil rose on Friday. Brent crude rose 0.8 percent while West Texas Intermediate crude rose 0.6 percent.

Bonds fell. The US 10-year Treasury yield rose 5.9 basis points to 2.337 percent to complete its largest two-week increase since November 2001.

Friday, 18 November 2016

US stocks rise but bonds fall as Yellen hints of rate hike

Stocks mostly rose on Thursday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 rose 0.6 percent. However, the Nikkei 225 was flat.

US Treasuries fell. The yield on the 10-year note rose to 2.278 percent from 2.222 percent on Wednesday after Federal Reserve Chair Janet Yellen told a congressional hearing that an increase in interest rates “could well become appropriate relatively soon”.

Yellen added that the “risk of falling behind the curve in the near future appears limited” and that future rate increases will be “gradual”.

Not everyone agrees with her.

Deutsche Bank chief economist Joe LaVorgna told CNBC on Thursday that Trump will give the economy a lot of fiscal stimulus and that could put the Fed “in a really, really tough spot”.

Thursday, 17 November 2016

Markets mixed amid US policy uncertainty

Markets were mixed on Wednesday.

Both the S&P 500 and STOXX Europe 600 fell 0.2 percent.

However, the Nikkei 225 jumped 1.1 percent earlier in the day.

Oil fell but bonds rose.

Annika Eiremo, a fund manager at Janus Capital Group Inc., thinks that “rates have room to go higher” and that it is “still early stages of a very uncertain time period in terms of what policy will be”.

Wednesday, 16 November 2016

Markets rise as bonds rebound

Markets rose on Tuesday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 0.3 percent.

Bonds rebounded. The US 10-year Treasury yield fell three basis points to 2.23 percent while Italy's 10-year yield fell 12 basis points to 1.96 percent.

Oil rose, with US crude surging 5.8 percent.

Brian Jacobsen, the chief portfolio strategist at Wells Fargo Funds Management, thinks that the market “could be handed off to a Santa Claus Rally”.

However, Jeffrey Gundlach, co-founder of DoubleLine Capital, said the stock market is in for a “bumpy ride” as expectations are dashed that President-Elect Donald Trump can quickly spur growth.

“The Trump win is not positive for consumer spending,” he said on Tuesday.

Gundlach also thinks that Trump's plans for the US economy are “bond unfriendly”, although he did recommend investors buy Treasuries on dips.

Tuesday, 15 November 2016

Bonds and emerging markets fall

Bonds and emerging markets fell on Monday.

US 10-year Treasury yields increased eight basis points to 2.24 percent. German, UK and Italian bonds also fell.

The MSCI Emerging Markets Index fell 1.1 percent.

However, the S&P 500 was little-changed while the STOXX Europe 600 rose 0.2 percent.

“Trump has introduced so much uncertainty -- around the fiscal outlook, the outlook for foreign demand for Treasuries given his protectionism and his views on China, uncertainty around the outlook for the Fed,” said John Davies, an interest-rate strategist at Standard Chartered.

Monday, 14 November 2016

US earnings recession over

The Wall Street Journal reports that the US earnings recession is over.

With more than 90% of S&P 500 companies having reported results for the latest quarter, earnings for the biggest U.S. companies are finally growing again. Third-quarter adjusted earnings are projected to increase 2.9% from the same period a year ago, according to FactSet. That marks the first year-over-year growth rate after five consecutive quarters of contractions.

The WSJ further reports that earnings growth this quarter is expected to improve to 3.5 percent followed by 11.4 percent and 10.5 percent in the first two quarters of 2017.

In another report, Bloomberg notes that among the nine instances since 1936 when companies emerged from an extended streak of profit declines, stocks posted gains in all but two, with the S&P 500 rising an average 12 percent over the following year.

On the other hand, Bloomberg does point out that the economy is "already showing signs of wobbling" while the WSJ points out that with stocks already near records, "there is no guarantee companies will be rewarded by investors" even if earnings keep rising.

Saturday, 12 November 2016

Markets mixed, US stock market may be close to peak

Markets were mixed on Friday.

The MSCI All-Country World Index fell 0.6 percent as the Emerging Markets Index plunged 2.9 percent.

However, in the US, the Dow Jones Industrial Average rose 0.2 percent to hit a record high even as the S&P 500 slid 0.1 percent.

Technical strategist Tom DeMark predicts that US stocks are on the verge of peaking and then subsequently tumbling by as much as 11 percent.

However, Warren Buffett thinks that over the longer term, stocks will continue rising.

Friday, 11 November 2016

Dow hits record high amid mixed markets

Markets were mixed on Thursday.

Asian stocks rose in the wake of the rally in the West the previous day. The Nikkei 225 in particular surged 6.7 percent.

In the US, the Dow Jones Industrial Average rose 1.2 percent to finish at a record high while the S&P 500 edged up 0.2 percent but the Nasdaq Composite fell 0.8 percent.

European stocks fell after rallying earlier in the day. The STOXX Europe 600 finished 0.3 percent lower.

Michael Reilly, chief investment officer for equities at TCW, said that “the market is expecting an emphasis on fiscal spending initiatives to jump-start the economy”.

However, Bruce McCain, chief investment strategist at Key Private Bank, warned that “as we get into the coming days and weeks, we’ll need to rethink a lot of our initial reactions” as there “are a lot of things we don’t know”.

Thursday, 10 November 2016

Markets rise on Trump victory

Markets rose on Wednesday after a surprise victory by Donald Trump in the US presidential election.

The S&P 500 rose 1.1 percent while the STOXX Europe 600 rose 1.5 percent.

However, the MSCI Emerging Markets Index fell 2.5 percent as Mexican and Brazilian shares sank.

The US 10-year Treasury yield jumped 22 basis points to 2.07 percent.

Wednesday, 9 November 2016

Markets rise as Americans vote

Markets rose on Tuesday as Americans went to vote.

The S&P 500 rose 0.4 percent while the STOXX Europe 600 rose 0.3 percent.

Safe haven assets declined. US 10-year notes fell and yields rose three basis points to 1.86 percent while gold fell 0.4 percent.

Earlier on Tuesday, Asian stocks mostly shrugged off a report that China's exports fell for a seventh consecutive month in October.

The Shanghai Composite Index rose 0.5 percent but the Nikkei 225 finished flat.

Tuesday, 8 November 2016

Markets rise after FBI clears Clinton

Markets rose on Monday following the FBI's announcement on Sunday that Democratic presidential candidate Hillary Clinton's handling of e-mails was not a crime.

The S&P 500 jumped 2.2 percent and the STOXX Europe 600 rose 1.5 percent.

Earlier in the day, Asian stocks had been the first to react. The Nikkei 225 jumped 1.6 percent while the Shanghai Composite rose 0.3 percent.

Oil rose, with West Texas Intermediate crude rising 1.9 percent and Brent rising 1.3 percent.

Safe haven assets fell. US 10-year Treasury yields rose five basis points to 1.82 percent.

Monday, 7 November 2016

FBI clears Clinton but US election still poses risks for stock market

The FBI said on Sunday it stood by its earlier finding that no criminal charges were warranted against Democrat Hillary Clinton for using a private email server for government work.

This should allow Clinton to coast towards victory in the presidential election on Tuesday. The latest Reuters/Ipsos poll shows Clinton with a 5 percentage point lead over her rival, Republican candidate Donald Trump, while the Reuters/Ipsos States of the Nation project estimates that Clinton has a 90 percent chance of winning the election.

Still, with the uncertainty surrounding the US elections coupled with the weak global economic climate, former IMF chief economist Simon Johnson thinks that the stock market is at risk of a crash.

[G]rowth and employment around the world look fragile. A big adverse surprise – like the election of Donald Trump in the US – would likely cause the stock market to crash and plunge the world into recession.

Meanwhile, William Watts at MarketWatch thinks there is a risk for stocks even if Hillary Clinton wins.

Investors may have qualms about the prospect of a Donald Trump presidency, but the biggest near-term threat to stocks is posed by the outside possibility that neither he nor Hillary Clinton emerges a clear winner on Tuesday.

Saturday, 5 November 2016

US stocks fall for ninth day

Markets fell on Friday.

The S&P 500 fell 0.2 percent to extend its decline to nine consecutive days, its longest slide since 1980.

US 10-year Treasury yields fell four basis points to 1.78 percent.

Oil fell. US crude fell 1.3 percent and Brent fell 1.7 percent.

A report showing that US payrolls rose 161,000 last month failed to sustainably boost stocks.

Dennis Debusschere, a senior managing director and global portfolio strategist at Evercore ISI, said: “All expectations of the rate outlook and by extension the markets are being muted by election uncertainty.”

Friday, 4 November 2016

S&P 500 falls again

Markets mostly fell on Thursday.

The S&P 500 fell 0.4 percent, an eighth consecutive decline that is its longest run of losses since 2008.

The US dollar fell against the euro and the yen while the British pound jumped 1.3 percent against the US dollar after the Bank of England said it is no longer expecting to cut interest rates this year.

The US 10-year Treasury yield rose one basis point to 1.81 percent.

Oil fell. West Texas Intermediate crude fell 1.5 percent while Brent declined 1.1 percent.

Thursday, 3 November 2016

Markets fall as Fed sees strengthened case for rate hike

Markets fell on Wednesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 1.8 percent.

Oil fell, with US crude declining 2.8 percent.

The yield on the US 10-year Treasury note fell to 1.799 percent from 1.822 percent on Tuesday.

The Federal Reserve left interest rates unchanged as expected on Wednesday but said that “the case for an increase in the federal funds rate has continued to strengthen”.

“This is as close as you can get to a data-dependent Fed saying they are most likely to go in December,” said Brent Schutte, chief investment strategist of Northwestern Mutual Life Insurance Co.’s wealth-management unit.

After the Fed decision, the probability traders are assigning to a rate hike rose to 78 percent from 68 percent on Tuesday, according to data compiled by Bloomberg.

Wednesday, 2 November 2016

Investors shift to safe assets as BoJ leaves policy unchanged, US election nears

Stocks mostly fell on Tuesday.

The S&P 500 fell 0.7 percent and the STOXX Europe 600 fell 1.1 percent.

The Nikkei 225 edged up 0.1 percent though after the Bank of Japan left its monetary policy unchanged.

Safe haven assets rose. The yield on the US 10-year Treasury note fell to 1.822 percent from 1.834 percent on Monday. Gold rose 1.2 percent.

“As we move closer to the election, people start getting more and more jittery,” said Mohit Bajaj, director of exchange-traded fund trading solutions at WallachBeth Capital.

Indeed, CNBC reports that during presidential election years, the S&P 500 rises 56 percent of the time in November for an overall average gain of about half a percent. In non-presidential election years, the S&P 500 rises three-fourths of the time for an average gain of 1.7 percent.

Tuesday, 1 November 2016

Markets fall ahead of US elections

Markets mostly fell on Monday.

The S&P 500 was flat but the Dow Jones Industrial Average fell 0.1 percent. The S&P 500 was down 1.9 percent for the whole of October, its worst performance since January.

Elsewhere, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.1 percent.

US crude oil fell 3.8 percent, its biggest decline since 23 September.

The yield on the US 10-year Treasury note fell to 1.834 percent from 1.847 percent on Friday.

CNBC reports that stocks could continue to trade hesitantly ahead of the US elections.

Julian Emanuel, equity and derivative strategist at UBS, reportedly said: "When the election is as contentious as this one has been with so much back and forth, and the prevalence of the third-party candidate, what our work has shown is the market has tended to trade very indecisively the month before and several months after."