Tuesday, 31 January 2017

Markets fall as Trump orders travel restrictions

Markets fell on Monday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.5 percent.

Deutsche Bank analysts Jim Reid and Craig Nichol wrote in a note to clients on Monday: “It just seems that there are too many uncertainties, unknowns and major policy changes attached to a Trump presidency for it to be a smooth year.”

William Watts at MarketWatch wrote that “the path higher might no longer be so smooth”.

“The weekend chaos and backlash that followed President Donald Trump’s signing of an executive order late Friday temporarily restricting immigration from seven Muslim-majority countries was blamed for a “risk-off” reaction across global financial markets,” wrote Watts.

“Market bulls argue that Trump’s pro-growth agenda, which is centered on tax cuts, deregulation and infrastructure spending, remains a positive for the economy and markets,” he said, citing analysts at Wells Fargo Investment Institute, who wrote in a note that “these pullbacks due to uncertainties are likely to be opportunities to buy”.

However, he also noted a remark from David Kotok, chairman and chief investment officer at Cumberland Advisors, that Trump's “fragmented policy combined with obfuscation is now a growing detriment to growth acceleration”.

Monday, 30 January 2017

US stock market expensive, record-breaking run may just be "sugar-high"

The S&P 500 rose one percent last week, hitting a record high in the process before slipping at the end.

Some analysts doubt that the US stock market will continue its strong run though.

Roger Aitken at Forbes wrote that US stocks are “unlikely to perform better” during Donald Trump’s tenure as 45th President than under many of his predecessors.

Citing Source ETF, an independent ETF provider authorised and regulated by the Financial Conduct Authority in the UK, Aitken said that the S&P 500 delivered an annualized return of 13.9 percent under Barack Obama and 15.2 percent under Bill Clinton.

However, with the S&P 500 currently at a Shiller price-earnings ratio of more than 28, it is unlikely that it will do better under President Trump.

Aitken quoted Paul Jackson, Head of Research at Source, as saying that “we would favour treasuries over the S&P 500 for the rest of the first quarter”.

Lawrence Summers, writing at the Washington Post, wrote that “markets and the economy are most likely enjoying a sugar-high that will not last a year”.

Saturday, 28 January 2017

Markets fall

Markets fell on Friday.

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

The US 10-year Treasury yield fell two basis points to 2.48 percent.

West Texas Intermediate crude fell 1.2 percent.

Friday, 27 January 2017

Markets mixed but Dow at record high as earnings come through

Markets were mixed on Thursday.

In the US, the Dow Jones Industrial Average rose 0.2 percent to a fresh record high but the S&P 500 dipped less than 0.1 percent.

Elsewhere, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 1.8 percent.

Despite the recent record-breaking run, Mark Foster, chief investment officer at Kirr Marbach & Co., an investment advisory firm, thinks that the US market is fairly valued.

“We need to see earnings come through, but we are starting to see that, and on top of that we have a new administration that is offering tax and regulatory relief, which is making people feel better about the market,” he said.

Of the 120 S&P 500 companies that have released quarterly results so far, 78 percent are beating earnings estimates, according to data from Fundstrat.

Thursday, 26 January 2017

US stock indices at record highs as Dow breaks 20,000

Stock markets were buoyant on Wednesday.

US stock indices rose to record highs, with the S&P 500 and Dow Jones Industrial Average both climbing 0.8 percent, the latter breaking the 20,000 level for the first time.

The STOXX Europe 600 jumped 1.3 percent, its biggest one-day percentage gain since 9 November last year, to its highest close in more than a year.

In Asia, the Nikkei 225 led gains, surging 1.4 percent after setting a 7-week closing low on Tuesday.

“It’s psychologically huge,” said Neil Wilson, senior market analyst at ETX Capital, of the Dow breaking the 20,000 level.

“Dow 21,000 will soon become the next media obsession,” said Quincy Krosby, market strategist at Prudential Financial.

Others see improved earnings outlooks as the main factor behind the rally.

“What’s happening with earnings is driving gains, not just in the U.S., this is a global rally,” said Ryan Detrick, senior market strategist at LPL Financial, a view echoed by Kim Forrest, senior analyst and portfolio manager at Fort Pitt Capital Group.

Wednesday, 25 January 2017

S&P 500 at new record as bull market continues

Markets mostly rose on Tuesday.

The S&P 500 rose 0.7 percent to a record high. The STOXX Europe 600 rose 0.3 percent, ending a three-day losing streak. In Asia, the Shanghai Composite rose 0.2 percent but the Nikkei 225 ended down 0.6 percent.

“Earnings are coming in generally better than expected while economic data are also good. We believe the medium-term bias in equity markets is to the upside,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

However, Cavanaugh added that “there is a lot of complacency” and “we expect a lot of short-term volatility”.

CNBC reports that the Trump trade is back.

“Our take is that the longer-term bull market is continuing,” said Ari Wald, technical strategist at Oppenheimer. “I think the market could be up 10 percent this year.”

Ward McCarthy, chief financial economist at Jefferies, is less confident. He thinks the stock and bond markets “are going to be in range mode until something signals them to break one way or the other”.

Tuesday, 24 January 2017

Japan's stock market leads falls but rally may not be over

Markets fell on Monday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 1.3 percent.

While Japanese stocks fell on Monday, Russ Koesterich, portfolio manager for BlackRock's Global Allocation Team, thinks that the Japanese rally may not be over.

Among the positive factors for the Japanese stock market, Koesterich listed reasonable prices (cheapest in the developed world), supportive monetary policy, rising inflation and improving corporate sector

Monday, 23 January 2017

As Trump era begins, S&P 500 at risk of falling

US stocks fell last week. The S&P 500 lost 0.2 percent for its second consecutive weekly decline.

Reuters cites history in saying that there could be more losses in the coming month.

For financial markets, the Trump era begins on Monday, and if history is any guide the following month should be a rocky one for Wall Street but positive for the dollar.

The S&P 500 has fallen a median 2.7 percent in the month after each new president has taken the keys to the White House since Herbert Hoover did so in January 1929, according to Reuters analysis.

Meanwhile, John Hussman, who has been warning of a weak US stock market ahead, notes even more negative signs in his latest article.

Last week, an unusual set of classifiers that we monitor raised red flags, with two of our three “crash signatures” now suggesting the likelihood of a market loss in excess of -25% in the months ahead (the last time these signatures were active was between April-October 2008). This would potentially represent the opening salvo of a more extended completion to the current market cycle.

Saturday, 21 January 2017

Markets mixed as Trump inaugurated but face risk of “severe bear market”

Markets were mixed on Friday.

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

While markets were mostly focused on Donald Trump's inauguration as President of the United States, David Joy, chief market strategist at Ameriprise Financial, noted that earnings “have been a mixed bag so far”.

“We’ll need to see some follow-through there in order to justify valuations,” Joy said. “But recent economic data has been encouraging, including here, in Europe, and in China.”

Indeed, Barbara Kollmeyer at MarketWatch writes that “this bull market will keep going, Trump angst or no.”

However, MarketWatch columnist Market Hulbert says that the “biggest danger facing stock investors now is a severe bear market”.

Invoking contrarian principles, he noted that at the World Economic Forum in Davos, “the possibility of a financial crisis doesn’t even make its list of top 10 global risks” whereas in early 2009, at the bottom of the 2007-2009 bear market and financial crisis, the Forum had identified “Asset Price Collapse” as the top global risk.

He concluded that “someday we will look back at the World Economic Forum’s current sanguine assessment of financial risks with the disdain that we today view its doom and gloom assessment from 2009”.

Friday, 20 January 2017

Markets mixed but Dow down for fifth day amid anxiety before Trump inauguration

Markets were mixed on Thursday.

The Nikkei 225 rose 0.9 percent while the STOXX Europe 600 fell less than 0.1 percent.

However, in the US, the S&P 500 and the Dow Jones Industrial Average fell 0.4 percent, the latter declining for the fifth consecutive day.

“The next logical move may be down before it regroups and moves higher,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

Mark DeCambre at MarketWatch thinks that Donald Trump's inauguration is set to unleash a cascade of stock-market anxiety.

DeCambre wrote that the “boundless uncertainty” of a Trump presidency “has investors tied up in knots” and quotes Keith Wade, Chief Economist at Schroders, in saying: “prepare for a reappraisal of the Trump trade”.

Thursday, 19 January 2017

Markets rise but uncertainty over Trump policies “biggest risk for markets”

Markets were mostly up on Wednesday.

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

Some analysts think that the market will have difficulty regaining momentum.

“Short-term overbought conditions continue to challenge the major U.S. equity indices, which have exhibited weak short-term momentum in recent weeks,” said Katie Stockton, chief technical strategist at BTIG.

Quincy Krosby, market strategist at Prudential Financial, thinks that the market is expecting clarity over the first few months of Donald Trump's administration. “There remains some trepidation with regard to trade policy,” Krosby said.

Indeed, Lukas Daalder, a chief investment officer of Dutch asset management firm Robeco, told Reuters that uncertainty over Trump's economic policies is the biggest risk for markets this year.

Wednesday, 18 January 2017

Markets fall but laggards may shine

Markets fell on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 fell 1.5 percent.

The UK stock market was among the hardest hit on Tuesday after Prime Minister Theresa May said the UK would make a clean break with the European Union. The FTSE 100 fell 1.5 percent.

With stocks starting the week on a weak note, some analysts are looking for ways to beat a falling market.

Mark Hulbert at MarketWatch writes that “with anxiety about the Trump rally stalling”, it may be time for low-volatility stocks to shine as “they usually beat the market when it’s falling”.

Fundstrat's Tom Lee thinks that 2017 is likely to be a very good year for laggards of the S&P 500 and recommends oil and gas drillers, metal and glass containers, fertilizers and agricultural chemicals, IT consulting, tanker stocks, and metals and mining.

Tuesday, 17 January 2017

Stocks fall with pound but sterling “might be close to floor”

Stocks fell on Monday, as did sterling, amid concerns that UK Prime Minister Theresa May is prepared to lead Britain out of the European Union’s single market.

The STOXX Europe 600 fell 0.9 percent. The British pound fell 1.1 percent lower to US$1.2052 after touching US$1.1986, its weakest level since October.

“Markets are trading in risk aversion mode,” said Neil Jones, the head of hedge-fund sales at Mizuho Bank in London.

Earlier in Asia, the Nikkei 225 fell 1.0 percent.

Nothwithstanding the fall on Monday, Marcus Ashworth at Bloomberg thinks that sterling can survive Britain's exit from the European Union.

“Monday saw the pound dip to its weakest versus the euro since November and fall briefly below $1.20, the lowest level since the Oct. 7 flash crash,” he wrote. “If this constitutes the bulk of the hard Brexit news, we just might be close to the floor for sterling versus the euro.”

Monday, 16 January 2017

Shenzhen index plunges

Stocks fell in China, with the country's second-largest equity market plunging the most in 10 months, although a rebound late in the day limited losses.

Bloomberg reports:

The Shenzhen Composite Index sank as much as 6.1 percent, the biggest loss since Feb. 29, with at least 80 stocks falling by the 10 percent daily limit. The Shanghai Composite Index dropped as much as 2.2 percent in minutes before paring losses...

The Shenzhen gauge trimmed declines to 3.6 percent at 2:56 p.m. local time, while the Shanghai Composite was down 0.4 percent in a fifth day of losses -- its longest losing streak since August 2015.

The report added that the Shenzhen index has lost 11 percent since foreign investors were allowed to buy the city’s shares through an exchange link with Hong Kong last month.

Saturday, 14 January 2017

Stocks rise amid sign investors bracing for downturn

Stocks mostly rose on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.8 percent.

However, the Shanghai Composite Index fell 0.2 percent after China reported that its exports fell in December from a year earlier. The Shenzhen index fell a hefty 1.6 percent.

Oil also fell. West Texas Intermediate crude fell 1.2 percent while Brent fell 1.0 percent.

Despite the gain on Friday, US stocks finished the week down 0.1 percent.

A MarketWatch report sees worrying signs for the market ahead.

It cites Bespoke Investing Group in saying that the most heavily shorted stocks have not taken part in the stock market rally so far. According to Bespoke, this goes against the usual trend in rising markets, and suggests a cause for concern for the broader market.

Another MarketWatch report notes that demand for one-month call options tied to the CBOE Volatility Index has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump.

Friday, 13 January 2017

Markets fall amid fear gains could unravel "very quickly"

Markets fell on Thursday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 fell 1.2 percent.

Michael McCarthy, Sydney-based chief market strategist at CMC Markets, said: “There is a growing fear that recent positive moves are based on bombast, and could unravel very quickly.”

Indeed, Vanguard founder Jack Bogle told CNBC on Thursday that while US president-elect Donald Trump's proposals may be bullish for stocks in the near term, they are “bad for society”, the market and the economy in the long term.

In contrast, Kevin Marder at MarketWatch thinks that there are more gains ahead for the stock market.

Thursday, 12 January 2017

Markets rise but drug stocks hit by Trump call

Markets rose on Wednesday.

The S&P 500 rose 0.3 percent despite a hit to health-care stocks after President-elect Donald Trump said at a press conference that he would force price bidding for drugs.

The STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.3 percent.

While Trump's comments on drug pricing primarily hurt health-care stocks on Wednesday but left the rest of the US stock market relatively unscathed, the US dollar fell.

Analysts at Westpac noted that the lack of clarity provided on future fiscal policies suggests that “markets arguably priced in too much reflation without any solid policy detail”.

Indeed, Thomas H Kee Jr, founder of Stock Traders Daily, thinks that the stock market has reacted prematurely to the potential benefits of Trump's policies and that a decline of 5-7 percent may begin “almost immediately”.

Wednesday, 11 January 2017

US stocks unchanged amid diverging projections

Markets were mixed on Tuesday.

The S&P 500 closed unchanged, the STOXX Europe 600 edged up 0.1 percent and the Nikkei 225 fell 0.8 percent.

Oil fell. West Texas Intermediate crude fell 2.2 percent while Brent fell 2.4 percent.

US Treasuries were little-changed on Tuesday, with the 10-year yield at 2.378 percent.

However, DoubleLine Capital chief executive Jeffrey Gundlach warned on Tuesday that there will be “trouble for equity markets” if the 10-year Treasury yield moves beyond 3 percent.

Gundlach expects markets to reverse their post-election moves, as does Larry Summers, who described the market rally since Election Day as a “sugar high”.

In contrast, Steve Grasso thinks that there is a “tremendous runway for stocks to move higher”.

Tuesday, 10 January 2017

Markets fall, “may see significantly more downside”

Markets failed to sustain the previous week's rally on Monday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.5 percent.

Oil fell, with West Texas Intermediate crude tumbling 3.8 percent.

The US 10-year Treasury yield fell five basis points to 2.37 percent.

Michael Hewson, a markets analyst at CMC Markets, noted: “Last week’s optimism is giving way to a raft of profit taking.”

Indeed, Sven Henrich of NorthmanTrader.com thinks that the current market rally is on its last legs.

“Risk has been priced out of the market,” he said. If the S&P 500 falls below its 25-day moving average, “we may see significantly more downside”.

Monday, 9 January 2017

Dow falters before 20,000

Despite a record breaking run by US stocks last week, the Dow Jones Industrial Average again failed to break the 20,000 level.

While the S&P 500 rose 1.7 percent to an all-time high of 2,276.98, the Dow hit an intra-day high of 19,999.63 on Friday but fell back to close at 19,963.8.

Bloomberg reported that the “Dow’s flirtation suggests to some analysts that more than chance is keeping a lid on its progress -- that trading stops in the form of sell orders are pressuring the index each time it approaches 20,000.”

Indeed, Tom DeMark thinks that the stock market may be in a topping process. “It’s unanimous, every market, even the derivatives, they’re all identifying tops at this time, all upside projections,” he said.

Another Bloomberg report noted the large inflows into US stocks seen since 8 November and that this inflow is vulnerable to reversal.

Saturday, 7 January 2017

US stocks hit record highs but may see sell-off

Markets were mixed on Friday.

The US stock market performed best, with the S&P 500 and Nasdaq Composite rising 0.4 percent and 0.6 percent respectively to new all-time highs.

Elsewhere, though, the STOXX Europe 600 slipped 0.1 percent and the Nikkei 225 fell 0.3 percent.

Helping to boost US stocks on Friday was the employment report, which showed that the US economy added 156,000 jobs in December.

“This report is very good,” said Michael Arone, chief investment strategist at State Street Global Advisors.

However, the US stock market's record-breaking run is turning some analysts cautious.

Thomas Lee, managing partner and co-founder of Fundstrat Global Advisors, wrote in a note on Friday that the “bond market is signaling inflation confusion” and a flattening long-term yield curve. That “generally leads to a 5 to 7 percent selloff”.

Meanwhile, Jim Paulsen, chief investment strategist at Wells Capital Management, told CNBC on Friday that the 2017 stock market reminds him of the one in 1987, when a recovering economy led to an “explosion” in the stock market and bond yields before the market crashed.

Friday, 6 January 2017

Markets mixed but US stocks “could explode much higher”

Markets were mixed on Thursday.

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

Earlier in Asia, the Nikkei 225 fell 0.4 percent but the Hang Seng jumped 1.5 percent.

Meanwhile, macro strategist and trader Boris Schlossberg sees more gains for US stocks ahead.

Schlossberg told CNBC on Wednesday that the “incredible potential of deregulation, possible tax cuts and fiscal policy” from an incoming Donald Trump administration could provide “fuel for much higher-than-expected earnings and much better-than-expected performance in 2017”.

In fact, Schlossberg thinks that “the market could explode much higher on sentiment alone”.

Oppenheimer technical analyst Ari Wald also said on Wednesday that “the longer-term picture is still bullish” and thinks that the S&P 500 could hit 2,500 this year.

Thursday, 5 January 2017

Markets mixed, bond market faces major reversal

Markets were mixed on Wednesday.

The S&P 500 rose 0.6 percent and the Nikkei 225 surged 2.5 percent but the STOXX Europe 600 fell 0.1 percent.

James Meyer, chief investment officer at Tower Bridge Advisors, wrote in an email to clients that the mood “continues to be positive”.

However, Remo Fritschi, institutional sales manager at ADS Securities, wrote in a note that “the appetite to push higher still seems lacking”.

Oil rebounded, with both West Texas Intermediate and Brent crude rising 1.8 percent.

US Treasuries fluctuated between gains and losses to finish little-changed on Wednesday.

However, Paul Schmelzing at Harvard University sees a bond market reversal coming.

The economist Eugen von Böhm-Bawerk once opined that “the cultural level of a nation is mirrored by its interest rate: the higher a people’s intelligence and moral strength, the lower the rate of interest”. But as rates reached their lowest level ever in 2016, investors rather worried about the “biggest bond market bubble in history” coming to a violent end. The sharp sell-off in global bonds following the US election seems to confirm their fears. Looking back over eight centuries of data, I find that the 2016 bull market was indeed one of the largest ever recorded. History suggests this reversal will be driven by inflation fundamentals, and leave investors worse off than the 1994 “bond massacre”.

Wednesday, 4 January 2017

Rally in stocks cut short by oil stumble but fundamentals "strong enough"

Stocks rose on Tuesday.

The US stock market kicked off 2017 trading by resuming its rally. The S&P 500 rose 0.9 percent.

Elsewhere, the STOXX Europe 600 rose 0.7 percent while the MSCI Asia Pacific Index excluding Japan Index rose 0.4 percent.

However, the stock rally was held back by a fall in oil prices. West Texas Intermediate crude fell 2.6 percent on Tuesday while Brent fell 2.4 percent amid doubts over the ability of OPEC and its partners to balance the market.

Gene McGillian, manager of market research for Tradition Energy, said that “there’s a lot of nervousness about whether these guys will follow through with their cuts and how fast U.S. and Canadian production picks up”.

In spite of the stumble in oil prices, some analysts think that stocks will continue to rally. Peter Andersen, chief investment officer at Fiduciary Trust Co, thinks that “the fundamentals are strong enough to keep the market rising”.

Tuesday, 3 January 2017

European stocks rise, look set for a "solid 2017"

European markets rose on the first trading day of 2017.

With most other major markets closed, Europe took the spotlight on Monday, with the STOXX Europe 600 rising 0.5 percent.

Italy's FTSE MIB was the outperformer, jumping 1.7 percent. The DAX 30 rose 1.0 percent.

Supporting European markets were positive economic data. Final Eurozone manufacturing PMI data showed a reading of 54.9 in December, the highest level since April 2011.

The gain on the first trading day of the year marked a turnaround from 2016, when the STOXX Europe 600 fell 1.2 percent.

Some analysts think that European equities are set for a solid 2017.

“Bond yields and global economic momentum are two of the most important macro drivers impacting the performance of European equities, and both factors are now increasingly supportive,” equity strategists at Credit Suisse said in their year-ahead outlook.

Monday, 2 January 2017

After gains in 2016, stocks could see pullbacks

Stock markets mostly rose in 2016.

The United States stock market led the major markets. The Standard & Poor's 500 Index rose 9.5 percent.

Asian stocks saw smaller gains. The MSCI All-Country Asia Pacific Index rose 2.3 percent.

However, despite a year-end rally, European stocks failed to completely erase losses at the beginning of the year. The STOXX Europe 600 Index ended the year down 1.2 percent.

Some analysts think a short-term pullback in stocks is likely.

Diane Jaffee, senior portfolio manager at TCW, said that selling to take advantage of possibly lower taxes this year could result in pullbacks.

Mark Arbeter, president of Arbeter Investments, wrote in a note that the softness at the end of 2016 indicates that “some unwinding of the election trade was due”.

However, some anaysts are optimistic for 2017 as a whole.

In an article for ABC News, Dave Sheaff Gilreath, a founding principal of Sheaff Brock Investment Advisors LLC, said that “investors could be in for a very good year”. He wrote that while “the market has probably gotten a little ahead of itself in the short term ... the tea leaves for all of 2017 look good”.