Tuesday, 1 August 2017

Markets fall as analysts see trouble ahead for stocks

Markets were mostly lower on Monday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.2 percent.

The euro rose above US$1.18 for the first time since January 2015.

“The longer this U.S. dollar slump goes on, the more worrying it becomes. It is this that is behind the ongoing rise in the euro and sterling, and it is this that spells trouble ahead for stock markets as August looms,” said IG’s chief market analyst Chris Beauchamp in an note.

However, Avi Gilburt said that while a pullback is approaching, that pullback “will set up the next rally phase”, taking the S&P 500 “toward the 2,600 region into 2018”.

Strategas Research technical analyst Todd Sohn also warned that “there's a seasonal risk into August” but added that once October starts, “you usually see the bullish equities seasonals take over”.

However, for the longer term, analysts at Goldman Sachs said in its third-quarter outlook that annualised returns on the S&P 500 10 years out were in the single digits or negative 99 percent of the time when starting with valuations at current levels.

In light of this, Goldman suggested a look at international small caps, which it said are “well positioned to benefit from the global economic expansion”.

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