Wednesday, 31 January 2018

Markets fall but pullback a “buying opportunity”

Markets fell on Tuesday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.9 percent and the Nikkei 225 fell 0.7 percent.

“Concerns are starting to enter the market that inflation could be catching up and higher interest rates could pour cold water on the bull run,” said Jasper Lawler, head of research at London Capital Group, in a note.

Other analysts remain sanguine.

“Despite the hiccup in the market, the bigger picture remains positive: The economy is finally growing faster than in the previous nine years, and businesses, especially job-creating small businesses, are doing well,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

Joshua Mahony, market analyst at IG, said that with Treasuries “selling off throughout the beginning of 2018, there is reason to believe that market confidence will not be gone for long, as investors shift away from bonds amid improved economic and corporate performance”.

Indeed, while some analysts attribute the market declines to a fear of rising interest rates, Tom Lee, co-founder and head of research Fundstrat Global Advisors, said that “it's good for rates to go up because it creates reflation expectations which is good for nominal growth”.

Oppenheimer technical analyst Ari Wald expects only a brief pullback of about 3 to 5 percent and concluded: “We think the assumption is the bull market is intact and the pullbacks are a buying opportunity.”

Tuesday, 30 January 2018

Markets fall as bond yields hit multi-year highs

Markets fell on Monday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.2 percent and the MSCI Asia Pacific Index fell 0.2 percent.

The US 10-year Treasury yield rose four basis points to 2.70 percent, the highest in almost four years, and the German 10-year yield jumped seven basis points to 0.69 percent, the highest in more than two years.

The sharp moves on Monday came after Dutch central bank president Klaas Knot told Dutch current affairs program Buitenhof on Sunday the European Central Bank should make it clear how it will end its asset purchases as soon as possible after the current bond buying programme ends in September.

“There is no reason whatsoever to continue the programme”, Knot said. “I feel that we need to be clear about this.”

“The forward looking return on equities has come down marginally because of the valuation issue, and at the same time, global investors are looking at bond yields which have risen, maybe making global bonds a little more attractive,” said Kevin Caron, a senior portfolio manager at Washington Crossing Advisors. “At some point you would expect to see a rotation out of one and into another.”

Monday, 29 January 2018

US stock market's “parabolic move” may be bullish signal

The S&P 500 rose 2.2 percent last week, marking its fourth consecutive weekly gain.

“The herd is running into the market at the moment, and that’s giving the market some additional legs,” said Matt Schreiber, president and chief investment strategist at WBI Investments.

To Tom Lee, co-founder of Fundstrat Global Advisors, this is a bullish signal for the rest of the year.

Lee described the latest rally as a “parabolic move”, adding: “The only 2 years where this ended poorly was 1929 and 1946-but in both instances, it was higher THEN lower.”

Saturday, 27 January 2018

US stocks hit new record but pullback “very likely”

Markets mostly rose on Friday.

The S&P 500 jumped 1.2 percent to another record high and the STOXX Europe 600 rose 0.5 percent.

in Asia, the Nikkei 225 fell 0.2 percent but the Hang Seng surged 1.5 percent to a record high.

A report on Friday showed that the US economy grew at a 2.6 percent rate in the fourth quarter of 2017. Growth was powered by consumers and businesses but held back by declining inventories and a wider trade deficit.

Ian Winer, head of equities at Wedbush Securities, said that the report was “slightly disappointing but I think people who believe in the president and the tax reform and all that stuff aren’t all that concerned with Q4 gross domestic product”.

Indeed, investors see more gains ahead for the stock market, if funds inflow is anything to go by. According to a Bank of America Merrill Lynch report on Friday, funds took in a record $33.2 billion over the last week.

With equity exposure rising at the fastest pace in ten years and cash allocation at a record low, BAML said that a tactical pullback in the S&P 500 to 2,686 is now “very likely”.

Friday, 26 January 2018

US stocks hit new records but European stocks fall

The US stock market rally continued on Thursday, with the S&P 500 rising 0.1 percent to another record high.

"The numbers companies are releasing, along with the upbeat views from executives, is helping analysts lift their estimates and that's helping stocks advance," said Mark Luschini, chief investment strategist at Janney.

In contrast, the STOXX Europe 600 fell 0.6 after the European Central Bank said eurozone growth was surprisingly strong.

Thursday, 25 January 2018

Markets mixed but “nothing can stop this market”

Markets were mixed on Wednesday.

The S&P 500 fell 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent.

Elsewhere, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.8 percent but the Shanghai Composite rose 0.4 percent.

Wednesday's fall notwithstanding, a CNBC report noted that the US stock market has made its best start to a year in 31 years and this spells even more gains for the rest of 2018.

“With a 6.1 percent year to date gain and just three down days in the fifteen trading days of 2018, nothing can seemingly stop this market in 2018,” wrote analysts at Bespoke Investment Group on Wednesday.

However, Max Wolff, chief economist at The Phoenix Group, told CNBC that the stock market rally has been just a “string of sugar highs” but “a longer sustainable run has been elusive”.

“My guess is the second half of 2018, you start having to pay for it, some of this partying is going to produce more hangover than bliss,” added Wolff.

Wednesday, 24 January 2018

Markets rise, “blowoff” rally to make cash holders “feel pretty stupid”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent to another record high, the STOXX Europe 600 rose 0.2 percent to its highest close since August 2015 and the Nikkei 225 jumped 1.3 percent to close above 24,000 for the first time since November 1991.

Markets rose after the US Congress passed a three-week funding measure on Monday that ended a three-day partial government shutdown.

And there could be more gains ahead.

Millenials, those born between the early 1980s and early 2000s, who had been the most reluctant demographic to buy risk assets, now appear to be ready to join the party. A survey released on Tuesday by BlackRock indicated a big jump in millennial interest in exchange-traded funds.

Bridgewater Associates founder Ray Dalio told CNBC on Tuesday that “everything is pretty good with a big jolt of stimulation coming from changes in tax laws” and predicts “a market blowoff” rally.

“If you're holding cash, you're going to feel pretty stupid,” he added.

Tuesday, 23 January 2018

US stocks hit record again but housing market could “come down hard”

US stocks rose to record highs again on Monday, with the S&P 500 gaining 0.8 percent.

However, after the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole, money manager James Stack is getting nervous.

According to Bloomberg, Stack predicted the housing crash in 2005 and now says: “It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial.”

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said, adding that the market is likely to “come down hard” with the next recession.

However, Bloomberg also noted: “Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around.”

Saturday, 20 January 2018

Markets rise, strategist sees bull run for another 11 years

Markets rose on Friday.

The S&P 500 rose 0.4 percent to close at another record high, the STOXX Europe 600 rose 0.5 percent to the highest level since August 2015 and the Nikkei 225 rose 0.2 percent.

Investors shrugged off worries about a possible US government shutdown. Mick Mulvaney, chief of the Office of Management and Budget, said on Friday that odds of a shutdown occurring are 50-50.

“For traders, many are looking beyond the beltway and finding fundamentals in US companies as sound as they've been in a long time,” said Mike Loewengart, vice president of investment strategy at E-Trade.

“This reporting season should confirm continuity of synchronized global growth and start to provide clarity on the impact of tax reform on earnings and prospects for rising shareholder distributions,” said Dubravko Lakos-Bujas, head of US equity strategy at JP Morgan.

Indeed, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC that “2029 is the peak of this equity market cycle”, and by then the S&P is likely to be between 6,000 to 15,000.

Friday, 19 January 2018

Markets mixed, “very, very dangerous to be out of the market”

Markets were mixed on Thursday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.4 percent but the Shanghai Composite rose 0.9 percent.

Investor sentiment got a boost from China's economic growth report, which showed an acceleration in 2017 for the first time in seven years.

However, worries in the US over a possible partial government shutdown weighed on markets.

“I wouldn’t be surprised if markets made a small retreat, or at least took a breather given the threat of a shutdown this weekend,” said Lee Wild, head of equity strategy at Interactive Investor.

However, over the longer term, analysts appear to remain optimistic on stocks.

“Historically, in an environment of slowly rising yields the market has done very well,” said Randy Frederick, vice president for trading and derivatives at the Schwab Center for Financial Research.

Indeed, Alan Higgins, chief investment officer at Coutts & Co, pointed out that the “last two years of the bull markets are the best”, with a return of at least 30 percent.

“So it’s very, very dangerous to be out of the market,” he added.

Thursday, 18 January 2018

US stocks hit all-time highs but may be “on edge of chaos”

Markets were mixed on Wednesday.

The S&P 500 rose 0.9 percent to another all-time high but the STOXX Europe 600 fell 0.1 percent and Asian markets were mixed.

With the resumption of the rally, Craig Birk, executive vice president of portfolio management at Personal Capital, said he did not see “anything that will bring a shock to the market”.

However, Peter Boockvar, chief investment officer at wealth manager Bleakley Financial Group, said the market is “extraordinarily stretched”.

Francesco Filia, chief executive at asset management firm Fasanara Capital, told CNBC that markets are “on the edge of chaos” with valuations “totally disconnected from fundamentals”.

Wednesday, 17 January 2018

US stocks fall amid undiminished investor optimism

Markets were mixed on Tuesday.

The S&P 500 fell 0.4 percent but the STOXX Euro 600 rose 0.1 percent and the Nikkei 225 rose 1 percent.

Alexandra Coupe, associate director and portfolio manager at PAAMCO, said that after the rally over the past year, “we are likely to continue to see this momentum to persist”. However, he also said that “when momentum crashes, it does so rather violently”.

Investors appear unconcerned though.

Respondents to the January Bank of America Merrill Lynch Fund Manager Survey reduced cash allocations to the lowest level in five years and put the most money in stocks in two years.

The American Association of Individual Investors saw those expecting gains over the next six months outnumber those who think the market will fall by 48.7 percent to 25.1 percent.

The Investors Intelligence survey of market newsletter showed the bull-bear spread at 64.4 percent to 13.5 percent, the biggest gap since April 1986.

Tuesday, 16 January 2018

Markets mixed with US market closed

Markets were mixed on Monday.

While the US stock market was closed for a holiday, the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.3 percent.

European stocks were kept under pressure by a stronger euro in the wake of the release of the minutes from the European Central Bank’s meeting in December suggesting that the bank may take a more hawkish stance on its monetary policy. Currency strategists at Brown Brothers Harriman noted on Monday that the “euro’s 2.5% appreciation on a trade-weighted basis is tantamount to a 40 basis points tightening of monetary policy”.

Also weighing on the market on Monday was news that UK construction giant Carillion will enter liquidation after weekend rescue talks collapsed.

Monday, 15 January 2018

Stock bull market expected to continue

Stocks have started 2018 strongly and many analysts see the bull run continuing.

Stephen Suttmeier, chief equity technical strategist at Bank of America, told CNBC last week that there is a strong technical case for a rally through 2018.

Canaccord's chief market strategist Tony Dwyer told CNBC that while a correction may be coming in the near term, a flattening yield curve is “actually a monster buy signal”.

“The thing in this environment is: There are no negative divergences. The advance-decline line is making new highs. It's a pretty broad move,” he said.

Walter Todd, Greenwood Capital chief investment officer, told Bloomberg: “The fundamentals for the rally are strong, though the higher it goes, the higher the risk of a correction, and the higher the risk that the correction will be steep.”

According to Bloomberg, the S&P 500 trades at 3.4 times book value, the most expensive level since 2002.

However, it also noted that an expected 10.2 percent growth in corporate earnings in the fourth quarter and 15 percent growth in 2018 may support the valuation.

Saturday, 13 January 2018

US stocks hit another record high amid optimism

Markets mostly rose on Friday.

The S&P 500 rose 0.7 percent to hit another record high, the STOXX Europe 600 rose 0.3 percent but the Nikkei 225 fell 0.2 percent.

There were mixed views among analysts about the latest surge.

Michael Matousek, head trader at US Global Investors, said that “there’s so much optimism, so much enthusiasm about earnings”. He added: “Things are really starting to take off, and the only thing that makes it scary is the idea that we may be culminating to a top in the market.”

“The move isn’t about fundamentals anymore, but the overall euphoria,” said Jason Browne, chief investment officer of FundX Investment Group.

Indeed, investor money gushed into stock-based funds during the first full week of trading in 2018, according to Bank of America Merrill Lynch, with the sixth-biggest equity inflow total ever and the most in at least six months.

Friday, 12 January 2018

Stocks resume rally in US but fall in Europe on monetary tightening concerns

US stocks resumed their rally on Thursday.

The S&P 500 rose 0.7 percent to close at a record high. The Dow Jones Industrial Average and Nasdaq Composite both rose 0.8 percent to also close at record highs.

However, elsewhere, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.3 percent.

While US investors shrugged off weaker-than-expected jobless claims and wholesale inflation data on Thursday, European investors had to contend with the possibility of an earlier-than expected tightening of monetary policy by the European Central Bank after the latter released its minutes from its December meeting.

“The language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year,” the minutes reported.

Thursday, 11 January 2018

Stock rally pauses but “it still makes sense to be invested in equities”

The 2018 market rally finally came to a pause on Wednesday.

The S&P 500 fell 0.1 percent to record its first decline of the year. The STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.2 percent.

David Donabedian, chief investment officer of CIBC Atlantic Trust Private Wealth Management, said that a “backup in bond yields is impacting sentiment a bit” after a report said that China is considering halting or cutting its purchases of US government bonds.

However, Donbedian remained confident that “the bull market will be sustained in 2018”.

Mike Bell, global market strategist at JP Morgan Asset Management, said that now is not the time to "de-risk" portfolios, according to a CNBC report.

“Despite the strong rally, valuations have not changed much since the start of 2017 in Europe, U.K. and Japan, as earnings have grown strongly,” said Bell.

Mark Haefele, global chief information officer at UBS, also said in a note on Wednesday that “it still makes sense to be invested in equities”.

Wednesday, 10 January 2018

S&P 500 hits another record, winning streak getting “scary”

Markets rose on Tuesday.

The S&P 500 rose 0.1 percent to another record high and extending its winning streak to six, its best since 1964.

Elsewhere, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.6 percent.

“I am really struggling to find any bad news at the moment,” said Rob Carnell, head of research for Asia at ING.

However, some analaysts are getting concerned.

“It’s scary, the unrelenting advance,” said Kent Engelke, chief economic strategist, at Capitol Securities Management. “This reminds me of January 2000.”

Tuesday, 9 January 2018

Stocks rise again as investors look like entering “euphoria stage”

Markets rose on Monday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.3 percent and the Shanghai Composite rose 0.5 percent.

Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note that “investors continue to appear to be happy to push this bull market even higher, despite some misgivings that, particularly in the case of U.S. markets valuations remain stretched”.

Indeed, MarketWatch reported that the latest AAII investor sentiment survey last week showed that 59.8 percent of polled investors are bullish on the stock market, the highest level in about seven years.

Morgan Stanley, which had said a year ago that investors “would finally enter the euphoria stage in 2017-18”, now says that “it looks like we are there”.

Monday, 8 January 2018

“Solid” earnings growth to boost stocks further

Stocks started the year on a strong note last week and analysts are expecting more gains as the year progresses.

The S&P 500 rose 2.6 percent last week, breaking above 2,700 for the first time in the process and ending at a record high.

According to Bloomberg, “the fundamental backdrop for equities remains bullish”.

Phil Orlando, chief equity strategist at Federated Investors, said: “Corporate earnings growth has been solid in the last nine months, we expect another double-digits in the fourth quarter. The party is going to continue.”

The same story could be said of Asian stocks, according to another Bloomberg report.

“Asian equities may be at record highs but analysts see earnings season, which gets under way this week, providing a further boost,” the report said.

Saturday, 6 January 2018

US stocks hit record highs as employment growth slows

Markets rose on Friday.

The S&P 500 rose 0.7 percent to a new high, its fourth consecutive record. Elsewhere, the Nikkei 225 rose 0.9 percent to hit a 26-year high while the STOXX Europe 600 also rose 0.9 percent.

The US employment report on Friday showed that 148,000 jobs were created in December, below expectations and the slowest pace in three months.

Nevertheless, Mark Luschini, chief investment strategist at Janney Montgomery Scott, said that the report showed “a market-friendly number, in that it is good but not overheated” and that the Federal Reserve will “not get overly aggressive in raising rates in 2018”.

Friday, 5 January 2018

US stocks hit records again, Nikkei soars to 26-year high

Markets continued their positive start to the new year on Thursday.

The S&P 500 rose 0.4 percent to another record high, the first time since 1964 that it has closed at a record in each of the first three trading days of a new year.

Elsewhere, the Nikkei 225 soared 3.3 percent to a 26-year high and the STOXX Europe 600 rose 0.9 percent.

Michael Mullaney, director of global market research at Boston Partners, said that momentum drove stock prices in 2017 “and that remains the case so far this year”.

“Valuations are stretched, no question, based on historical standards, but they’re OK relative to bond yields and inflation, which means we’re not overly concerned about them at this juncture,” he added.

Thursday, 4 January 2018

US stocks hit new highs, may be entering melt-up phase

Markets rose on Wednesday.

The S&P 500 rose 0.6 percent to close at a record high for the second consecutive day. The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite rose 0.6 percent.

“What we are seeing is a typical continuation of a Santa Rally, with new money coming into equity funds,” said Quincy Krosby, chief market strategist at Prudential Financial.

Indeed, the Santa rally may well be morphing into a melt-up, according to the usually bearish Jeremy Grantham at GMO.

“I recognize on one hand that this is one of the highest-priced markets in US history,” he wrote in his latest commentary. “On the other hand, as a historian of the great equity bubbles, I also recognize that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market.”

Wednesday, 3 January 2018

US stocks hit record highs at start of new year

Markets kicked off the new year with more record highs.

In the US, the S&P 500 rose 0.8 percent to close at a record high while the Nasdaq Composite jumped 1.5 percent to close above 7,000 for the first time ever.

However, elsewhere, markets were mixed. The Hang Seng soared 1.8 percent but the STOXX Europe 600 fell 0.2 percent.

Brian Battle, director of trading at Performance Trust Capital Partners in Chicago, said that “all valuations are really high” and “it’s hard to imagine that we could replicate” gains like last year.

Still, Battle thinks that “it’s reasonable to believe we could have another up market this year”.

Tuesday, 2 January 2018

After "absurdly good" 2017, stock market could see more gains in 2018

BBC summarised the performance of stocks in 2017:

In the US, the S&P 500 topped 2,670, rising more than 400 points or about 19% over the year.

Japan's Nikkei also gained nearly 20%. Even the UK's FTSE indexes hit record highs, ending the year more than 7% ahead.

As Morgan Stanley analysts put it, for shareholders at least, the year has been "absurdly good".

The important question, of course, is whether 2018 will see a continuation of gains. Wall Street apparently thinks so.

Morgan Stanley predicts the S&P 500 will reach 2,750 in 2018. Bank of America Merrill Lynch expects it could hit 2,800, while Goldman Sachs forecasts a rise to 2,850 as corporate profits climb.