Friday, 31 August 2018

US stocks snap winning streak but analysts remain bullish

The US stock market snapped a four-day winning streak on Thursday as the S&P 500 fell 0.4 percent.

However, Raymond James' Jeffrey Saut told CNBC that the S&P 500's recently rally saw it break a multi-month base, a bullish sign.

"That upside consolidation phase tells me that we're going to be above 3,000 probably by Thanksgiving and probably 3,100 to 3,200 by the end of the year," Saut said.

Similarly, Jerry Castellini, president and chief investment officer of CastleArk Management, told CNBC that now is the time to buy.

"I'm outright bullish," Castellini said.

However, Robert Pavlik, chief investment strategist at Slatestone Wealth, was concerned that other countries may not be as ready as the US to handle interest rate increases and said that if the S&P 500 gets past 3,040, there may be a bit of a pullback.

Thursday, 30 August 2018

US stocks hit another record amid “positive momentum” but September could “jolt markets”

Markets rose on Wednesday.

The S&P 500 rose 0.6 percent to a fourth consecutive record high, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.2 percent.

A report on Wednesday showed that US second-quarter GDP was revised to show an annualised growth rate of 4.2 percent, slightly better than the initial estimate of 4.1 percent.

Mike Loewengart, vice president of investment strategy at E-Trade Financial Corp, remarked that the GDP report “should serve as another lesson to shelf geopolitical noise and focus on the fundamentals, which are nothing if not strong”.

Meanwhile, some analysts are also becoming more optimistic about trade.

Jeff Kravetz, a regional investment strategist at US Bank Private Wealth Management, said that “a revised Nafta agreement between the U.S., Mexico and Canada may be reached shortly”. He added that that “is giving investors optimism that a U.S.-China trade deal can be worked out in the fall which would remove an obstacle for markets to move higher”.

Katie Stockton, managing partner and founder at Fairlead Strategies, sees “positive momentum” and expects “short-term overbought conditions to be sustained another week or two before a pullback arises”.

However, Patti Domm at CNBC wrote that September is typically a rocky month for stocks and “this year the odds are even greater than normal that something big could jolt markets”.

“If I'm going to rank the risks this fall, trade wars are one. Iran oil sanctions are two, then the European crisis is three,” Ethan Harris, head of global economics at Bank of America Merrill Lynch, was quoted as saying.

David Bianco, Americas CIO at DWS, is expecting a stock sell-off. “We think a 5-9 percent dip is likely this autumn, but worse than that is also a possibility given the uncertainties,” he wrote.

According to Bianco, one risk for the stock market is the Federal Reserve's interest rate hikes, which has caused the US dollar to rise. According to Bianco, the rising US dollar has already caused “an emerging market slowdown”.

Those rate hikes look set to continue, according to David Ader, chief macro strategist at Informa Financial Intelligence. “The odds for a December hike are now higher than they've been,” said Ader.

Wednesday, 29 August 2018

S&P 500 hits another record high but “it can't get better than this”

Markets were mostly little changed on Tuesday.

The S&P 500 hit a record high for the third consecutive day while the STOXX Europe 600 and the Nikkei 225 were flat.

“In the short run, the market is a momentum machine, and this is being clearly demonstrated as the U.S. market diverges from Europe, leaving the FTSE and others trailing far behind,” said Chris Beauchamp, chief market analyst at IG, in a note.

Beauchamp added that “those looking for gains will keep their money stateside”.

Indeed, Bob Pisani at CNBC noted that global markets have “notably underperformed” the US market while the rally in the US “is broadening”.

However, Michael Wilson, the chief US equity strategist at Morgan Stanley, is unconvinced.

“Over the past two months, the U.S. equity market has moved decidedly more defensive and value is showing more persistent performance versus growth,” he wrote in a note. “The market seems to be (rightly in our view) worried about growth slowing later this year and next.”

Peter Toogood, chief investment officer at Embark Group, was more emphatic.

“It can't get better than this, absolutely can't get better than this,” he said on CNBC. “You don't buy here, you will not make long-term money out of investing today from these levels. Period."

Tuesday, 28 August 2018

US stocks at another record high after US-Mexico trade agreement

Markets rose on Monday.

The S&P 500 rose 0.8 percent to hit a record high for the second consecutive day. The Nasdaq also hit a second consecutive record high.

Elsewhere, the STOXX Europe 600 rose 0.5 percent, the Nikkei 225 rose 0.9 percent and the Shanghai Composite surged 1.9 percent.

Market sentiment was boosted by an agreement by the US and Mexico to enter into a new trade deal.

Paul Ashworth, chief US economist at Capital Economics, said that the deal showed that the Trump administration “is willing to negotiate in good faith and accept a compromise, which will be welcomed in both China and Europe”.

Steve Nelson, a partner at the law firm Dorsey & Whitney and a former state department lawyer, called the deal “a victory for rationality over rhetoric”.

Monday, 27 August 2018

S&P 500 now in longest bull run in history

The S&P 500 confirmed that it is now in its longest bull run in history after it rose 0.6 percent on Friday to close at a record high.

Markets rose after Federal Reserve Chairman Jerome Powell affirmed the central bank’s strategy of gradually raising interest rates.

Karyn Cavanaugh, senior market strategist at Voya Investment Management, saw Powell’s speech as “a little bit dovish”.

The S&P 500 is at a record high despite one-fifth of its stocks being in a bear market.

The rest of the index is likely to also turn down if the US economy enters a recession. However, that is not likely soon, according to Mark Tepper, president and CEO of Strategic Wealth Partners.

Tepper said that three indicators are important in signalling a recession: an inverted yield curve, contraction in the leading economic index and tightening monetary policy. These are not currently indicating a recession.

Friday, 24 August 2018

Stocks fall as US-China trade war drags on

Markets mostly fell on Thursday.

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

“It’s really slow, volumes are down 12% versus a 20-day average. I usually don’t put much credibility into slow markets,” said Mike Antonelli, an equity sales trader at Robert W. Baird & Co.

Concerns over a trade war are likely to persist after activation of another round of tariffs by the US and China on each other’s goods and US and Chinese officials ended two days of talks on Thursday with no major breakthrough.

Some remain hopeful though.

“The next few months are going to be a challenge,” said Wharton School finance professor Jeremy Siegel. “But if we can get China [and] NAFTA settled, I see a 10 percent pop in the market because I think that's the kind of 800-pound gorilla keeping a lid on prices now.”

Siegel was not too concerned about the US stock market's valuation.

“The previous longest bull market ended in March of 2000 with a price-earnings ratio at 30 for the S&P. We're looking at 18 right now for looking at this year's earnings,” he said.

Thursday, 23 August 2018

US stocks could underperform amid longest bull run in history

Markets were mostly flat on Wednesday.

The S&P 500 and STOXX Europe 600 both slipped marginally while in Asia, the Nikkei 225 rose 0.6 percent but the Shanghai Composite fell 0.7 percent.

While the US stock market appears on track to stretch its bull run to the longest ever, JP Morgan thinks that it will start to underperform the rest of the world.

“The recent divergence in the performance of US Equities vs. the rest of the world is unprecedented in history,” said Marko Kolanovic, quantitative and derivative strategist at JP Morgan, in a note to clients on Tuesday.

Kolanovic wrote that the trade dispute between the US and China will probably get resolved and that would “lead to a 'risk on' convergence”.

Wednesday, 22 August 2018

S&P 500 hits intraday high as another indicator hits sell signal

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent, touching an intraday record high. The STOXX Europe 600 rose 0.2 percent and the Shanghai Composite jumped 1.3 percent.

Kate Warne, investment strategist at Edward Jones, said that the rally showed “optimism on at least some partial resolution of the trade negotiations” between the US and China but also “the positive underlying fundamentals of very positive earnings growth and modest interest rates”.

Still, Mark Hulbert at MarketWatch said that “an indicator with more 100 years of history, an excellent record at calling multi-generational tops in the U.S. stock market...has just flashed only its sixth sell signal since 1895”.

Tuesday, 21 August 2018

Markets rise, “path of least resistance now is higher”

Markets were mostly higher on Monday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.6 percent and the Shanghai Composite jumped 1.1 percent. The Nikkei 225 fell 0.3 percent.

Paul Nolte, portfolio manager at Kingsview Asset Management LLC, said that with reports of China and the US resuming trade talks and the situation in Turkey looking better, the “path of least resistance now is higher”.

However, Kristina Hooper, chief global market strategist at Invesco, said that she thinks that the US-China trade talks “will fail“ and suggested that investors “be prepared for some downside volatility“.

Nevertheless, Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch, said that the strength in the market’s breadth suggests that this is “not a market top”.

Monday, 20 August 2018

As S&P 500 nears record high, emerging markets near bear market

There is a clear divergence between the fortunes of the US stock market and emerging markets.

The S&P 500 rose 0.6 percent to 2,850.13 to leave it less than 1 percent below its record high of 2,872.87 set in January.

In contrast, the MSCI Emerging Markets index has dropped 19.8 percent from a peak in January, a degree of decline that is just below the 20 percent threshold that is generally considered to represent a bear market.

A stronger US dollar, trade tension and, most recently, concerns over Turkey have weighed on emerging market stocks.

Some analysts think that the decline has created a buying opportunity.

“Despite the Turkey situation, EM broadly has many solid fundamentals, including economic growth, favorable demographics, and attractive valuations. We look for an eventual compromise on trade, suggesting the potential for a pivot in EM performance,” wrote John Lynch, chief investment strategist for LPL Financial.

Richard Turnill, BlackRock’s global chief investment strategist, wrote that emerging-markets “offer attractive compensation for risk”.

Saturday, 18 August 2018

Markets mixed, US stocks outperform

Markets were mixed on Friday.

The S&P 500 rose 0.3 percent and the Nikkei 225 rose 0.3 percent but the Shanghai Composite tumbled 1.3 percent and the STOXX Europe 600 fell 0.1 percent.

“U.S. stocks are holding up relatively well, but if global sentiment sours, the impressive strength of the Dow Jones and S&P 500 could be chipped away at,” said David Madden, an analyst at CMC Markets UK, in a note.

For the meantime, though, the US stock market has outperformed the rest of the world.

“I think one of the biggest stories throughout the year has been the pressure we've seen on emerging markets,” said Scott Brown, chief economist at Raymond James. “A lot of these countries have high levels of debt, so higher rates put pressure there.”

Ed Yardeni, president of Yardeni Research, Inc., thinks that it is not just about the risks in other countries. “I believe that the outperformance of Stay Home so far this year also owes a lot to Trump's stimulative tax cuts at the end of 2017,” he wrote.

Friday, 17 August 2018

Markets could “pop” as China set to resume trade talks with US

Markets were mixed on Thursday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.5 percent while the Nikkei 225 fell less than 0.1 percent.

Markets were supported by news that China will send a delegation to the US later this month to resume trade talks as well as signs of stabilisation of the Turkish lira.

Wharton School finance professor Jeremy Siegel said on CNBC on Thursday: “If we could get resolution with China, this market could pop 10 percent.”

However, he also said that implementation of the US$200 billion worth of additional tariffs that President Donald Trump has threatened could result in a “20 percent drop” in stocks.

Thursday, 16 August 2018

Markets fall on trade and Turkey, could be “buying opportunity”

Markets fell on Wednesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 tumbled 1.4 percent and the Nikkei 225 fell 0.7 percent.

Oil fell sharply. West Texas Intermediate crude plunged 3 percent and Brent fell 2.4 percent.

“Really, everything today has been playing on the idea of the trade tensions and Turkey. Obviously crude is down today because U.S. stockpiles rose over the last week to their highest level since March 2017,” said Kevin Nicholson, chief market strategist at RiverFront Investment Group.

Also weighing on stocks was weakness in Tencent Holding after it reported disappointing revenue and profit for its second quarter.

Christopher Harvey, head of equity strategy at Wells Fargo Securities, told CNBC that there could be “a lot more wild swings in the marketplace” but that any sell-off would likely be limited to “2 to 3 percent”.

Indeed, Byron Wien, vice chairman of Blackstone Private Wealth Solutions, told CNBC that the current market tumble is “going to represent a buying opportunity”.

Wednesday, 15 August 2018

Markets rise amid lingering concerns over Turkey and trade

Markets mostly rose on Tuesday.

The S&P 500 rose 0.6 percent, the Nikkei 225 surged 2.2 percent and the STOXX Europe 600 was unchanged.

There are lingering concerns over the situation in Turkey, particularly over the possibility of contagion, with Robert Pavlik, chief investment strategist at SlateStone Wealth LLC, saying that “I wouldn’t be rushing into things because it has to play out”.

In the meantime, the US stock market appears to act as a safe haven, forming the biggest portfolio weight since January 2015, according to the August Bank of America Merrill Lynch Fund Managers Survey.

Still, cash rose to 5 percent of portfolios, up from 4.7 percent in the previous month and higher than the 10-year average of 4.5 percent, with the trade war considered to be the biggest tail risk.

Tuesday, 14 August 2018

Markets fall as investors fear Turkey contagion

Markets fell on Monday.

The S&P 500 fell 0.4 percent, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 plunged 2.0 percent.

Investors remained concerned over the situation in Turkey even though the Turkish central bank said on Monday it would provide “all the liquidity the banks need”.

“Even though the country itself has limited ties with the rest of the word, a spreading of the crisis to Europe via its banks’ exposure is a major concern,” said Konstantinos Anthis, head of research at ADS Securities.

“I don’t see Turkey as a significant risk, but investors are very worried about what the next headline risk is going to be,” said Tom Stringfellow, chief investment officer for Frost Investment Advisors.

Bruce Bittles, chief investment strategist at Baird, said: “The largest negative on the horizon is the reluctance of either the U.S. or China to back down from tariff threats, which could eventually lead to a slowing of global economic growth.”

Indeed, Goldman Sachs sees the trade issue as key. It said that an escalation of trade friction could push the US stock market into a bear market but an easing could extend the rally.

Monday, 13 August 2018

S&P 500 could go higher by year end but expected long term return “not all that enticing”

Last week, Ryan Detrick, senior market strategist at LPL Financial, told CNBC that the US stock market is flashing a historically bullish signal.

“The S&P was up in April, May, June and July, those four months this year,” said Detrick. “Since 1950, there were 10 instances where that had happened, and the rest of the year, so the final five months, were actually higher every single time.”

However, Simon Moore, chief investment officer at Moola, wrote in a Forbes article that “trying to predict the market on a 12-month view is essentially a waste of time” and suggested looking a decade ahead instead.

He said that based on the Shiller PE and dividend yield, he expects “approximately 2.5% to 5.5% for the annual 10 year return for the S&P 500 looking forward to mid 2028”.

He noted that with the US 10-year Treasury offering a little under 3 percent a year, this forecast return for the S&P 500 “is not all that enticing” and suggested that investors “invest globally”.

Saturday, 11 August 2018

Markets fall as Turkish lira tumbles

Markets fell on Friday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 tumbled 1.3 percent.

Markets fell amid concerns that the decline in the Turkish lira is accelerating.

“Turkey’s currency volatility has recently accelerated and now gotten to the point where it’s beginning to impact global markets as investors worry about European banking exposure,” said Alec Young, managing director of global markets research at FTSE Russell.

Compounding Turkey’s woes, US President Donald Trump announced a doubling of US tariffs on certain Turkish goods on the back of the lira’s decline.

Also roiled by US action was Russia, whose currency and blue-chip stocks tumbled in the wake of US sanctions.

Friday, 10 August 2018

Stocks jump in China, mixed elsewhere

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 0.2 percent but the Shanghai Composite jumped 1.8 percent.

“Things are looking good in the U.S. in terms of earnings and data, but things aren’t as rosy if you look to China, emerging markets or Europe. Weakness in those regions could eventually become a headwind for the U.S.,” said Suzanne Hutchins, senior portfolio manager of the Dreyfus Global Real Return Fund run by investment boutique Newton.

However, Canaccord Genuity strategist Tony Dwyer said that optimism among businesses and consumers alike, combined with continued positive quarterly results, suggest “there is a long way to go” for the US bull market despite persistent concerns over a trade war.

Thursday, 9 August 2018

Markets fall amid escalating US-China trade dispute

Markets fell on Wednesday.

The Shanghai Composite tumbled 1.3 percent after the US confirmed it would impose 25 percent tariffs on US$16 billion in Chinese imports later this month. China subsequently countered with additional tariffs of 25 percent on US$16 billion worth of US imports.

The STOXX Europe 600 fell 0.2 percent while the S&P 500 was marginally lower.

Oil plunged 3.2 percent.

Sean Darby, chief global equity strategist at Jefferies, noted that while the trade dispute between the US and China “have not noticeably impacted overall growth”, negotiating positions have become “much more entrenched” and it is likely that “the dispute will run beyond the November US midterm elections”.

Even if the trade dispute is resolved though, markets may not be safe.

Ned Davis Research's chief US strategist Ed Clissold thinks there is a high probability a record year-end rally will give way to a painful 2019.

“You could be looking at the first 20 percent-plus decline in the S&P since the financial crisis,” he said, citing unsustainable earnings growth.

Wednesday, 8 August 2018

S&P 500 could break record in August followed by turbulence

Global markets rose on Tuesday, with the S&P 500 gaining 0.3 percent to come within 0.5 percent of its record high.

Tony Dwyer, an equity strategist at Canaccord Genuity, said the current market cycle probably has “a long way to go” due to “the combination of a solid economic backdrop, historically high business and consumer confidence, and better-than-expected earnings growth”.

However, while some analysts expect the S&P 500 to break its record high in August, they also say turbulence and a pullback is likely thereafter.

“The markets tend to have near-term peaks in August, and September has historically been a negative return month, and it's also the most volatile month of the year,” said Julian Emanuel, chief equity and derivatives strategist at BTIG.

“There could be a short-term psychological problem with the market once it hits the all-time high,” said Don Townswick, director of equities strategies at Conning. Nevertheless, he sees “significant expansion potential” as the market remains “fairly valued”.

Still, there are signs that investors are beginning to favour value stocks, typically a defensive play, over riskier growth stocks.

“The market is saying we're probably going to go into a normal second phase of the cycle,” said Gina Sanchez, CEO of Chantico Global. “We're likely going to slow and as that happens investors are going to get more defensive and they're going to look for better value for the money that they invest.”

However, Roger Jones, head of equities at London Capital, told CNBC that risks in stock markets are already elevated.

“We're starting to see a much more challenging picture from a very high level; we are starting to see very narrow markets; we've got very high expectations and we've got high valuations. That's a pretty horrible concoction to have effectively in terms of markets,” he said.

Tuesday, 7 August 2018

Caution over stocks amid signs of trade war and extreme market valuation

While global stocks saw a mixed performance on Monday, the S&P 500 managed a gain of 0.4 percent.

Still, after a weekend editorial in China’s Global Times newspaper said the country was ready for a “protracted war” over trade, some analysts are sounding caution.

Diane Jaffee, senior portfolio manager at TCW, noted “signs that tariffs have moved from rhetoric into action and are impacting global supply chain”.

Meanwhile, William Delwiche, an investment strategist at Baird, said that “the technical indicators argue on the side of caution”

Indeed, some of the best stock market indicators are flashing warning signs, with the ratio of US total market cap to GDP, supposedly a favourite stock market valuation indicator of Warren Buffett, approaching 140 percent and a new record high.

Monday, 6 August 2018

US economy “chugging along” but stock market risks “are elevated”

Markets were mixed last week. The S&P 500 rose 0.8 percent for a fifth consecutive weekly gain but the STOXX Europe 600 fell 0.7 percent to end a run of four consecutive weekly gains.

The US stock market shrugged off a weaker-than-expected employment report on Friday. July's nonfarm payrolls report showed that 157,000 jobs were created compared to an expected 195,000.

“The latest jobs reports means that the economy is chugging along, we are still adding jobs this late in the cycle while we had double-digit revenue and earnings growth,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Antonelli said that the risk from trade wars has been priced in, adding that “if we get some kind of resolution with China, then markets will rip higher”.

Indeed, some think the S&P 500 will hit a new all-time high this week.

However, Michael Brush thinks “risks are elevated”.

Brush said that “the elevated mood of stock investors right now is not a great sign” while “market internals look sick” and valuations are “rich”.

“This isn’t a time to put new money into stocks, have dubious trades on, or own stocks on margin,” he warned. “There may be trouble ahead.”

Friday, 3 August 2018

Apple leads US stocks up but growth as well as small-cap stocks may be running out of steam

US stocks rose on Thursday.

The S&P 500 rose 0.5 percent and the Nasdaq Composite jumped 1.2 percent on the back of a 2.9 percent surge in Apple that took the latter's market cap above US$1 trillion.

However, Thomas Moore, the ‎investment director at Aberdeen Standard Investments, thinks that the time is now right for a rotation out of growth stocks.

“Investors have lost sight of valuations in the last few months,” said Moore, adding that “conditions are there for a rotation in the second half of the year”.

Another group of stocks that may be vulnerable is small caps.

Michael Wilson, Morgan Stanley’s chief US equity strategist, said he was “a bit leery about the fact that small caps have become a perceived safe haven in the event of trade conflicts” and that this “perception may now be overpriced”.

Morgan Stanley sees a “rolling bear market” and small caps could be about to turn.

Wilson said that “if we are right and U.S. large-cap growth stocks and small-cap stocks finally take their turn in the rolling bear market, we would view it as the final inning of the game we expected this year”.

Thursday, 2 August 2018

Markets fall amid renewed trade concerns

Markets mostly fell on Wednesday.

The S&P 500 fell 0.1 percent and the STOXX Europe 600 fell 0.5 percent.

In Asia, the Nikkei 225 rose 0.9 percent but the Shanghai Composite plunged 1.8 percent after a report on Tuesday said that the US was considering raising its planned tariffs on US$200 billion worth of Chinese goods from 10 percent to 25 percent.

In the US, the Federal Reserve left interest rates unchanged after its monetary policy meeting on Wednesday. It said in its statement following the meeting that job gains and economic activity have been “strong”.

Kevin Nicholson, chief market strategist at RiverFront Investment Group, sees “a lot of overhead resistance” for the S&P 500 but Sandip Bhagat, chief investment officer at Whittier Trust, thinks “stocks should be able to move higher”.

In the meantime, Bruce McCain, chief investment strategist at Key Private Bank, said that the risk of a trade war “hasn’t been taken off the table” while Kent Engelke, chief economic strategist at Capitol Securities Management Inc, said that “the market is also struggling because of potentially higher interest rates”.

US technology stocks did rise on Wednesday, with Apple hitting a record high after reporting its highest-ever revenue for the three months ending in June.

BTIG's chief equity and derivatives strategist Julian Emanuel thinks the tech sell-off has reached its peak.

“The options market among other things is telling us that the fear is probably overdone at this point,” Emanuel said on Tuesday.

Wednesday, 1 August 2018

Markets rise as investors buy the dip but August looms

Markets rose on Tuesday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.04 percent.

Liz Young, senior investment strategist at BNY Mellon Investment Management, said: “My opinion has been that there are a lot of overreactions, especially in the tech sector...but nothing catastrophic has really come out. I don’t expect things to turn markedly lower for the remainder of the year.”

Indeed, some financial advisors are recommending that investors buy tech stocks during the dip.

Dennis Berman, managing director in financial advisory at Lazard, said that people are still “looking at their phones” while value-oriented Christian Bertelsen, CEO of Aviance Capital Management, said that “Facebook is getting into my range”.

The S&P 500's gain on Tuesday enabled it to complete a 3.6 percent advance for the month of July, its fourth consecutive monthly gain.

However, August could prove a more difficult month for investors, as it ranks as one of the weakest months of the year for major indices, with steeper losses in midterm years, as the current one is.