Markets fall but triple put may keep rally going

Markets fell on Monday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 1.0 percent and the Nikkei 225 fell 0.6 percent.

The end of the partial US government shutdown agreed to on Friday provided little boost to markets.

Dave Lutz, head of ETFs at JonesTrading, wrote in a note that US stocks are “starting this week under some pressure as Trump throws cold water on the chances of a shutdown deal” while a Mizuho Bank commentary noted that “it is the U.S.-China trade talks that will be in the limelight”.

Also, Caterpillar reported disappointing fourth-quarter earnings while Nvidia lowered its fiscal fourth-quarter revenue outlook.

“Slowing demand in China hit them hard,” said Larry Benedict, chief executive of the Opportunistic Trader.

Morgan Stanley’s chief equity strategist Mike Wilson sugggested that investors should get out of stocks right now.

“We struggle to see the upside in hanging on just to see how long we can. We think it is better to hop off now and rest up for the next rodeo,” said Wilson.

Other strategists think that a more dovish Federal Reserve could keep the rally going.

“Inflation is probably low enough to justify keeping rates on hold, and we expect only one hike in 2019,” he said. “If this plays out, versus the Fed’s own forecast of two hikes, it should be positive for risk assets.”

Furthermore, Deutsche Bank macro strategist Alan Ruskin noted after discussions with investors in Hong Kong and Singapore that while there is a “strong consensus about a newfound Powell put”, there is also “a widely perceived” President Trump put and a “commonly perceived” President Xi put.