Markets fall, “time to turn cautious on stocks”

Markets were mostly lower on Thursday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.6 percent but in Asia, the Hang Seng rose 0.8 percent.

Tom Essaye, president of the Sevens Report, said that after the Federal Reserve meeting on Wednesday, investors were “left with a market lacking a material, positive catalyst at the moment and one at the top of reasonable valuations”, and added that “this market could at best churn sideways, or even see a mild pullback”.

Indeed, Morgan Stanley analysts think that a melt-up in the stock market is unlikely at this point. “Large moves from a high starting point (a melt-up) are rare and unlike today usually follow a period of subdued returns and good earnings growth,” the analysts wrote.

However, the analysts also wrote that “hitting our equity strategists’ S&P 500 bull case of 3,000 is likely”.

In contrast, Michael Brush wrote on MarketWatch that it is “time to turn cautious on stocks”.

“Sentiment is getting rich,” he wrote, while “fewer stocks are participating”.

“This combination — investor complacency plus narrowing market breadth — often shows up ahead of a nice pullback. Plus we are moving into the seasonally more volatile time of the year,” he wrote.