Saturday, 30 January 2021

Markets fall, GameStop jumps

Markets fell on Friday.

The S&P 500, STOXX Europe 600 and Nikkei 225 all fell 1.9 percent.

“There’s way too much leverage in the system, and we’re starting to see signs that this excess leverage is going to be unwound in a way that will create headwinds for the stock market and other risk assets for more than just a few days,” said Matt Maley, chief market strategist at Miller Tabak.

Shares of GameStop jumped 67.9 percent after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before, a move that had caused the stock to fall 44 percent.

Such volatility is raising concerns among some investors.

“This apparent budding crisis needs regulatory warnings and mainstream media alerts as to the dangers this week, both to overall markets and individual investors,” wrote billionaire bond investor Bill Gross.

Others, though, remain relatively sanguine.

“While we believe there is more pain to come we remain optimistic that it is likely to remain localized,” said Maneesh Deshpande, head of equity derivatives strategy at Barclays.

Friday, 29 January 2021

US stocks rebound, earnings surprises “look more positive than usual”

Markets were mixed on Thursday.

The S&P 500 rose 1.0 percent, rebounding from Wednesday's sharp losses, while the STOXX Europe 600 rose 0.1 percent.

Earlier in Asia, though, the Shanghai Composite and Nikkei 225 fell 1.9 percent and 1.5 percent respectively.

Ellen Hazen, portfolio manager at FL Putnam Investment Management, said that earnings surprises ammong US companies “look more positive than usual and that bodes well as an outlook for the economy and for the markets”.

Of the 159 companies in the S&P 500 that reported earnings through Thursday morning, 83 percent posted results that topped analyst expectations, according to Refinitiv data, well above the 76 percent beat rate over the past four quarters.

Thursday, 28 January 2021

US stocks plunge, “this is healthy profit taking”

Markets were mostly lower on Wednesday.

The S&P 500 plunged 2.6 percent and the STOXX Europe 600 tumbled 1.2 percent.

Earlier in Asia, the Nikkei 225 rose 0.3 percent and the Shanghai Composite rose 0.1 percent.

“We’ve run up so much and this is healthy profit taking,” said John Davi, founder and CIO of Astoria Portfolio Advisors.

FundStrat’s Tom Lee said that a “surge in heavily shorted stocks like GME and others [is] creating substantial margin calls for funds short these positions”.

The Federal Reserve left its key overnight interest rate near zero and made no change to its monthly bond purchases at its monetary policy meeting on Wednesday.

In Europe, stocks were weighed down by a downward revision in the forecast for Germany's 2021 GDP growth from 4.4 percent to 3 percent.

“It can be a bit bumpy, especially the first half of the year,” said Matthias Scheiber, global head of multi-asset solutions at Wells Fargo Asset Management in London.

However, Scheiber added that “we are generally positive on the value-oriented sectors because from a valuation perspective, they are still cheap”.

Wednesday, 27 January 2021

Markets mixed, IMF raises global growth forecast

Markets were mixed on Tuesday.

The S&P 500 fell 0.2 percent and the Shanghai Composite fell 1.2 percent. However, the STOXX Europe 600 rose 0.6 percent.

Tom Essaye, founder of Sevens Report, said in a note Tuesday that “at least in the near term, complacent/frothy investor sentiment is the biggest near-term risk to stocks”.

“The combination of virus containment and policy support should bolster economic growth this year,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

Indeed, the International Monetary Fund raised its forecast for global economic growth in 2021 on Tuesday and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

Tuesday, 26 January 2021

Stock market showing “bubble-like sentiment”

Markets were mixed on Monday.

The S&P 500 rose 0.4 percent and the Shanghai Composite rose 0.5 percent. However, the STOXX Europe 600 fell 0.8 percent.

“I do think we've been in a euphoric state in the market for awhile, and now that the election settled and congress is in place, a lot of the good news has already been priced in,” said Tom Martin, vice president and senior portfolio manager at Globalt.

Indeed, many analysts are seeing signs of a stock market bubble.

“Pockets of the market have recently demonstrated investor behavior consistent with bubble-like sentiment,” Goldman Sachs analysts led by David Kostin wrote in a note.

Still, that may not deter investors.

“Equity bubbles are not delicate,” said Robert Buckland, Citi equity strategist. “They take some stopping.”

Monday, 25 January 2021

US stock market valuation “has never been higher”

The S&P 500 rose 1.9 percent last week, hitting a record high on Thursday.

After the latest rally, Michael Santoli at CNBC wrote that US stocks are “richly valued”.

“Right now, it’s hard to deny that on the whole, stocks are rich relative to past earnings and forecast earnings,” he wrote on Saturday. “The trailing price/earnings ratio of the median U.S. stock, tracked by Ned Davis Research, has never been higher.”

However, Santoli noted that Treasury and investment-grade bond yields are low, so stocks look attractive in comparison.

“When financial conditions remain very loose and the direction of expected earnings is up, there tends not to be a general reckoning due to high valuations,” he said.

Still, investors nervous about the high valuations of US stocks can always look at foreign stocks.

“Foreign equities have the opportunity to outperform U.S. stocks in 2021, three market analysts said Thursday,” wrote Lizzy Gurdus at CNBC.

Gurdus cited Jeremy Schwartz, global head of research at WisdomTree Asset Management, as saying that emerging markets “now have some of the best growth opportunities” on the market.

Bryon Lake, head of Americas client ETF at JP Morgan Asset Management, was cited as describing valuations overseas as “extremely attractive”.

“We survey thousands of advisors every week and they are very bullish on international markets, very bullish on emerging markets,” said ETF Trends and ETF Database CEO Tom Lydon.

Saturday, 23 January 2021

Markets fall amid “harsh near-term reality” of COVID-19

Markets fell on Friday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.6 percent and the Shanghai Composite fell 0.4 percent.

Tom Essaye, founder of Sevens Report, said that “it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law”.

Adam Crisafulli, founder of Vital Knowledge, said in a note that the focus in the COVID-19 pandemic, “which normally emphasizes vaccine optimism over the harsh near-term reality, is swinging back towards the latter”.

Indeed, on Friday, US President Joe Biden said that the American death toll from the disease is “expected to reach well over 600,000” after hitting 400,000 on Tuesday.

In Europe, British Prime Minister Boris Johnson said on Friday that the new English variant of COVID-19 “may be associated with a higher degree of mortality”.

Friday, 22 January 2021

S&P 500 ekes out record high, investors “becoming euphoric”

Markets were mostly little-changed on Thursday.

The S&P 500 eked out a small gain to close at another record high while the STOXX Europe 600 finished flat.

Earlier in Asia, the Shanghai Composite rose 1.1 percent and the Nikkei 225 rose 0.8 percent.

Both the European Central Bank and the Bank of Japan left interest rates unchanged on Thursday.

Keith Parker, head of equity strategy at UBS, said in a note that COVID-19 vaccination is a key driver for stocks. “Removing bottlenecks for administering doses would present an upside case near-term,” he said.

However, Matt Maley, chief market strategist at Miller Tabak, noted: “The breadth in the market place was quite poor during the rally.”

Meanwhile, Jeremy Grantham, co-founder and chief investment strategist at Grantham, Mayo, & van Otterloo, told CNBC that investors are “becoming euphoric”.

Grantham said that there has “never been a great bull market that ended in this kind of bubble that did not decline by at least 50%”.

Thursday, 21 January 2021

Markets rise, see “robust recovery later in 2021”

Markets rose on Wednesday.

The S&P 500 jumped 1.4 percent to a record high, the STOXX Europe 600 rose 0.7 percent and the Shanghai Composite rose 0.4 percent.

Many analysts are optimistic about the US economy as President Joe Biden signed a string of executive orders on Wednesday to combat the COVID-19 pandemic.

“We’re entering what may be the toughest and deadliest period of the virus and must set aside politics and finally face this pandemic as one nation,” said Biden in his inauguration speech.

“I expect markets to continue to move in expectations of a robust recovery later in 2021 when vaccines are broadly distributed,” said Kristina Hooper, chief global market strategist at Invesco.

Chris Larkin, managing director of trading and investing product at E-Trade Financial, said that “traders and corporate America alike are starting to see the light at the end of the tunnel”.

Wednesday, 20 January 2021

Markets mixed, Yellen looking to “act big” on stimulus

Markets were mixed on Tuesday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 fell 0.2 percent.

Earlier in Asia, the Nikkei 225 jumped 1.4 percent but the Shanghai Composite fell 0.8 percent.

In the US, some investors were looking for more fiscal stimulus after Janet Yellen, President-elect Joe Biden’s designated nominee for Treasury Secretary, told the Senate Finance Committee on Tuesday that “with interest rates at historic lows, the smartest thing we can do is act big”.

Fundstrat’s Tom Lee wrote in a note that stocks are “likely poised to resume upside, after ending a healthy consolidation”.

Meanwhile, though, some investors remain concerned about bubbles, with a Deutsche Bank survey showing that Bitcoin and US tech stocks are viewed as the biggest market bubbles right now.

Tuesday, 19 January 2021

Markets mixed, China GDP grows 2.3 percent in 2020

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.2 percent and the Shanghai Composite rose 0.8 percent.

However, the Nikkei 225 fell 1.0 percent while the KOSPI plunged 2.3 percent after a report that Samsung heir Jay Y Lee has received a 2-1/2-year jail term.

The US stock market was closed for a holiday.

A report that China's GDP rose 2.3 percent last year, better than economists' expectations for just over 2 percent growth, helped lift market sentiment on Monday.

Many analysts remain upbeat on Chinese stocks.

“The core assets are not cheap based on the historical average, but they have not reached the extreme level in valuation,” said Zhou Jianhua, an analyst at Central China Securities. “The medium-term uptrend remains unchanged.”

Monday, 18 January 2021

Risk tolerance increases with rising bubble fears

Eric Rosenbaum at CNBC wrote on Sunday that the wealthy are investing like a market bubble is here, or at least near.

However, Rosenbaum noted that these investors remain invested according to a survey by E-Trade Financial.

“In fact, amid rising bubble fears these same investors say their risk tolerance has increased, significantly, in the first quarter of 2021, and the majority expect stocks to end Q1 with more gains,” he wrote.

Mohamed El-Erian, the president of Queens College at Cambridge University and the Chief Economic Adviser to Allianz, appears to agree with these investors' stance.

In an interview with Yahoo Finance Live, El-Erian said: “If we were to see another 20 basis point move in yields, that would be bad news.”

However, he added that the Federal Reserve is unlikely to raise rates soon.

“To be clear, the path of least resistance right now is higher,” El-Erian said.

Saturday, 16 January 2021

Markets fall, Biden’s COVID-19 relief plan “priced in”

Markets fell on Friday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 1.0 percent and the Nikkei 225 fell 0.6 percent.

The announcement of US President-elect Joe Biden’s COVID-19 relief plan on Thursday did little to lift markets.

Tom Essaye, founder of The Sevens Report, said the proposal was “being met by a ‘sell the news’ reaction as markets already priced in most of what was included”.

Indeed, David Neuhauser, managing director of hedge fund Livermore Partners, went further, warning that the market “will eventually start to see factors of inflation take hold” and that could “ultimately pop the epic bubble”.

Friday, 15 January 2021

Markets mixed, Fed rate hikes “no time soon”

Markets were mixed on Thursday.

The S&P 500 fell 0.4 percent and the Shanghai Composite fell 0.9 percent.

However, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.8 percent.

US president-elect Joe Biden unveiled his stimulus plan in a speech on Thursday night that includes sending additional US$1,400 payments to Americans following the US$600 second stimulus checks that were recently deployed.

While additional fiscal stimulus raises the prospects for higher interest rates, Federal Reserve Chairman Jerome Powell said on Thursday that the time for the Fed to raise interest rates “is no time soon”.

Another encouraging news for investors came on Wednesday when trial data showed that Johnson & Johnson’s one-dose COVID-19 vaccine is safe and generates a promising immune response.

CNBC’s Jim Cramer raised the possibility that the vaccines bring the pandemic under control sometime this year, suggesting that the “market has not priced it in”.

Thursday, 14 January 2021

Markets rise, could “take more of a breather” soon

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 1.0 percent.

Mark Hackett, chief of investment research at Nationwide, noted that “sentiment and risk indicators continue to reflect investor optimism, with credit spreads at their tightest level since before the pandemic, fear & greed indicators at elevated levels, and the put/call ratio near historic lows.”

“In 2021, the U.S. economy should experience strong tailwinds from additional fiscal and monetary stimulus coupled with an end to the pandemic’s impact on the economy,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management.

Some analysts, however, have expressed concern over the speed of the market rally so far this year.

“These benchmark moves had even long-term bulls like us wondering if the stock markets are climbing the proverbial ‘wall of worry’ too fast for this early in a year,” said John Stoltzfus, Oppenheimer Asset Management’s chief investment strategist.

Goldman Sachs Chief Economist Jan Hatzius said that US stocks and bond markets could possibly “take more of a breather” in the near term.

Wednesday, 13 January 2021

Markets flat as rising rates “raises questions about valuations”

Most markets were little-changed on Tuesday.

The S&P 500 closed flat, as did the STOXX Europe 600.

However, the Shanghai Composite surged 2.2 percent.

“Markets have shifted in mindset as the Democratic ripple is digested short-term,” wrote Gregory Faranello, head of US rates at AmeriVet Securities. “The focus is now turning to growth and inflation and perhaps a combination of both.”

The US 10-year note yield briefly traded at 1.187 percent, its highest level since March, before easing back to 1.13 percent.

“When you think about the 10-year gradually working higher after spending most of last year below 1%, it raises questions about valuations, especially as it pertains to technology,” said Art Hogan, chief market strategist at National Securities.

Tuesday, 12 January 2021

Markets fall, at “extraordinarily high valuations”

Markets fell on Monday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.7 percent and the Shanghai Composite fell 1.1 percent.

Markets fell as investors became increasingly concerned that stocks are entering the manic, exuberant bull market stage.

“At extraordinarily high valuations is where we are, and its being supported by massive amounts of stimulus,” Jeffrey Gundlach, founder and CEO of DoubleLine Capital, told CNBC on Monday.

Monday, 11 January 2021

With S&P 500 at record highs, concerns rising of “bubble bursting”

Markets rose last week, with the S&P 500 rising 1.8 percent to a record high.

Still, many analysts are becoming increasingly concerned about stocks.

Dick Parsons, former Citigroup chairman, said he thinks there is a “disconnect” between the market and the real economy and he is concerned of “a bubble bursting and the markets falling precipitously”.

Mellody Hobson, president and co-CEO of Ariel Investments, said that growth stocks in particular are in “nosebleed territory” and are vulnerable to a rise in interest rates.

Ryan Payne, president of Payne Capital Management, said the six stocks that have driven the S&P 500's gains – Facebook, Apple, Tesla, Microsoft, Amazon and Google – are already trading at “extremely high multiples” and have little further to gain as the economy reopens.

BofA’s chief investment strategist Michael Hartnett said: “Sell the vaccine: frothy prices, greedy positioning, inflationary and desperate policymakers, peaky China and consumer all ultimately (a) toxic brew in 2021.”

Saturday, 9 January 2021

S&P 500 rises to record high as US economy loses jobs

Markets rose on Friday.

The S&P 500 rose 0.6 percent to a record high, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 jumped 1.6 percent.

US investors shrugged off news that the economy lost 140,000 jobs in December amid a surge in COVID-19 cases.

“In some ways, bad news is good news, because it increases the probability for more stimulus,” said Michael Arone, chief investment strategist for US SPDR Business.

Friday, 8 January 2021

US stocks hit record highs as Biden confirmed president

Markets rose on Thursday.

The S&P 500 rose 1.5 percent to a record high, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 jumped 1.6 percent.

The US Congress affirmed the election of Joe Biden as president on Thursday, and with the Democratic party expected to win the Senate elections in Georgia, JJ Kinahan, chief market strategist at TD Ameritrade, said there are now “increasing expectations of more stimulus to come”.

Still, with global equities trading at 20 times 12-month forward earnings, Citi sees no further upside for world stocks as the valuation is well above the long-term median of 15 times forward earnings.

Thursday, 7 January 2021

Markets rise, US could see “a lot more spending”

Markets rose on Wednesday.

The S&P 500 rose 0.6 percent, the STOXX Europe 600 rose 1.4 percent and the Shanghai Composite rose 0.6 percent.

With the Democratic Party looking set to win Senate elections in Georgia, Jason Trennert, chairman of Strategas, told CNBC that “there’s going to be a lot more spending”.

In Europe, the European Medicines Agency approved Moderna’s COVID-19 vaccine for EU use. David Madden, market analyst at CMC Markets said “that added to the optimistic sentiment”.

Wednesday, 6 January 2021

Markets mixed, US manufacturing improves

Markets were mixed on Tuesday.

The S&P 500 rose 0.7 percent but the STOXX Europe 600 fell 0.2 percent.

Earlier in Asia, the Shanghai Composite rose 0.7 percent but the Nikkei 225 fell 0.4 percent.

Stocks in the US were boosted by a report from the Institute for Supply Management showing that its manufacturing index rose to 60.7 in December — its highest level since August 2018 — from 57.5 in November.

However, markets in Europe were weighed down by continued concerns over COVID-19 as England entered its toughest nationwide lockdown since last March on Tuesday.

Tuesday, 5 January 2021

Markets mixed, UK going back to lockdown

Markets were mixed on the first trading day of 2021.

The S&P 500 fell 1.5 percent but the STOXX Europe 600 rose 0.7 percent and the Shanghai Composite rose 0.9 percent.

The COVID-19 pandemic continued to weigh on investors' minds as the US reported over 18,400 deaths from the disease in the week ended 3 January and UK Prime Minister Boris Johnson ordered another national lockdown.

However, some analysts are undaunted.

“The stock market is positioned for further gains in 2021 based on the twin pillars of coordinated fiscal and monetary policy from the U.S. Treasury and the Federal Reserve Board and a successful COVID vaccine rollout,” said Marc Chaikin, CEO of Chaikin Analytics.

Monday, 4 January 2021

After record-breaking year, S&P 500 could push higher in 2021

After a turbulent year, stock markets ended 2020 on a strong note, with the S&P 500 in particular closing at a record high after a 16.3 percent gain for the year as a whole.

Despite the rally last year, investors remain bullish, according to a Reuters article.

“We are going to continue to see a push higher,” Peter Essele, Commonwealth Financial Network’s head of portfolio management, was quoted as saying.

“The market, overall, does not seem overbought,” said Tim Ghriskey, chief investment strategist at Inverness Counsel.

However, David Rosenberg, president of Rosenberg Research, thinks the stock market is “in a bubble”.

“Based on our [stock market] valuation work, we are anywhere from 20% to 30% overvalued based on a whole bunch of different metrics,” Rosenberg told CNBC last week.

Nevertheless, Rosenberg is not expecting an imminent pullback.

“As long as rates remain where they are, unless we have a real dramatic pullback in economic activity, this bubble that we’re in is probably not going to burst any time soon,” he said.

Friday, 1 January 2021

US stocks end 2020 at record highs

Markets were mixed on Thursday.

The S&P 500 rose 0.6 percent to a record high while the Shanghai Composite jumped 1.7 percent. However, European stocks fell, with the FTSE 100 losing 1.5 percent.

US stocks ended 2020 on a high note after weekly jobless claims posted a better-than-expected reading of 787,000 for the week ending 26 December.

Improvement in US employment going forward would likely depend on the pace of vaccination for COVID-19, which, unfortunately has fallen far short of target.

“We know that it should be better and we are working hard to make it better,” said Operation Warp Speed chief adviser Dr Moncef Slaoui.