Friday, 30 April 2021

Markets mixed, “trend remains positive”

Markets were mixed on Thursday.

The S&P 500 rose 0.7 percent to a record high but the STOXX Europe 600 fell 0.3 percent.

Keith Lerner, chief market strategist at Truist, said that the “primary market trend remains positive” but “we expect a choppier environment”.

Other analysts have expressed similar views.

“In an environment of strong consumer demand, we expect revenue growth to help offset the drag from input costs,” said UBS Global Wealth Management Chief Investment Officer Mark Haefele.

David Marchant, CIO of Canada Life Asset Management, said that “equities will probably stay up and may continue to drift higher, but I just think you need to exercise a degree of caution, be a little more selective about where you are putting your money”.

Update: Revised on 1 May to remove an outdated Nikkei 225 performance figure.

Thursday, 29 April 2021

Markets mixed, Fed keeps easy monetary policy

Markets were mixed on Wednesday.

The S&P 500 touched an intraday record but closed 0.1 percent lower.

Elsewhere, the Nikkei 225 rose 0.2 percent while the STOXX Europe 600 ended little-changed.

The Federal Reserve kept its easy monetary policy in place on Wednesday despite an economy that it acknowledged is accelerating.

However, US stocks failed to maintain initial gains from the decision after Fed Chairman Jerome Powell said at a news conference after its monetary policy meeting that equity markets are showing signs of “froth”.

Wednesday, 28 April 2021

Markets lower, “stocks still have more upside”

Markets were mostly lower on Tuesday.

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

US economic data on Tuesday were positive.

Home prices in February rose 12 percent year-over-year, the biggest gain in 15 years, according to the S&P CoreLogic Case-Shiller home price index.

The Conference Board’s consumer confidence index jumped to 121.7, the highest since February 2020.

US corporate earnings reports have also been positive. With about a third of the S&P 500 having reported numbers so far, 84 percent of companies have turned in a positive earnings surprise, according to FactSet.

Jeff Kilburg, chief investment officer at Sanctuary Wealth, said that “we are going to see the FANG stocks deliver and I think that’s the catalyst to continue the trajectory of the S&P 500 to new all-time highs”.

“Strong breadth measures suggest stocks still may have more upside,” said Jeff Buchbinder, equity strategist at LPL Financial.

Tuesday, 27 April 2021

S&P 500, Indian COVID-19 cases hit record highs

Markets were mostly higher on Monday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.4 percent.

“Growth is still improving and liquidity is still abundant,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “The bull market remains intact [but] a harder, choppier, more range-bound summer does seem likely.”

“Despite the strong earnings reports we’ve seen thus far, the market is really taking beats in stride amid already high valuations,” said Chris Larkin, managing director of trading and investing product at E-Trade.

On the COVID-19 front, the US picture is looking brighter as officials have started talking about reaching the “finish line”.

However, in India, it is panic stations as the country reported a record 352,991 new coronavirus infections on Monday and overcrowded hospitals in Delhi and elsewhere turn away patients after running out of supplies of medical oxygen and beds.

“Currently the hospital is in beg-and-borrow mode and it is an extreme crisis situation,” said a spokesman of the Sir Ganga Ram Hospital in the capital.

Monday, 26 April 2021

Yields could rise with debt near “dangerous” levels

The S&P 500 dipped 0.1 percent last week.

A Federal Reserve monetary policy meeting this week is unlikely to move the market significantly as it is widely expected that the central bank will not signal a change to its policy stance.

“The economic outlook is fairly good, as long the Fed keeps its foot on the pedal,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “The market has finally accepted that they will.”

However, Michael Schumacher, Wells Fargo Securities’ head of macro strategy, thinks that the Fed’s high level of comfort with rising inflation, the massive amount of fiscal and monetary stimulus in the pipeline and the economic data’s strength, could drive Treasury yields back up.

“It’s a recipe for yields to go up and perhaps pretty significantly,” he told CNBC on Friday.

Apart from potentially impacting markets, a rise in bond yields could spell trouble for some countries that are already knee-deep in debt.

A paper by Marcos Chamon and Jonathan D Ostry at the International Monetary Fund warned that debt in some countries “is getting closer to levels that were previously considered dangerous”.

“For some countries, the remaining fiscal space would not allow a response of a size comparable to what was deployed following the Global Financial Crisis or COVID-19—potentially constraining action in the event of another major shock,” they wrote.

Saturday, 24 April 2021

S&P 500 jumps, tax hike likely to be “scaled back”

Markets were mixed on Friday, with the S&P 500 the outperformer among major markets, rising 1.1 percent.

US President Joe Biden's reported proposal to raise capital gains taxes for the rich remained a talking point in the market, with more analysts now saying that the impact on the market may not be that great.

“We expect Congress will pass a scaled back version of this tax increase,” wrote Goldman Sachs economists in a note.

“We would expect opportunistic investors who are unaffected by this proposal to step in and take advantage of lower prices,” UBS strategists said.

Friday, 23 April 2021

Markets mixed, US taxes may be “going higher”

Markets were mixed on Thursday.

The S&P 500 fell 0.9 percent but the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 2.4 percent.

US stocks came under pressure after a report said that President Joe Biden is slated to propose much higher capital gains taxes for the rich.

“Expect selling this year if investors sense the proposal has a chance of becoming law next year,” said Jack Ablin, Cresset Capital Management’s founding partner and CIO.

Doug Sandler, head of global strategy at RiverFront Investment Group, said that the Democrats hold only a narrow majority in Congress, so Biden's proposal “seems too controversial to get passed, but it starts the framework that taxes are going higher”.

Elsewhere, the European Central Bank kept its monetary policy unchanged on Thursday.

Thursday, 22 April 2021

Markets rise, “economy well on its way to recovery”

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 rose 0.7 percent. However, the Nikkei 2252 plunged 2.0 percent.

Analysts expressed a mix of optimism and caution.

Scott Wren, Wells Fargo’s senior global market strategist, said: “It appears the economy is now well on its way to recovery. Still, earnings guidance early in the current reporting season appears to lean more conservative than our economic projections suggest.”

“While we see further spikes in volatility ahead, we expect the market rally to continue and the rotation trade to resume,” said Mark Haefele, CIO at UBS.

Wednesday, 21 April 2021

Markets fall, COVID-19 deaths pass 3 million

Markets fell on Tuesday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 plunged 1.9 percent and the Nikkei 225 sank 2.0 percent.

The worldwide Covid-19 death toll hit 3 million on Saturday, and Michael James, managing director of equity trading at Wedbush Securities, said: “We’re not out of the woods yet when it comes to the COVID virus and getting to where global economies are reopening.”

“There’s a repricing of what the international environment is going to look like,” said Tufts University economist Brian Bethune.

Tuesday, 20 April 2021

Markets mixed after hitting “strong highs”

Markets were mixed on Monday.

The S&P 500 fell 0.5 percent, the STOXX Europe 600 was little changed and the Shanghai Composite jumped 1.5 percent.

“The markets are at strong highs at the moment, and given that it is also a quiet day data-wise, it is not a surprise to see the markets drifting lower,” said Connor Campbell, an analyst at Spreadex.

“We remain bullish on equity markets overall, and see continued strength in cyclical sectors that will benefit from a broad-based economic recovery that is underway,” said James Ragan, director of wealth management research at DA Davidson.

Monday, 19 April 2021

US stocks could surge 8% by July

The S&P 500 rose 1.4 percent last week, its fourth consecutive positive week, to end at a record high.

Phil Orlando, chief equity market strategist at Federated Hermes, told CNBC on Friday that stocks could surge another 8 percent by July.

“First quarter earnings are coming in very strong. Looks like we could be up 30% year over year. The earnings recession is over,” said Orlando.

“In the second quarter, which will enjoy the full benefit of some of this fiscal stimulus, we could be looking at an earnings growth rate twice that on a year over year basis,” he added.

However, Orlando was concerned that inflation could pick up pace in the latter half of the year, which might cause the Federal Reserve to adjust its easy monetary policy.

“Right now we’re just going to have to watch and wait and make our best judgment later in the year,” he said.

There is a problem with waiting for clarity, though: many investors may reach the same conclusion at the same time.

This was highlighted by John Hussman, president of Hussman Investment Trust, in a commentary last week.

“My impression is that the next material market decline may take the form of a 25-35% air-pocket, driven by nothing more than the sudden concerted effort of overextended investors to sell, and the need for a large price adjustment in order to induce scarce buyers to take the other side,” he wrote. “Such a decline would not require a recession.”

Saturday, 17 April 2021

Markets rise, US economy “ready to rip”

Markets rose on Friday.

The S&P 500 rose 0.4 percent to a record high, the STOXX Europe 600 rose 0.9 percent and the Shanghai Composite rose 0.8 percent.

Economic data on Friday showed that economies are recovering.

China reported that its gross domestic product surged 18.3 percent in the first three months of the year from a year ago.

The University of Michigan reported that its preliminary US consumer sentiment index rose to a one-year high of 86.5 in April from 84.9 in March.

Federal Reserve Governor Christopher Waller said the US economy “is ready to rip”.

Friday, 16 April 2021

US and European stocks hit record highs

Markets were mostly higher on Thursday.

The S&P 500 rose 1.1 percent to a record high while the STOXX Europe 600 rose 0.5 percent to also close at a record high. However, the Shanghai Composite fell 0.5 percent.

US economic data on Thursday helped boost stocks as retail sales surged 9.8 percent in March while first-time claims for unemployment insurance fell to 576,000 for the week ended 10 April, the lowest level since March 2020.

“The speed and resiliency of this economic recovery is unlike anything we’ve ever seen and it helps to justify stocks at all-time highs,” said Ryan Detrick, chief market strategist at LPL Financial.

“I am incredibly bullish on the markets,” said Larry Fink, CEO of BlackRock.

Meanwhile, Chantico Global founder and CEO Gina Sanchez told CNBC on Thursday that there is opportunity in European stocks.

Sanchez said that European stocks are “very, very attractively priced” and that growth expectations are “very strong”.

Thursday, 15 April 2021

Markets mixed, “path of least resistance is higher”

Markets were mixed on Wednesday.

The S&P 500 fell 0.4 percent and the Nikkei 225 fell 0.4 percent.

However, the STOXX Europe 600 rose 0.2 percent and the Shanghai Composite rose 0.6 percent.

Despite the decline in US stocks, some analysts remain upbeat.

“The path of least resistance for stocks continues to seem to be to go higher,” said JJ Kinahan, chief market strategist at TD Ameritrade.

Wednesday, 14 April 2021

Markets shrug off negative vaccine and inflation news

Markets mostly rose on Tuesday.

The S&P 500 rose 0.3 percent to a record high, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.7 percent.

Markets were largely able to shrug off a call by the US Food and Drug Administration to pause innoculation with the Johnson & Johnson Covid-19 vaccine after reported cases of blood clotting.

“We’re optimistic, very optimistic that we’re going to be reopened fully in the second half of this year,” said Mike Wilson, chief US equity strategist for Morgan Stanley.

Investors also shrugged off a report on Tuesday that showed that the US consumer price index rose 0.6 percent in March and 2.6 period from the same period a year ago, slightly higher than economists expected.

Tuesday, 13 April 2021

Markets lower, COVID-19 cases “growing exponentially”

Markets were mostly lower on Monday.

The S&P 500 dipped less than 1 point to 4,127.99, the STOXX Europe 600 fell 0.5 percent and the Shanghai Composite fell 1.1 percent.

While most economies are expected to recover in the coming months, the threat from COVID-19 remains great.

The World Health Organization said on Monday that the coronavirus pandemic is now “growing exponentially”, with more than 4.4 million new Covid-19 cases reported over the last week.

Monday, 12 April 2021

Money flows push stocks higher

The S&P 500 rose 2.7 percent last week, ending the week at a record high.

The rally in stocks has been maintained amid large inflows into equity funds. According to data from BofA, equity funds have attracted more than half a trillion dollars in the past five months, exceeding inflows recorded over the previous 12 years.

“Sentiment is in very worrisome territory as is valuation, yet money flows continue to push indices higher,” said Tobias Levkovich, Citi’s chief US equity strategist.

Analysts mostly remain bullish, although some are becoming cautious.

“We remain optimistic but there’s less upside left in our view,” said Emmanuel Cau, head of European equity strategy at Barclays.

“We are risk-on, but we haven’t put our foot down on the accelerator because of valuations in some parts of the market,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Saturday, 10 April 2021

S&P 500 hits another record high, “irrational exuberance is building”

Markets were mostly higher on Friday.

The S&P 500 rose 0.8 percent to a record high, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.2 percent.

US producer prices rose 1.0 percent in March and 4.2 percent from the previous year, the largest annual gain in nine years.

“Inflation in the pipeline keeps heating up,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Larry Adam, chief investment officer at Raymond James, suggested that “rising interest rates, healthy levels of inflation, and an eventual Fed rate hike are not necessarily market negatives”, noting that stocks often perform well under such conditions as long as economic growth remains robust.

Still, Chris Beauchamp, chief market analyst at IG, said that “with equity inflows continuing to hit new multi-year highs the sense of ‘irrational exuberance’ is building once again”.

Friday, 9 April 2021

Siegel: Bull market is on for 2021

Markets were mostly higher on Thursday.

The S&P 500 rose 0.4 percent to a record high and the STOXX Europe 600 rose 0.6 percent. Asian markets were mixed though, with the Nikkei 225 dipping less than 0.1 percent.

With Fed Chair Jerome Powell committing to continue buying assets for the forseeable future, Wharton School finance professor Jeremy Siegel said on CNBC that the stock market could go up 30 to 40 percent.

“I have never heard a Fed chair so dovish,” Siegel said.

“I would not really be cautious right now. I still think bull market is on for 2021,” he added.

Thursday, 8 April 2021

US stocks at record high, economy “will likely boom”

Markets were mixed on Wednesday.

The S&P 500 rose 0.1 percent to a record high and the Nikkei 225 rose 0.1 percent. However, the STOXX Europe 600 fell 0.2 percent.

The minutes of the last Federal Reserve monetary policy meeting released on Wednesday showed that officials projected that it would “be some time” before the central bank’s employment and price goals are met, so in the meantime, “asset purchases would continue at least at the current pace”.

JPMorgan Chase CEO Jamie Dimon was somewhat more ebullient in his annual letter released on Wednesday, saying that “the U.S. economy will likely boom”, and that the boom “could easily run into 2023”.

“There are lots of reasons to be excited about the months ahead, and we’re generally optimistic for this year,” said Lindsey Bell, chief investment strategist at Ally Invest.

Wednesday, 7 April 2021

Markets mixed, way out of crisis “increasingly visible”

Markets were mixed on Tuesday.

The S&P 500 dipped 0.1 percent and the Nikkei 225 fell 1.3 percent but the STOXX Europe 600 rose 0.7 percent.

Chris Hussey, a managing director at Goldman Sachs, said that “today is a time for markets to ‘consolidate’”.

However, the rally is expected to resume soon.

“Vaccinations are rolling out at a record clip, and historic stimulus efforts from Congress have all paved the way for continued positive market momentum,” said Chris Larkin, managing director of trading and investing product at E-Trade Financial.

Indeed, the International Monetary Fund is now expecting a stronger economic recovery in 2021, with the world economy now expected to grow by 6 percent in 2021, up from 5.5 percent forecast in January.

“Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible,” IMF chief economist Gita Gopinath said in the latest World Economic Outlook report.

Tuesday, 6 April 2021

S&P 500 hits record high, economic boom expected

Markets rose on Monday.

The S&P 500 rose 1.4 percent to a record high and the Nikkei 225 rose 0.8 percent.

European markets were closed for a holiday.

Following the strong US jobs report on Friday, the Institute for Supply Management reported on Monday that its non-manufacturing activity index jumped to a reading of 63.7 last month, the highest level in the survey’s history.

“A ‘Capital V’ recovery that is in the early innings,” said Tony Dwyer, Canaccord Genuity’s chief market strategist.

Indeed, with some economists expecting the US economy to boom over the next couple of months, there could be increasing pressure on the Federal Reserve to defend its super-easy monetary policy.

“They’re going to go through the gauntlet now,” said Jim Caron, head of global macro strategy at Morgan Stanley Investment Management. “The second quarter is going to be plus 10% growth and inflation is going to get to core PCE around 2.5%, and they’re going to say, ‘this is transitory.’”

“The market is pricing a lot of rate hikes,” said Michael Schumacher, director of rates at Wells Fargo. “The question then is, what does Powell do?”

“This is the market saying we’re getting ahead of the Fed,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. “The market is going to drag the Fed into a tightening at some point.”

Monday, 5 April 2021

Tobin’s q for US stocks at twice historical average

The S&P 500 rose 1.1 percent last week, closing at a record high of 4,019.95.

With the continuing rally in US stocks, valuations are becoming more stretched.

Chris Dillow at Investors Chronicle noted last week that based on the latest figures from the Federal Reserve, the Tobin’s q, the ratio of share prices to the net worth of companies, was over 165 per cent for non-financial firms. That is twice the average since data began in 1952, and the second-highest level ever.

Dillow said that the Tobin’s q has predictive value for the stock market.

“High levels of Tobin’s q in 1969 and 2000 led to the S&P 500 falling in subsequent years and low ratios in the early 80s and in 2009 led to high returns on equities,” he wrote.

“A high q can therefore be a sign of irrational exuberance and therefore a predictor of falling prices,” he added.

Saturday, 3 April 2021

Asian markets rise, US economy “on strong path to recovery”

Asian markets rose on Friday. The Nikkei 225 surged 1.6 percent and the Shanghai Composite rose 0.5 percent.

Most markets in the US and Europe were closed for a holiday.

The US did release its March jobs report on Friday, which came in at 916,000, exceeding economists' expectations of a 675,000 gain.

Quincy Krosby, chief market strategist at Prudential Financial, said that the report “shows that the economy is healing” while Eric Merlis, head of global markets trading at Citizens, said that it was “another clear sign that the U.S. economy is on a strong path to recovery”.

Joseph Brusuelas, chief economist at RSM, suggested that “if the economy puts together a string of months like what we’ve seen in March, it will only be a matter of time before expectations on the start of Fed tapering will move up to late 2021, also pulling forward market expectations for the first interest-rate hike into the latter part of 2023”.

Friday, 2 April 2021

Markets rise, factory indices jump in US and Europe

Markets rose on Thursday.

The S&P 500 rose 1.2 percent to a record high, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 rose 0.7 percent.

Economic data on Thursday were mostly positive.

The Institute for Supply Management's index of US manufacturing activity jumped to 64.7 last month, the highest since December 1983, from 60.8 in February.

Euro zone manufacturing activity grew at its fastest pace on record in March, with IHS Markit’s final manufacturing PMI coming in at 62.5 compared to February’s 57.9.

In China, though, the Caixin/Markit manufacturing PMI for March came in at 50.6, slightly down from February’s reading of 50.9.

Thursday, 1 April 2021

Markets mixed, higher interest rates a threat to stocks

Markets were mixed on Wednesday.

The S&P 500 rose 0.4 percent but the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 fell 0.9 percent.

Economic data released on Wednesday were largely positive.

In the US, private payrolls expanded by 517,000 in March, the fastest pace since September 2020.

In China, the official manufacturing PMI came in at 51.9 in March, up from February’s reading of 50.6.

In Germany, the total number of jobless people declined by 8,000 to 2.745 million in seasonally-adjusted terms.

However, positive economic data raise the probability of higher interest rates, which investors see as the biggest threat to stocks.