Saturday, 20 January 2018

Markets rise, strategist sees bull run for another 11 years

Markets rose on Friday.

The S&P 500 rose 0.4 percent to close at another record high, the STOXX Europe 600 rose 0.5 percent to the highest level since August 2015 and the Nikkei 225 rose 0.2 percent.

Investors shrugged off worries about a possible US government shutdown. Mick Mulvaney, chief of the Office of Management and Budget, said on Friday that odds of a shutdown occurring are 50-50.

“For traders, many are looking beyond the beltway and finding fundamentals in US companies as sound as they've been in a long time,” said Mike Loewengart, vice president of investment strategy at E-Trade.

“This reporting season should confirm continuity of synchronized global growth and start to provide clarity on the impact of tax reform on earnings and prospects for rising shareholder distributions,” said Dubravko Lakos-Bujas, head of US equity strategy at JP Morgan.

Indeed, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC that “2029 is the peak of this equity market cycle”, and by then the S&P is likely to be between 6,000 to 15,000.

Friday, 19 January 2018

Markets mixed, “very, very dangerous to be out of the market”

Markets were mixed on Thursday.

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

Earlier in Asia, the Nikkei 225 fell 0.4 percent but the Shanghai Composite rose 0.9 percent.

Investor sentiment got a boost from China's economic growth report, which showed an acceleration in 2017 for the first time in seven years.

However, worries in the US over a possible partial government shutdown weighed on markets.

“I wouldn’t be surprised if markets made a small retreat, or at least took a breather given the threat of a shutdown this weekend,” said Lee Wild, head of equity strategy at Interactive Investor.

However, over the longer term, analysts appear to remain optimistic on stocks.

“Historically, in an environment of slowly rising yields the market has done very well,” said Randy Frederick, vice president for trading and derivatives at the Schwab Center for Financial Research.

Indeed, Alan Higgins, chief investment officer at Coutts & Co, pointed out that the “last two years of the bull markets are the best”, with a return of at least 30 percent.

“So it’s very, very dangerous to be out of the market,” he added.

Thursday, 18 January 2018

US stocks hit all-time highs but may be “on edge of chaos”

Markets were mixed on Wednesday.

The S&P 500 rose 0.9 percent to another all-time high but the STOXX Europe 600 fell 0.1 percent and Asian markets were mixed.

With the resumption of the rally, Craig Birk, executive vice president of portfolio management at Personal Capital, said he did not see “anything that will bring a shock to the market”.

However, Peter Boockvar, chief investment officer at wealth manager Bleakley Financial Group, said the market is “extraordinarily stretched”.

Francesco Filia, chief executive at asset management firm Fasanara Capital, told CNBC that markets are “on the edge of chaos” with valuations “totally disconnected from fundamentals”.

Wednesday, 17 January 2018

US stocks fall amid undiminished investor optimism

Markets were mixed on Tuesday.

The S&P 500 fell 0.4 percent but the STOXX Euro 600 rose 0.1 percent and the Nikkei 225 rose 1 percent.

Alexandra Coupe, associate director and portfolio manager at PAAMCO, said that after the rally over the past year, “we are likely to continue to see this momentum to persist”. However, he also said that “when momentum crashes, it does so rather violently”.

Investors appear unconcerned though.

Respondents to the January Bank of America Merrill Lynch Fund Manager Survey reduced cash allocations to the lowest level in five years and put the most money in stocks in two years.

The American Association of Individual Investors saw those expecting gains over the next six months outnumber those who think the market will fall by 48.7 percent to 25.1 percent.

The Investors Intelligence survey of market newsletter showed the bull-bear spread at 64.4 percent to 13.5 percent, the biggest gap since April 1986.

Tuesday, 16 January 2018

Markets mixed with US market closed

Markets were mixed on Monday.

While the US stock market was closed for a holiday, the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.3 percent.

European stocks were kept under pressure by a stronger euro in the wake of the release of the minutes from the European Central Bank’s meeting in December suggesting that the bank may take a more hawkish stance on its monetary policy. Currency strategists at Brown Brothers Harriman noted on Monday that the “euro’s 2.5% appreciation on a trade-weighted basis is tantamount to a 40 basis points tightening of monetary policy”.

Also weighing on the market on Monday was news that UK construction giant Carillion will enter liquidation after weekend rescue talks collapsed.

Monday, 15 January 2018

Stock bull market expected to continue

Stocks have started 2018 strongly and many analysts see the bull run continuing.

Stephen Suttmeier, chief equity technical strategist at Bank of America, told CNBC last week that there is a strong technical case for a rally through 2018.

Canaccord's chief market strategist Tony Dwyer told CNBC that while a correction may be coming in the near term, a flattening yield curve is “actually a monster buy signal”.

“The thing in this environment is: There are no negative divergences. The advance-decline line is making new highs. It's a pretty broad move,” he said.

Walter Todd, Greenwood Capital chief investment officer, told Bloomberg: “The fundamentals for the rally are strong, though the higher it goes, the higher the risk of a correction, and the higher the risk that the correction will be steep.”

According to Bloomberg, the S&P 500 trades at 3.4 times book value, the most expensive level since 2002.

However, it also noted that an expected 10.2 percent growth in corporate earnings in the fourth quarter and 15 percent growth in 2018 may support the valuation.