Displaying items by tag: bull market

(New York)

Anybody who is worried about a pending bond bear market might take some solace in recent news. Bond markets are becoming increasingly skeptical of the Fed’s bullish stance on the economy, and traders believe there won’t be nearly as many rate hikes as the Fed says. The US has just seen a weak inflation report, and a flattening of the yield curve, both at home and in the Eurodollar market, spells ill for the economy. So while the Fed says it will continue to hike rates into 2020, top market analysts are saying things like “The markets are telling us that there is a pretty high risk of economic slowdown or recession at the end of 2019” (Janney Capital Management).

FINSUM: We think the economy will definitely start to weaken before 2020. Perhaps we will not have a deep recession, but we definitely don’t think there will be continuous hikes for the next year and a half, which is good news for bonds.

(New York)

Everyone is feeling it, but no one is sure when it might actually come. The big question is when will this bull market end and finally reverse into the bear market everyone fears. While a solid case could be made that it has already happened, Barron’s says it will be in 2020. The logic is that in 2020 the US will be facing genuinely higher rates, and the short-term benefits from tax cuts will have faded from earnings and the economy.

FINSUM: There is a serious argument to be made that the market may have already peaked, but the idea of a 2020 downturn sounds quite compelling too.

(New York)

A lot of investors are worried about the stock market. The market has been essentially flat this year, but given fears over a looming trade war, a potential recession, and higher rates, there is much concern about the potential for falling prices. All that said, here is a factor that may boost markets, but doesn’t seem to be fully priced-in by the market: growing buybacks. Goldman Sachs forecasts that companies in the S&P 500 will buyback a record $650 bn worth of stocks this year, far outpacing the record set in 2007. This should lead to a buyback yield of about 3% for investors, which combined with the dividend yield should net investors about 5%.

FINSUM: A record setting year for buybacks would be a big boost for markets that are lacking a growth story at the moment.

(New York)

Bloomberg has just made a bold call—they say the bull market ended yesterday. While stocks dropped sharply, 1.7% for the Dow, which basically eliminates all the progress they had made over the last couple of weeks, it is hard to say that it means the end of the bull market. The reason Bloomberg argues so is that the market has been stuck in a rut for three months, and yesterday, investors digested a dark survey which showed that Americans, on average, expect stocks to be lower 12 months from now, a sharp turnaround in sentiment. One portfolio manager from Stifel Nicolaus summarizes where the market is now, ”Investors have this understanding that equity markets are at lofty levels and we are in a low-return environment, so as the risk-free rate moves higher, even in a gradual manner, that becomes more of a competitive asset class”.

FINSUM: We are not particularly bearish, but do concede that if rates keep moving higher it is going to be hard for equities to do the same.

(New York)

While the market has not been doing so well this year and there are many warning signs, there are some positives too. One great sign for markets is that earnings are very strong. First quarter earnings season looks to be a great one, but what will that do for the markets? This year is supposed to be the best for earnings growth since 2010, but that is exactly the problem—great earnings this year have been forecasted for a while because of the strong economy and tax cuts. That means all the risk appears to be to the downside rather than the upside.

FINSUM: We think this round of earnings have little margin for error as everyone is expecting them to be great.