Displaying items by tag: equities

(New York)

Investors need to take notice, a bear market is arriving. Trade wars and rising rates have been plaguing equity markets, and US indices seem to have already seen their peaks. But while the US market is still holding on, investors need to take notice that both China and emerging markets are both flirting with bear markets, with China crossing into one this week. The threat of a trade war and a strengthening Dollar are both weighing on international stocks, and are threatening to crimp economic output. Morgan Stanley is warning of a big drop in the MSCI emerging markets index. According to the Bank’s strategy team, “This is a dangerous market … We now think we’re heading to an outright bear market”.

FINSUM: If there is a global recession coming, it seems like one that will start overseas and filter back to the US. The big question is whether that recession will lead to major asset meltdowns, such as in corporate debt.

(New York)

Investors look out! After years of booming asset prices on the back of extraordinarily loose monetary policy, everything looks like it is about to implode. Not only is the Fed hiking and looking hawkish, but the ECB is in the middle of a covert meeting likely about how to end QE. China also looks close to reigning in its economy. Altogether, the economy on which current markets have been built looks set for change, which might cause big problems for equity investors.

FINSUM: So far “normalization” of interest rates has been quite slow, which has let investors sort of ignore the process. If things start accelerating quickly, then markets may react very sharply.

(New York)

One of the key story lines that has been driving global equities gains over the last year and a half is that economic growth has finally returned to all corners of the world. Yet just as that story was becoming very believable, it is starting to fade. Global benchmarks for measuring growth have fallen undeniably since January, especially in Europe, and inflation is cooling in developed economies, both signs that the boom in expansion might have come to an end. Everything from shipping costs to copper prices have fallen as demand has waned.

FINSUM: Are we headed towards a global recession? It is always hard to forecast, but it seems as though we may be.

(New York)

US investors got a rude shock yesterday: the Dow fell a whopping 391 points. The reason? An election in Italy that occurred several weeks ago led to the president there announcing someone else as prime minister, leading to a political crisis that could see alternative parties come to power. The big question now is whether this is the kind of situation that will blow over in a few days, or whether it is the kind of protracted issue that can ruin a whole summer, such as in 2011 and 2012.

FINSUM: We are worried this could take longer to play out than US investors would like. The big worry here is that Italy might default and then leave the Euro, which could lead to an unwinding of the whole currency. The size of those implications coupled with the complexity of the situation in Italy means this could take some time to play out.

(New York)

Investors beware, US stocks may be in for a real summer storm. On the surface things have been looking better. Despite a week in which many geopolitical events went wrong (e.g. trade war, Trump and North Korea, Italian bonds/government), the markets stayed strong. However, underneath the positive surface, there is some real bearishness. The average stock in the S&P 500 is underperforming the market as a whole by almost a whole percent. The S&P 500 is up 3% this year, but the average stock has gained just 2.1%, showing that market breadth has narrowed.

FINSUM: We do not think the current market breadth figures show much of anything, but then again, we are more concerned about the overall economy than the signals the market is sending.