Displaying items by tag: bear market
Despite all fears, markets had a fairly strong year in 2020. Why? See the full story on our partner Magnifi’s site.
Goldman Sachs has been leading Wall Street in its bullish outlook for 2021. The bank has been forecasting 6.6% GDP growth, a full 2.5% above the consensus forecast. However, the bank just published a note which represents the first backtrack on that call. The bank pointed out that the new strains of COVID could pose a risk to growth. In particular, they explained that if the current vaccines do not give a high degree of protection against the new COVID strains, then the spending boom which they forecasted this year might be delayed to 2022. In the bank’s own words, if the new strains require a new vaccine “Virus-sensitive spending would likely retrench while a new vaccine is developed, and although a new vaccine could be approved in less than five months, the consumption boom would likely be delayed until 2022”.
FINSUM: We are sure they made this admission with some frustration as GS has been quite bullish. That said, they did so because it is very realistic. It should be noted that most authorities say that the current vaccine should cover the new strains.
Goldman Sachs went on the record with a bold call last week. They told investors that despite all the fears in the market, a big correction WAS NOT coming. Alessio Rizzi and his team at Goldman say that many indicators are showing a bullish outlook, and that big losses don’t seem likely. According to Rizzi, “more moderate risky asset returns are likely from here, rather than an imminent risk of a sizable correction”. One indicator Goldman cited as very bullish was the ratio between puts and calls. Right now the market is deeply favoring calls, with the ratio nearing the limits of its normal distribution.
FINSUM: So bulls look at this and say “aha, I’m right, the market will rise”; and bears say “exactly as expected, this is a contrarian indicator”! In our opinion, on the whole, there is plenty to be optimistic about.
New jobless data was released this morning and it took the market by surprise. Economists had been calling for new jobless claims to stay around the level of recent weeks—something around 695,00. But what happened was quite eye-opening: they came in at 853,000. The losses show that the economy is starting to feel renewed impacts of the surge in COVID cases. According to a job market expert, “Job destruction has not come to an end … We might be gaining jobs overall, but thousands of people are losing their jobs every week because demand has not returned”. Markets dipped on the release.
FINSUM: This is worrying for the economy. Hard to say if this trend will continue, but certainly not the direction markets have been predicting the economy would be heading.
Make no mistake, in the long run Morgan Stanley is bullish. The problem is that the short-term does not look so bright, according to the bank. While MS raised their S&P 500 target for 2021 to 3,900 (well above today’s 3,350 level), they think the market might be rough in the near term. Citing “the second wave of virus, remaining election uncertainties and the specter of higher rates”, the bank says prices will swing from as low as 3,150 to 3,550 in the short-term. According to Morgan Stanley, “Once sentiment turns from euphoric bullishness, reality will strike and we expect to see the S&P 500 begin to feel the pressure”.
FINSUM: The bank says that without the vaccine news, the market would have fallen 5% already and they basically think that fall is due at any moment.