Displaying items by tag: bull market

(New York)

In a refreshing article given the relative doom and gloom over the last month, Barron’s has published a piece arguing that it is the bears, not the bulls, that need to be afraid of the equity market right now. The view is based on technical analysis. Many might be interested to learn that rather than the technical indicators showing a bull market at or near its peak, signs are suggesting a move upward may be in store. The piece is also quick to point out that despite the shallow correction a month ago, the bull trend for the market has continued unabated.

FINSUM: We don’t put a great deal of stock in technical analysis and only view it as useful as a companion to fundamental analysis. Nonetheless, it is good to stay abreast of this information.

(New York)

Few remember how this very long bull market started, but it happened with some very badly blown earnings forecasts. At the grim bottom of the Financial Crisis in 2009, analysts were expecting double digit declines in corporate earnings. Instead, earnings rose, starting what is a bull market entering its tenth year. Now, Bloomberg says, blown earnings forecasts will be what turns this bull into a bear. Analysts tend to be comically wrong on earnings forecasts at the most pivotal moments, and with sentiment looking very strong, it may very well be a similar miss to 2009 that sends the bull market off its lofty perch.

FINSUM: A big earnings miss right when the economy looks strong would be very jarring for investors and sow a lot of doubt about the future. This call seems plausible to us.

(New York)

Anniversaries offer an opportunity to gain perspective on the market. This week is no different. The S&P 500 just had its nine-year anniversary from its bottom of 666.79 in March 2009. Along the way there have been somewhere around 32 “panic attacks” according to analysts. But despite these, the market is now trading above 2,700.

FINSUM: So the real question is whether that 4x+ rise should make one nervous a new downturn is on the way, or comfortable that we are on an upward trend.

(New York)

In an article that contrasts strongly to some others we are running today, here is a different view on bonds coming out of the Wall Street Journal—that the bull market is far from over. The argument is based on two interconnected factors. The first is that rates and yields do look likely to rise in the short term, but at the same time, there are many signs the business cycle is poised to end, which will bring on a recession. When that happens, yields will once again plunge, keeping the bond market surging.

FINSUM: If a recession does come then rates and yields will likely drop again. Unless of course inflation sticks around and we get caught in a stagflationary period.

(Washington)

Whether one likes it or not, Treasury yields hitting 3%, which they look bound to do, will be a major event. The big question is what to do once it happens. Is it the signal of a sharp move higher in yields, or will it be the climax to a short-lived selloff? The reality is that if Treasuries move just a little above three, there could be a strong wave of selling. However, strategies betting against volatility have been paired back in recent weeks, so the selling might not be as furious as one might fear.

FINSUM: Nobody has any idea what will happen if Treasuries move above 3%. As far as bonds, we expect that there will be more and more organic buyers above 3%, which should keep things in check. On the stock side, we do not see why a move higher would be too bad, as the spread to equity yields will still be wide.