Displaying items by tag: S&P 500

(New York)

It has been a rough several month stretch for stocks and no one seems to have a clear view on where things are headed. All the same fears dog the market now just as they have all year, but at the same time, there seems to be some bullish indicators. Economic signals have been much better recently, which could support a longer bull market. Additionally, so much bearish sentiment has built up that it seems like the market is poised for a big move higher. Finally, the sideways action of the market seems to point to another move higher. Some think the sideways move over the last several months means that this cycle has seen its peak. On the contrary, though, usually late stage bull markets move higher right before an economic downturn.

FINSUM: The market was flat for over a year right in the middle of the bull market and then took a huge move higher. Same situation?

(New York)

September is usually a very poor month for stocks. Investors are generally uptight because of this, but this year tensions are much higher after a brutal August that saw benchmarks fall around 3%, a figure which frankly does not do justice to the turmoil. The Dow actually averages a large decline in September historically, and the month has only had positives returns 36% of the time in the last 100 years. This statement from Barron’s says it all: “If you only owned the S&P 500 in September during every year, a $100 investment starting in 1969 would now be worth just $70.

FINSUM: September is usually bad (which does not really mean anything for this year in itself), but this year could be extra ugly because it may just be more of the same turmoil that has already been occurring.

(New York)

It has been a rough road for equities this month. Benchmarks are down 5% and there has been frequent whip-sawing action based on data and news over the trade war. Despite the fears, JP Morgan is telling investors that it is time to buy. The bank’s equity strategists, led by Mislav Matejka think that stocks are going to turn the corner very soon. The bank thinks three elements may catalyze a move higher into the year end—restarted ECB easing, a bigger than expected Fed rate cut, and improving technical indicators on signs the market has bottomed out.

FINSUM: The Fed and the ECB could certainly help support stocks, but it hard to imagine benchmarks gaining much if we keep up the frenzy of trade war news.

(New York)

What is the biggest risk to the equity market right now. Is it a recession? Is it a trade war? Neither, it is something much more mundane—earnings, at least according to John Hancock Investment Management. Analysts, and the market by extension, are expecting big earnings growth in 2020. And we mean big—the average analyst estimate for S&P 500 earnings growth is 10.5%. That seems like a huge number given that earnings growth in 2019 is set to be only 1%, and has been flat for a couple of quarters. It is made even more unrealistic by the direction of the economy. John Hancock says that defensive sectors like utilities, pipelines, and electricity grids should hold up best in the possibly forthcoming recession.

FINSUM: 10.5% earnings growth in 2020 sounds frankly laughable right now. That said, the market can adjust to these kind of expectations fairly fluidly, so a downturn in expectations may not wound equities all that much.

(New York)

Markets took a nosedive yesterday. Last week was bad, but yesterday’s falls were so steep they amounted to about as much as all of last week. All fears over rates and the trade war came to a head when Trump labeled China a currency manipulator. The S&P 500 fell about 3%, meaning the total decline in the index since last week is around 6%. The Dow lost 760 points. The losses amounted to the worst single day drop since early 2018.

FINSUM: The “currency manipulator” claim is largely symbolic. While it certainly won’t help a deal get done, it is hard to see it having a tangible outcome. This seems like a lot of pent-up market anxiety manifesting itself.