Displaying items by tag: bear market

(New York)

The S&P 500 experienced a correction earlier this year, and since February, has been stuck in a rut. While the declines were not terribly deep, the doldrums were very long lasting. In fact, this was the longest correction (without a rebound or a fall into a bear market) since 1984. That meant the market was in correction for 115 straight sessions.

FINSUM: The market has finally regained some momentum, but it feels odd that stocks have been gaining in the face of largely negative trade war news. Then again, stocks love to climb a wall of worry.

(New York)

Investors look out, it is time to go on the defensive, at least according to JP Morgan. The top strategist at JPMorgan Asset & Wealth Management, Michael Cembalest, has just told investors that the growing trade war and its threat to markets and the economy means investors need to be very worried. Cembalest points out that this will be the first sustained rise in tariffs across the global economy in 50 years and it is a profound shift away from decades of historical precedent. If the US proceeds with a further $200 bn tariff package on top of its $34 bn package, then markets could be in for a wild ride, says JP Morgan. They advise to focus on consumer staples and tech stocks.

FINSUM: This is a pretty stark warning from JP Morgan and it does make sense. Because there is little recent precedent for trade war, the market may not be accurately pricing the threat it poses.

(New York)

Are you worried about an inverted yield curve and the arrival of a recession? Morgan Stanley thinks you should be, as the bank has just called for a big bust coming to markets and the economy. MS thinks the Fed will end its contraction of its balance sheet soon, which will be supportive for long-dated Treasuries. Accordingly, with short-term rates still rising, the yield curve will invert soon; by mid-2019 says the bank. Morgan Stanley recommends investors to be overweight US Treasuries and underweight corporate credit.

FINSUM: The spread between two-years and ten-years is only 27 bp right now. We think it will much less than a year before an inversion, especially given the hawkishness of the Fed coupled with the threat of a trade war.

(New York)

Everyone knows it has not been a good year for bonds, especially Treasuries and long-dated bonds. However, did you know that it is July and the bond market is on pace for its worst annual performance in a century? (yes you read that correctly). Global bonds are on pace for an annualized loss of 3.5%. So the question is how can one keep money in the market, but not get hammered. The answer is high-grade, short-term bond funds. Floating rate corporate loans and high-yield municipals seem like good areas of focus. Remember that shorter duration bonds are less susceptible to interest rate risk, which makes them safer as the Fed raises rates.

FINSUM: These picks seem spot on to us. Higher-yielding, shorter duration, and floating rates all appear to be good selections for the current environment.

(Chicago)

It was only a matter of time until US industry started to feel the pain of the current American-led trade war. Now it is happening. US manufacturers are reporting rising costs and difficulties in sourcing ahead of the tariff deadline. These companies say that the metal tariffs, combined with the threat of falling export business, all caused by tariffs, is threatening to make them stop hiring or making new investments. “We had a good year last year, and we’re in the middle of a good year this year. But we are very concerned about the tariffs”, says an Ohio manufacturer of excavation equipment.

FINSUM:That penultimate sentence is the most scary of all—that manufacturers may stop hiring and investing. That would be a leading indicator of a coming recession, especially if it has a trickle down effect to other sectors.