Displaying items by tag: S&P 500

(New York)

One of the hottest trades in the last several months has been to buy a basket of low volatility stocks. The idea is that one can insulate their portfolio from the market’s fluctuations by buying stocks that are less likely to see swings in value. The problem is, the trade has gotten very crowded. Legal & General Investment Management says that “Low volatility might be becoming vulnerable as investors chasing recent performance and buying into gloomy 2018 outlooks flock into it … It is becoming a relatively consensus position, which for us is a warning sign”.

FINSUM: Low volatility stocks held up well in the tumultuous fourth quarter, but the attractiveness of the strategy has made valuations quite high. Such stocks typically lag in upward markets, so there does seem to be some significant risk here.

(New York)

Here is potentially good news for investors—the market’s start to this year has been the best since 1987. Both the S&P and Russell have risen considerably in the first 12 sessions of the year, with the former jumping 8.8%. The best start since ’87 sounds good, except that 1987 rivals 2008 as having the worst reputation with investors (shares fell almost 23% in a single day in October 1987). Analysts are urging caution, especially on small caps, as the gains don’t seem sustainable given the huge buildup in leverage that has occurred in small companies over the last few years.

FINSUM: The parallel to 1987 is completely irrelevant, as it is really only based on the percentage gain over 12 sessions.

(New York)

Stocks got wounded very badly in the last quarter of the year, with many stocks entering deep bear markets. Many analysts think stocks are in for a good year, so many feel it is a good time to buy. So what are the best rebound picks for 2019? Sector-wise, it might be best to look at IT, energy, communication services, and utilities. In terms of individual names, consider Noble Energy, Conagra Brands, Alexion Pharma, American Airlines, Electronic Arts, Norwegian Cruise Lines, Tiffany & Co., and Citigroup.

FINSUM: Quite a diverse list! But then again, that is what happens when the S&P 500 falls 20%--there are a lot of wounded stocks to choose from.

(New York)

2019 is often to an uneven start. We have had some good days and some bad ones, but the market has surely not found solid footing or a narrative to drive it. With that in mind, the question of allocation becomes eve more complicated than it was a few months ago. Goldman Sachs has just put out its recommendations and argues that investors should put money back in shares, as they are due for a big rebound. Historically, shares generally bounce back after falling 20% in a quarter, and Goldman thinks there are big returns to be made. Companies seeing margin expansion might be particularly favorable.

FINSUM: The S&P 500 has already advanced almost 10% since Christmas eve, but we are not sold the current tread is upward.

(New York)

Some investors may be breathing a sigh of relief this week alongside the huge rally. The massive gain of 5% earlier this week was the biggest single day gain since 2009. However, taking a broader view, such major gains have usually mean the market is in deep trouble. To give some context, every comparable rally in stocks since 1900 occurred during the bear market of 2008-2009. Overall, it was the 9th time the market reversed an intraday move of at least 1 percent this quarter. That is the most since the US downgrade in 2011.

FINSUM: In itself, we think the rally means precisely nothing for markets. Investors’ emotions are whipsawing all over the place and the market is yet to find solid footing behind any positive narrative.