Displaying items by tag: S&P 500

(New York)

Despite a tumultuous market over the last few weeks, stocks are at least maintaining their ground. This may give investors hope that prices can make a turnaround and the bull market can resume. However, beware history, as in previous periods of Fed tightening, valuation multiples have tended to decline, a fact that spells trouble for this market.

FINSUM: If higher rates mean lower multiples, then the 18-month outlook is not too strong for this market. However, the economy may not be as strong as many expect (look at the most recent jobs report), which could keep the Fed at bay.

(New York)

A huge investment bank has just put out an eye-opening, no, eye-watering, article that jumps right off your browser window. Societe Generale is now saying that the S&P 500 will fall to its 2009 lows. And not just that, as SocGen says we will fall into a new financial “ice age”. The argument is based on analysis of what happened to Japan’s markets and economy in the 1990s, a fate Societe Generale says the West is doomed to repeat. The bank argues that the West was headed for this fate when the Financial Crisis kicked off, but that the Fed managed to reverse the pattern by inflating assets.

FINSUM: This is one of the most bearish arguments we have ever read. We doubt this will occur, but nonetheless felt compelled to share it.

(New York)

Barron’s put out a very troubling article today. The piece contends that even great earnings are not going to save the current market rout. The reason why is two part. Firstly, worries about the broader economy, and things like regulation of tech, are overwhelming the influence of strong earnings. But secondly, markets have seen these good earnings coming for a year, and have already priced them in. Therefore, strong numbers’ influence on investors is weak. In fact, the good earnings are more of a risk than a boost at the moment, as any underperformance could cause a big bout of selling.

FINSUM: This makes perfect sense to us. Everyone has seen these earnings coming from a mile away and has been betting on them for a year. They definitely have more risk than upside right now.

(New York)

It is not pleasant to think about, but investors may need to face reality—the bear market may have arrived this winter. Stocks are already well into a correction and the immediate path forward doesn’t seem bright. All that said, not all the indicators are showing a bear market to come. Bank of America has assembled 19 indicators which have forecasted bear markets in the past. Right now, only 13 of the 19 indicators have been tripped, meaning the market may have room to move higher. While 13 out of 19 may sound high, this level was usually reached two years before the peak in prices in previous bear markets.

FINSUM: If you buy into these types of indicators, the big x-factor is how quickly the other 6 could be tripped. The big problem, of course, is that the returns at the end of a bull market tend to be the strongest, so one does not want to take all their chips off the table.

(New York)

Equity investors may be understandably frustrated and anxious at the moment. The rebound after February’s lows has not held up and stocks are right around their bottom for the year. Well, if history is any guide, the pain will likely last 200 days. That is the average length that a correction has lasted during this bull market, and this is the sixth of its kind since 2009. The longest was 417 days between 2015 to 2016. The market is already 60 days into the correction, so if the forecast holds, it would emerge in August.

FINSUM: This would only provide comfort if one thinks the current correction is merely that, and not a full blown bear market.