Displaying items by tag: correction

(New York)

It seems to all be crashing down as we write. The markets had just eliminated all losses for the year and were above or near all-time highs (e.g. the Nasdaq). However, the market has all he hallmarks of irrational exuberance—indexes priced for such unlikely perfect outcomes that they just can’t stand. At 22x forward earnings, valuations are right around where they were in the tech bubble. The economy is likely to take two years to recover from the virus, but the markets only took two months.


FINSUM: The market seems to be getting a reality check this week. Legitimate fears of a second wave are growing as re-opening states are seeing hospitalizations surge.

Published in Eq: Total Market
Thursday, 04 June 2020 17:18

Hedge Funds Prepare for a Big Market Downturn

(New York)

Investment bank research teams all over Wall Street have been sounding the alarm about how untether from reality markets seem to be. Many are warning investors of another big fall in stocks, and at the same time are telling corporate customers to tap markets for funding as much as they can before another fall. Now hedge funds are joining too, saying it is time to pull back. One manager said “The markets are priced to perfection … The stability in equity markets does not reflect the job losses and the insolvencies ahead of us globally”. Paul Singer of Elliott Management made a specific call, saying “our gut tells us that a 50 per cent or deeper decline from the February top might be the ultimate path of global stock markets”.


FINSUM: In principal a big fall seems warranted, but it is hard to fight the Fed.

Published in Eq: Total Market

(Seattle)

Investors might be growing a little uneasy if they have been paying attention to market leaders. A number of stocks that have led the big market rally are starting to falter, and that could be a sign of a major pullback to come. Amazon, Zoom, Netflix and other leaders of this rally have recently plateaued or dipped, which could be a sign that the rally has lost strength. If those stocks start to lose ground, a lot of the gains the market has seen are at risk because of the chance that investors could capitulate once the indexes loses leadership. One equity strategist at BTIG put it this way, “We’d suggest that the ability for the broad market to build on its recent gains is contingent on names like Zoom, Moderna, Netflix and Amazon and other highflying ‘shelter-in-place’ names whose momentum has waned in recent days, to at least sustain their meteoric advances as leadership passes off to the more cyclical areas and themes”.


FINSUM: We think there is a degree of truth in this. If the big gainers start to fade, it is hard to imagine the laggards will suddenly start holding the market up.

Published in Eq: Total Market
Tuesday, 03 March 2020 15:32

Bernstein Says You Should Buy Stocks Now

(New York)

Storied research firm Bernstein Research has a recommendation for you, and it is a brave one—buy stocks. The firm says that on a tactical buying basis, it is time for investors to re-enter the market. Bernstein acknowledges that they have no idea when the coronavirus situation will clear up, but that given the general decline in indexes and that fact that sentiment has swung negative, it only makes sense to buy because the market has become too bearish.


FINSUM: We have to give Bernstein credit here for a bold call. Most analyst teams tend to hide or vacillate, but this is a strong call.

Published in Eq: Total Market
Tuesday, 25 February 2020 08:32

Stocks Need to Hold or a Full Correction Looms

(New York)

Global and US stocks are teetering on the brink of a major correction right now. US indexes fell around 3.5% and fears over the spread of coronavirus and its impact on the economy continue to rattle the psyche of markets. One analyst summarized the deepening fears of the virus’ potential impact this way, saying “When countries are closing borders, the threat of an outbreak is becoming more pronounced in Europe and the Middle East and supply chains are just going to be more disrupted, how do we model risk when we can’t even model economics with any confidence?”.


FINSUM: There was an early morning bounce in Asian markets that fizzled. The news today is not any better than yesterday. It is easy to imagine the bottom temporary falling out of markets.

Published in Eq: Total Market
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