Displaying items by tag: dow

(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.

Published in Eq: Large Cap
Monday, 26 March 2018 11:48

Here is Why the Dow is Dropping

(New York)

The Dow has not been doing so well lately. Last week it dropped to its lowest level of the year, declining further than in its worst bout of volatility in February. The reasons why are becoming harder to explain with every day of losses. While isolated flare ups used to be explained away, the situation is growing more complicated for investors. A growing risk of tech regulation, a looming trade war, higher interest rates—all are weighing on stocks. That makes the markets much more complicated and hazardous for investors, and it has become commensurately harder to make good decisions.


FINSUM: The market seems to be in a very treacherous period. Its failure to regain momentum after the fall in February seems ominous to us, and we do not see a clear end in sight.

Published in Eq: Large Cap
Wednesday, 14 February 2018 09:49

Inflation Data Might Cause a Renewed Plunge

(New York)

Investors need to be on red alert today, as this is the day markets have been waiting for. US inflation data for January comes out this morning, the piece of information which will either assuage or accelerate fears about pending Fed rate hikes and a possible recession. Not only will the data affect US markets, but if inflation accelerates, it will also impact other asset classes, such as the Dollar, and by extension, emerging markets.


FINSUM: If inflation is ahead of forecasts, or looks at all strong, it will likely panic markets. If it is weak, there may be a relief rally.

Published in Macro
Wednesday, 14 February 2018 09:47

Has the Market Finally Found a Floor?

(New York)

The Dow experienced mild gains yesterday, with just a 40-point move higher. After so much back and forth recently, nothing could have been more welcome for many investors. The mild move begs Barron’s to ask the question of whether stocks have finally found a floor after a roller coaster two weeks. Stocks started rough, but rallied late in the day, giving signs of renewed optimism. The most interesting part was that after opening down 180 points, bids started to appear which supported the market, leading some to believe that there is actually a market clearing price in place.


FINSUM: Whatever the market did until now is immaterial in our opinion, as it is this morning that inflation data comes out, and that will ultimately be what moves markets in one direction or another.

Published in Eq: Large Cap
Friday, 09 February 2018 10:34

Don’t Panic But the Correction Has Just Started

(New York)

The market fell another 4% yesterday, pushing all the major indices into a correction, meaning a 10% drop or more. However, the reality is that this really isn’t much of a correction, at least yet. Looking at a number of the most common valuation metrics, such as P/E, CAPE, dividend yields etc, stocks are still very expensive. Even considering this fall, they are still up 19% over the last year. That means it would take much a more substantial fall to push them into the territory where they could be a buy on a “value” basis.


FINSUM: A few thoughts here. Firstly, stocks are only a buy right now if you think the market is taking a break before heading higher. Well, that is our view. The market is all concerned that growth is too good, which through some mechanisms (like the Fed) will lead to a recession. In early 2016 (the last time a correction happened), the market was worried about a dismal economy. That time the fears were wrong, and we think they will be this time too. This has been a middle of the road recovery for almost a decade, and we think it will revert to that mean, avoiding investors’ worst nightmare—growth! (as if that is such a nightmare).

Published in Eq: Large Cap
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