Displaying items by tag: dow

Friday, 09 February 2018 10:27

Markets Just Entered a Correction

(New York)

Well it is now official, or as official as it can be considering “correction” is a generic term. However, a drop of 10% is widely considered to be a “correction”, and that is the threshold we just crossed after yesterday’s huge losses. Stocks dropped deeply again yesterday, with the Dow falling over 1,000 points, or over 4%, and the S&P 500 nearly that far. Markets fell after positive unemployment claims data fueled fears that the economy is too good, which would lead to a tightening Fed and bring about a recession.

FINSUM: It is quite odd that the markets are afraid the economy is too good. We recognize how a hot economy brings about issues, but we just don’t think we are there yet.

Published in Eq: Large Cap
Thursday, 08 February 2018 09:56

The Dow’s Finish Yesterday Was Bad News

(New York)

For most of the day the stock market was in positive territory yesterday. However, right at the close, the market was gripped by a swift selloff that pushed it into the red for the day. If the saying holds true—that smart money trades the close—then today could be an ugly one. The drop at the end seemed to foretell more volatility to come, and show that the market has not psychologically recovered from Monday. The market may remain directionless until next Wednesday, when new inflation data comes out. Investors are worried about the prospect of stronger inflation, and thus a quick rate rise.

FINSUM: The markets are trying to find a new baseline for valuations as investors search for a new narrative of where shares are heading. The US economic picture is strong, but there is no tax cut or other major carrot being dangled, which seems to be hurting prices.

Published in Eq: Large Cap

(New York)

Advisors all over the country got a lot of worried phone calls yesterday. Clients are understandably anxious about the mammoth losses over the last week, all punctuated by an almost 5% fall in the Dow yesterday. One advisor from LA says that “We’re reminding them that we knew this was going to happen and that we’ve been planning for it”. Other advisors are reminding their clients that the economy looks strong and that we are not headed into a recession. One Wells Fargo advisor makes a note that looks negative for stocks, saying “A 10-year Treasury yield above 3% would be reasonable competition for equities, and I would be able to replace fixed income maturities with higher yields for the first time in a decade”.

FINSUM: We think this a healthy correction, but that the market will likely continue to move higher. There is nothing fundamentally wrong with the economy, and once the market realizes that higher rates won’t kill stocks, things will get back to normal. However, this maelstrom is a very healthy recognition of risk.

Published in Wealth Management
Tuesday, 06 February 2018 10:31

Dow Drops Most in Six Years

(New York)

Everyone knows it, but in case you were under a rock, the Dow had its worst day in six years yesterday. At one point the index fell around 1,600 points before recovering to close down 1,175 points, or nearly 5%. The S&P 500 fell 4.1% to close down 7.8% since last Monday. One commentator argues that the market is now in “full price discovery mode”, with no technical supports or trend lines holding whatsoever.

FINSUM: We are five years since the Taper Tantrum, and now it is actually happening. Is this the start of the huge sting everyone has been predicting for years?

Published in Eq: Large Cap

(New York)

The markets had a wild day yesterday. Big loss at open, almost back to even, then a really steep fall, and finally, a little rally to close. Bloomberg says that the trading activity has all the telltale signs of algorithms wreaking havoc. For 15 minutes just after 3 pm, the volume of sell orders was so quick and so voluminous that nothing alive could have possibly executed them. The market tanked, plunging to a 1,597-point loss. Interestingly, the involvement of algorithms might help to assuage some fears, as brokers are using that dimension as a way to calm human investors that this was not an all out emotional panic, but rather technology gone wild.

FINSUM: So we know they are deeply ingrained and certainly going nowhere, but why, in principle, are non-human agents allowed to transact in markets? Market-making firms would say they add liquidity, but they certainly exacerbate, or even cause panic too.

Published in Eq: Large Cap
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