Eq: Total Market
(Washington)
The midterm elections are finally in the rearview mirror, and generally speaking, the results are exactly what the market expected. That means it may be time for a rush back into stocks after the turmoil of the last month. One analyst put it this way, saying “Following this week’s volatility and the FANGs selloff this week, we’re likely to see traders getting back in and buying the dip. The elections have been a win for both the Republicans and the Democrats, and this will bring balance to the market”.
FINSUM: We do suspect investors will breath a sigh of relief. Firstly, things went according to plan, but secondly, a split Congress is in some ways the best case scenario for stocks.
(New York)
Barron’s has made an argument to investors. Despite all the turmoil recently, and the potential threat of the midterm elections, it says you should stick with stocks. Part of the reason is historical—stocks have usually continued to do well even when Congress flips (though the sample size historically is small). For instance, the stock market continued to perform well when Congress turned against Obama. On a policy front, the outcome looks positive too, as Democrats could limit some of the less popular policies of the Republicans, like a trade war, which would help US corporates.
FINSUM: We think the election is going to be positive for shares if everything goes as it is forecasted to. Any change from the blue House-red Senate prediction might shake markets.
(New York)
The world may be on the verge of a recession and a bear market, or maybe not. But either way, investors need to think about the possibility and have a plan for how to handle it if it comes. With that in mind, some experts have weighed in on the topic. T. Rowe Price says that in a downturn, investors need to buy more emerging markets and hold less bank loans. Charles Schwab thinks investors need to get more defensive, moving out of growth stocks and into defensive sectors, like healthcare. Northern Trust is more benign and does not see big changes coming to the market or economy.
FINSUM: If the economy really goes south, we think the market will go with it, which means defensive sectors would be a good bet. We imagine the Dollar would stay strong and yields would be lower, so income investments could shine(which also happen to be quite defensive).
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(New York)
Bloomberg is arguing that the world may be on the verge of a big synchronized recession. In the words of the publication, there is “risk of synchronized slowdown in global growth as Europe wobbles, China sputters and stock markets around the world keep crumbling”. China is finally feeling real heat from the tariffs of the trade war and European growth is slumping. That begs the question of how long the US can remain the fast-growing outlier.
FINSUM: Growth is still good in the US but it does seem to be past peak. Just not as far past peak as in the rest of the world.
(New York)
Wall Street is getting behind the stock market in a way that is atypical for the current environment. Following a big fall in stocks, banks and analysts usually get shy about calling a rally and generally stay neutral or call for further losses. However, following the best two consecutive trading days since February, they are getting behind stocks with unusual vigor. For instance, JP Morgan’s all-world analyst said that the “rolling bear market” might turn into a “rolling squeeze higher” and that “the potential for a violent upside rally is substantial”.
FINSUM: We are not as optimistic as Wall Street, but certainly don’t feel gloomy about the market given the strength of earnings and the economy.
(New York)
The market seems to have finally regained its footing after a very turbulent couple of weeks. This selloff felt different than any in recent memory and serious damage to the market’s psyche seems to have been done. But what might it say about the wider economy? The answer is little, according to the Wall Street Journal. The selloff will probably be just that, a market fall. In reality, tech companies, which led the losses, reported very solid earnings, with margins expanding very well. Little can be drawn from the results that might show the economy is in trouble.
FINSUM: The only aspect of this selloff we are somewhat worried about is how it might impact consumer confidence and spending this holiday season. However, so long as the market stays strong this month, we expect the impact to fade.