Eq: Total Market


Donald Trump did something many might not have expected when he met Xi Jinping recently at the G20 conference: he told him he would dial down the criticism of China regarding the demonstrations in Hong Kong in order to get Beijing back to the negotiating table. The offer apparently echoed a previous one he had made to Xi in the week leading up to the conference. The plan worked and China has agreed to resume trade talks.

FINSUM: While many may disagree with the concession to China, we think this shows one thing very clearly: Trump does not want to let the trade war derail the US economy or markets and will likely do whatever is in his power to keep them afloat.

(New York)

Greedy is not usually a word associated with anything positive, but in this instance it seems fair. What we mean is that the market’s performance through the first half of this year has been so good, that investors need to double down on stocks. That likely sounds counterintuitive, but history tells us otherwise. When stocks have a good first half (and they surely have), then they are 60% more likely to finish the year strongly as well. On that basis it would make sense for investors to put more money into equities or at least don’t take any chips off the table.

FINSUM: We like this logic. While we do have some bearish reservations about the market right now, we think Trump is going to make sure to not do anything to derail stocks, as doing so might derail his re-election campaign.

(New York)

Investors need to take note, as one of the biggest equity research divisions on Wall Street has just turned overwhelmingly negative on equities. And this is not the “stocks will struggle in coming years” kind of call, it is an argument for right now and published yesterday. The bank has lowered its allocation to stocks, saying that the outlook for markets over the next three months is very poor. Morgan Stanley says equities prices are way too high and expectations for major rate cuts are already priced in, leaving little room for appreciation. They also think valuations are too high given deteriorating manufacturing and economic data.

FINSUM: Morgan Stanley is basically saying that the market is primed for disappointment because all the positive outcomes have already been priced in. Not unrealistic.

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