Displaying items by tag: bear market

Wednesday, 08 May 2019 11:13

This is the Biggest Threat to the Bull Market

(New York)

What is the biggest threat to the bull market? Is it a recession, high valuations, interest rate volatility? In reality, the biggest threat to the bull market might be rearing its ugly head now—a trade war. Trade tensions between the US and China have skyrocketed again this week and it has investors worried that there could be a global slowdown in trading which would sink the economy. In fact, that is the point that some don’t understand—it is not just about whether the US and China close a deal in the near term, it is about how the trade tensions the US and China create percolate through the global economy. Astute market watchers will have noticed new data out of China shows that exports have dropped, a sign of potential weakening.


FINSUM: We think cooler heads will prevail and the US and China will get a deal done. Our expectation is that it will not be ground-breaking in scope, but that it will be enough so that both countries can claim victory and investors can happily put these tensions in the rear view mirror.

Published in Eq: Total Market
Friday, 26 April 2019 11:30

Recession Watch: What Recession?

(New York)

For the last eight weeks or so we have been running a “recession watch” theme in articles, but the data is lately looking so good that we are feeling silly. New GDP data was released today and it was nothing short of a blowout. The US expanded 3.2% in the first quarter despite a government shutdown and winter weather. The growth was almost a full percentage point ahead of expectations and well beyond the 2.2% growth of the fourth quarter.


FINSUM: These recession fears seem pretty well put to bed in our opinion. Back in Q4, the declines in a number of indicators seemed to show we may be headed for a recession, but the strong reversal in data suggests this was just an aberration. The market doesn’t seem convinced, though, as Treasuries rallied on this news!

Published in Bonds: Total Market
Wednesday, 24 April 2019 11:09

Why the Bull Run Will Keep Going

(New York)

Stocks are once again nearing all-time highs, which is understandably making investors nervous about a repeat of the fourth quarter occurring. While that fear is healthy, the reality is that the underlying conditions of the market are a world different now. Not only are valuations lower, but the economy is looking robust, and perhaps most importantly of all, the Fed has let off the gas pedal with hikes, which puts recession risk much lower. All of these factors seem to conspire to make a perfect environment for stock price appreciation.


FINSUM: Anyone who reads FINSUM knows we lean towards bearish news, but the truth is that our better judgment is telling us that now is probably a time to be optimistic, as the trifecta of reasonable valuations, a solid/strong economy, and a dovish Fed, are in place.

Published in Eq: Total Market
Wednesday, 17 April 2019 12:16

20 Stocks to Play the End of the Rally

(New York)

Goldman Sachs put out a bearish article today that is calling for the tail end of this bull market. The bank thinks the rest of this year is going to be a dud and that PE multiples will not rise above 17. Therefore, they are suggesting a group of stocks that can thrive in such an environment. Here is a selection of 10 of their 20 choices: Texas Instruments, VeriSign, Gilead Sciences, Abbvie, Amgen, Starbucks, Lam Research, AT&T, Foot Locker, HanesBrands.


FINSUM: Appears like there are a lot of defensive stocks in this basket, which seems like a good plan for a sideways or bearish market.

Published in Eq: Total Market

(New York)

Asset manager Guggenheim just put out a big call. The money manager’s strategists think that the economy is headed for a recession and markets are headed for huge declines. Their call is more interesting than the usual prognostications though. They point out that while this recession looks likely to be shallow because of a lack of underlying issues in the economy, the losses the market will suffer are likely to be severe. Scott Minerd of Guggenheim points out that “Our work shows that when recessions hit, the severity of the downturn has a relatively minor impact on the magnitude of the associated bear market in stocks”. Instead, it is the loftiness of valuations prior to the downturn that has a greater impact on how markets behave during a recession.


FINSUM: This argument makes total sense to us—there is no big fundamental problem with the economy, so a shallow recession, but equity prices are hefty right now, which means big losses.

Published in Eq: Total Market
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