Displaying items by tag: bear market

(New York)

Bloomberg has put out a very bearish article on the economy. The publication is arguing that there is a 2/3 chance of a recession beginning this year, and that a bear market is likely to happen alongside it. As evidence of the pending downturn, the article cites these as indicators: the nearly inverted yield curve, the big fall in stocks in Q4, weak housing activity, terrible February payrolls, and the fact that the rest of the world is slowing. One of the most acute worries though is that the Fed will keep hiking as part of an effort to leave itself room to cut rates in the next recession, an action which could drive the economy into a recession.

FINSUM: Again, much of the direction of assets and the economy depends on the Fed’s mindset. If the central bank returns to hiking, a recession looks like a sure thing. But if not, it is far from certain.

(New York)

If you have doubts about where the market is heading and no fundamental view about direction, one place to search for one is in historical parallels. Sometimes looking at history prompts bullishness, but in this case, looking for past market parallels is terrifying. At the moment, the chart making the rounds is one comparing the current S&P 500 to 1937. Doing so makes it look as though the market is going to revert back into a bearish grip at any moment. But guess what, the same chart floated around in 2010, 2013, and 2015, and the big fall never happened.

FINSUM: This bull run has defied gravity many times, and it is hard to see why his time would be different. That said, all good things must come to an end at some point.

(New York)

In one of the most alarming bits of news we have seen about the economy is some time, new data out on the hiring market is showing a bleak trend. The US economy almost failed to produce any new jobs in February, with the total job creation figure at just 20,000. That is a major step down from the hundreds of thousands of new jobs investors had been used to seeing each month. The number is a meteoric fall from the 311,000 created in January, and way under the forecast of 180,000. Following the data, a senior member of the Fed reiterated that the central bank should take no actions on rates until at least the middle of the year.

FINSUM: This is very scary, but there is an important motto to remember here—one point does not a trend make.

(New York)

There are a lot of worrying signs out there right now, but one thing that has bolstered optimism is the strength of the stock market in 2019. That said, there are signs appearing that underlying fundamentals are weakening. In particular, daily moves are shrinking, down from 0.9% in the 4 months leading to February, to just 0.4% in February. The slowdown in trading momentum is not only worrying in its own right, but also because the exact same trend appeared before the falls of February and December 2018.

FINSUM: Our counter argument is that average index moves were quite small through several solid years between 2014 and 2018, so it dos not necessarily indicate a problem.

(New York)

Wall street bulls are becoming an endangered species, or so says the Financial Times. In a worrying sign for stocks, investors are increasing their cash balances, a move that supports the flood of bearish outlooks out there right now. Most analysts have a fairly pessimistic view of the market, with many calling for a recession and market downturn by the end of 2020. Precious few have bullish views, leaving Krishna Memani, CIO of OppenheimerFunds, in a unique spot in that he thinks we are in the middle of a 20-year bull market.

FINSUM: Most everyone has gotten very bearish in their medium term outlooks. Counter indicator?