Displaying items by tag: bear market

(New York)

Investors have been really afraid of the next bear market for the last few months. Ever since spreads grew tighter and the economy became very strong, fears of a looming recession and accompanying bear market have been rampant. Here are six signs to consider about a potential bear market. Firstly, look at high yield bond spreads. When they start to rise, its shows the credit cycle is ending, potentially signaling a recession. Yield curve steepness (or inversion) is another key metric. Deal activity in M&A is also excellent sign. Weekly jobless claims are another strong leading indicator. Finally, look at investor sentiment. When investors are very confident, that tends to be when the bear bites.

FINSUM: This is a pretty good list of leading indicators. Some are flashing red right now, while other are humming along nicely.

(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).

(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)

Is there gain ahead or pain ahead? That is the question on every investors’ mind. Well, Morgan Stanley has an answer. The bank’s chief US equity strategist, Michael Wilson, says that the answer is more pain. The bank thinks we are in a “rolling bear market” and that stocks will reach bear status soon. “We think we get there in four to eight weeks”, says Wilson. The bank defines a bear market as a drop of 20% or more with no recovery for 12 months. “Risk-reward remains unattractive for us”, he added.

FINSUM: Morgan Stanley thinks a lot of these losses come down to the change in central bank policy. We agree with that but we also think investors are just anxious about what lays ahead in terms of a possible recession, trade war, and beyond.

(New York)

Goldman Sachs thinks this selloff is “overdone” and that a rally is coming. The bank thinks the current market presents a good buying opportunity and forecasts the market to rise 7% before the end of the year. According to the bank “The recent sell-off has priced too sharp of a near-term growth slowdown. We expect continued economic and earnings growth will support a rebound in the S&P 500”. To play the rebound, the bank says to look at stocks in its “high quality” basket. These include: Mastercard, Cognizant Technology Solutions, Alphabet, Accenture, Ansys, C.H. Robinson Worldwide, Edwards Lifesciences, International Flavors & Fragrances, and Ross Stores.

FINSUM: That is a very wide selection of choices, but more interesting to us is Goldman’s view on a recovery. We agree that this selloff seems to be an overreaction relative to the fundamentals.