Displaying items by tag: bear market

September saw the Vix creep to a 4-month high as the S&P 500 blew off 4.8% of its value. Most investors were hoping for a bounce-back month in October, chalking up September’s poor performance to a checkered history for the opening of autumn. However, they are likely to be remiss as volatility indexes are still climbing. The pullback in September was the largest since March of 2020, when the pandemic began.BofA said that while October is generally a well-performing month when it trails a struggling September, October can drag as well. Debt ceiling negotiations, oil price spikes, and Fed tapering are just a few of the onslaught of headlines which are giving the market fits.

FINSUM: While volatility has yet to hit the peaks of September it is already consistently above its 200-day moving average, which could be a sign of even more volatility to come.

Facebook was blacked out on Monday October 5, 2021, which they claim was related to technical issues on their backbone routers. This came just before Frances Haugen, former product manager for Facebook’s civil integrity team, said that regulators need to intervene in the ‘crisis’. Haugen told ‘60 Minutes’ that she saw Facebook consistently choose profits over public safety at Facebook.She took with her tens of thousands of documents that prove these claims. Additionally, she filed complaints with the SEC that Facebook misled investors and advertisers by not sharing the whole picture about its platform.

FINSUM: This was a huge hit to Facebook stock on Monday, but it piggybacked on the rest of tech’s rally Tuesday morning to see some recovery. It is difficult to tell how long this may loom over the stock.

The Fed is beginning to talk tapering and that has sent treasury yields spiking to 3-month highs (since before delta was spreading rapidly). The treasury yield spike has sent Growth stocks, such as in the technology sector, tumbling. Investors caught in the middle have flocked to value stocks, such as energy and financials. These stocks have cyclical reopening qualities and investors are singing the same reflationary trade song from back in May. However, growth doesn’t look quite as sluggish, and this might keep these stocks rolling a bit longer. Supply side factors in energy in particular will keep value strong beyond interest rates falling or inflation being more than transitory.

FINSUM: Value needs this middle zone of moderate inflation and moderate growth. If either fall off or pick up too much it could push investors back into growth or push the whole market down!

(New York)

Some of the biggest names on Wall Street have been calling for a correction recently. Morgan Stanley is chief among them. The bank’s chief equity strategist, Mike Wilson, says he thinks there will be a 10% correction in the near term. According to Wilson—who predicted the last two market sell-offs—we are in a mid-cycle transition phase of a market cycle, which is an environment where equities getting very choppy.

FINSUM: This makes a lot of sense, but feels a little too bearish for us. If earnings can hold up, and inflation continues to moderate, we don’t think a full correction will occur. Flat and/or choppy, fair, but not a full 10% fall from here.

(New York)

Bank of America put out a stern warning this week. A team of Bank of America equity strategists led by Ohsung Kwon says that the current market looks eerily like the one in the fourth quarter of 2018, when stocks fell 20%. The market is experiencing some concerns on near-term earnings as companies cut back forecasts. According to Kwon, “The nearest memory of early cycle companies' impact on the market is almost exactly three years ago when companies warned about tariffs and slowing macro conditions during 3Q18 earnings … Those warnings and a hawkish Fed resulted in a 20% decline in the S&P 500”.

FINSUM: 2018 came within a hair of a full bear market. That feels too bearish given the overall trajectory of growth. If Congress doesn’t get the debt ceiling raised, though, all bets are off.