Displaying items by tag: recession

(New York)

One asset manager called last year’s fourth quarter stock rout perfectly, and they are doubling down, saying it will happen again this year. Principal Global Investors’ Seema Shah says that stocks are facing another imminent selloff if the US and China can’t get a trade deal done before the December 15th tariff deadline. “If that trade deal doesn’t happen and if everything falls apart and it feels like tensions are getting worse, then I think we are facing a potential repeat of last year, and it will be worse”, said Shah. She says that the shock could be even bigger than in other parts of the year because of how liquidity disappears in December.

FINSUM: So we are dubious on this call, but what is interesting to us is that this argument was published on November 28th, and since then Trump has backtracked on the trade deal timeline.

(New York)

Deutsche Bank has just gone on the record with a bold prognostication. The bank says that the global economy is “bottoming out”. While that may sound grave without further context, what Deutsche actually means is that the global economy has already seen the worst of the current downturn. The bank expects that the world’s economy will be improving next year, meaning we may have finally turned the corner on slowdown fears. “Key to our optimism is that the risks of trade wars and Brexit are evolving in positive ways, and the possibility of a radical policy shift to the far left in the U.S. and the U.K. after their respective elections seems remote”, says Deutsche Bank’s research team.

FINSUM: So did we just go through a “recession” and now the economy and market are ready to turn the jets back on? Quite optimistic (especially after a 25% gain in the S&P this year), but not altogether unlikely.

(New York)

If there was ever a stock market indicator that makes us worry, it is when the general public gets very bullish. Nothing seems to yell “stock market peak” like a record setting sentiment number. A new sentiment tracker from Qontigo called ROOF (risk-on/risk-off) just registered a score of 4.8, which is in the 95th percentile historically. The ROOF score hit a low on October 2nd and has been rising since then.

FINSUM: Whenever we see readings like this it just always feels as though a correction is near. The reason why is that since people’s expectations are high, they are easily let down and get fearful/redemptive.

(New York)

A huge institutional investor is poised to make a fortune if markets plunge. The biggest hedge fund in the world—Ray Dalio’s Bridgewater—has reportedly placed a $1 bn+ bet that stocks will tumble. Using Goldman Sachs and Morgan Stanley, the firm has been building up the bearish position for months. The bet wagers that stocks will fall sharply by March and will pay off if either the S&P 500 or the Euro Stoxx 50 moves lower. Bridgewater reportedly paid $1.5 bn for the options contracts, roughly 1% of their AUM.

FINSUM: This is a huge bet. Normally you could argue that this might just be a hedge, but the size of the position makes it seem much more like a gamble than a hedge.

(New York)

The economy has been in a rough patch for about a year, with major economies and emerging markets all slowing. But things may be poised to turn around. Markets have gotten very excited about the prospect for an upturn after the IMF said it expects 2020 to be better than 2019. One economist from Macquarie summarized sentiment this way, saying “As 2019 draws to a close, the market is pricing in economic recovery, with equities in the US hitting new highs and long yields well off the recent lows”. Global trade is now stabilizing, which begs the question as to whether the economy has already weathered the worst of the storm.

FINSUM: When it comes to the economy, things are very hard to forecast, but on balance the situation is looking better than worse.