Displaying items by tag: stocks

(New York)

JP Morgan put out an interesting recommendation to investors recently. They said the best place to make money in the recovery might not be in the US, but rather in international stocks. According to Gabriela Santos, global market strategist at JP Morgan Asset Management, “When you have a cyclical recovery like we expect in 2021, it’s really international’s time to shine … We think it’s really important for investors to have a balance between U.S. equity exposure and international exposure as we go into the year of the vaccine for 2021”. The key argument here is that international indexes are more dominated by cyclical stocks than tech, and those are the share poised to really gain as the vaccine plays out.

FINSUM: This is all pretty basic. International indexes have not recovered as much as US stocks, and are composed of companies that are likely to start outperforming at this stage of the recovery. Europe in particular seems to be a good bet.

(New York)

New jobless data was released this morning and it took the market by surprise. Economists had been calling for new jobless claims to stay around the level of recent weeks—something around 695,00. But what happened was quite eye-opening: they came in at 853,000. The losses show that the economy is starting to feel renewed impacts of the surge in COVID cases. According to a job market expert, “Job destruction has not come to an end … We might be gaining jobs overall, but thousands of people are losing their jobs every week because demand has not returned”. Markets dipped on the release.

FINSUM: This is worrying for the economy. Hard to say if this trend will continue, but certainly not the direction markets have been predicting the economy would be heading.

(London)

US market valuations are eye-watering. By several measures the S&P 500 is as richly valued as it has ever been. With that in mind, overseas stocks, especially in Europe, appear to be a good bet. For example, while US stocks are now well ahead of their pre-COVID peaks, the Stoxx Europe 600 is still down 9.2% since its high in February. Since March, the S&P 500 has rebounded by 60% while the Stoxx Europe 600 has only seen a 40% rise.

FINSUM: So European benchmarks are more exposed to the banks and industrials, which were more hurt by COVID than US tech companies, which dominate American benchmarks. That said, now that a vaccine is in site, there is a big chance for appreciation in Europe that seems much less likely to occur in the US.

(New York)

One of the big annual market traditions has begun: banks and their analysts put of their year-ahead forecasts. This year has seen a wide range of forecasts, but one thing is becoming apparent—analysts are bullish, and more so than usual. Jefferies has the most aggressive forecast, saying the S&P 500 will close 2021 at 4,250; it is at 3,662 now. Analysts are bullish because of the coming vaccine and central banks which will continue to be accommodative. However, Barclays adds a third consideration—that the economy is doing much better than anyone thought it would be at this point. According to Barclays “with central banks set to remain accommodative for several years, a likely drop in global trade tensions, and unappetizing fixed income returns, we remain overweight risk assets over core bonds”.

FINSUM: Yes valuations are high, but given the overall economic position the US is in (including the vaccine), it is hard not to be optimistic.

(New York)

Make no mistake, in the long run Morgan Stanley is bullish. The problem is that the short-term does not look so bright, according to the bank. While MS raised their S&P 500 target for 2021 to 3,900 (well above today’s 3,350 level), they think the market might be rough in the near term. Citing “the second wave of virus, remaining election uncertainties and the specter of higher rates”, the bank says prices will swing from as low as 3,150 to 3,550 in the short-term. According to Morgan Stanley, “Once sentiment turns from euphoric bullishness, reality will strike and we expect to see the S&P 500 begin to feel the pressure”.

FINSUM: The bank says that without the vaccine news, the market would have fallen 5% already and they basically think that fall is due at any moment.