Displaying items by tag: correction

(New York)

Just a day after Citi and Goldman Sachs warned of a market correction, Morgan Stanley has gone on the record with an even more stark warning. The bank says that an even stronger correction than February is looming and that the selloff is is imminent and has “just begun”. MS says that we are in the midst of a “rolling bear market”, and that almost every sector has been de-rated. Investors are unprepared for the big losses in tech, and the market has little to look forward to. Morgan Stanley says the drop will be bigger than earlier this year “if it’s centered on Tech, Consumer Discretionary, and small caps, as we expect”.


FINSUM: This is an even more stern warning than what we ran yesterday, and more specific too. Tech is already having a meltdown, but what really caught our eye was the threat to small caps, which have been on a great run.

Published in Eq: Large Cap
Monday, 30 July 2018 08:50

Citi and Goldman Call for Equity Meltdown

(New York)

One of the largest banks on Wall Street has just gone on the record calling for a major equity market firestorm. In an unusual move, Citi questions the recent rise in stocks and contends that things may unravel quickly. “It may be that easing trade tensions and China’s policy response are comforting investors, but the move has the hallmarks of herd instincts at work”. Citi continued, “riding the tailwinds of easy policy and fiscal stimulus, but these drivers are failing. Meanwhile storm clouds are gathering and risks look biased to the downside”. Goldman Sachs seconded the views, saying that market gains had been too narrow and would lead to “large drawdowns”.


FINSUM: It has been quite puzzling that stock prices have moved higher and higher even as the trade war was looking worse and worse and the Fed continued to be committed to its tightening path. Sharp reversal coming?

Published in Eq: Large Cap
Thursday, 26 July 2018 09:27

The S&P 500 Just Ended Its Longest Correction

(New York)

The S&P 500 experienced a correction earlier this year, and since February, has been stuck in a rut. While the declines were not terribly deep, the doldrums were very long lasting. In fact, this was the longest correction (without a rebound or a fall into a bear market) since 1984. That meant the market was in correction for 115 straight sessions.


FINSUM: The market has finally regained some momentum, but it feels odd that stocks have been gaining in the face of largely negative trade war news. Then again, stocks love to climb a wall of worry.

Published in Eq: Large Cap

(New York)

You have heard it before, and while you might not want to, you need to hear it again. All signs point to the fact that ETFs will likely be the epicenter of the next big market blow up. Investors will be familiar with the argument that the “liquidity mismatch” between ETFs and underlying bonds is a big problem, but the reality is that this is also the case in stocks. While small caps and other less-liquid stocks pose a big threat to ETFs which track them, in a market downturn, even quite liquid shares might be set alight by forced panicked selling by ETFs. Bloomberg gives and an example “Imagine that one big investor in an ETF with, say, a 10 percent stake is forced to sell a large part its holding in a single day. There might not be ready buyers for such a large holding, causing the ETF to fall to a price below the value of the assets it owns. This price impact may be exaggerated, as ETF activity intensifies both upswings and downswings”.


FINSUM: The fact that there are also big risks in equities really opened our eyes. We knew about the bond liquidity issue, but the fact that it extends to both small and large cap equities is quite concerning. Then again, there is a fatalistic logic where this all makes sense: ETFs have been the big growth driver since the Crisis, so it makes sense they would be the epicenter of the next one.

Published in Eq: Large Cap
Friday, 29 June 2018 09:38

The “Rolling” Bear Market

(New York)

This might be a unique kind of bear market we have on our hands, at least according to Morgan Stanley. The bank’s chief US equity strategist says that this is a “kind of rolling bear market”. Continuing “We are not seeing an ’08 scenario where everything gets hit at once … it’s selectively hitting markets one by one and it’s a rolling sort of correction”. Since that seems to be the case, one good defensive sector to avoid turmoil might be US small caps, which are shielded from trade war and are benefiting from last year’s tax cuts.


FINSUM: We like this description of the kind of correction we are currently in. It might not be a single cataclysmic event that sends the market tumbling, but a series of blows that drives things down continuously.

Published in Eq: Large Cap
Page 11 of 13

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…