Displaying items by tag: bear market

(New York)

One of the biggest banks in the country has just offered a very bullish view. BAML says the US will avoid a recession. The comments come from the bank’s CEO, Brian Moynihan, who believes that growth will slow, but then flatten out and not go into a recession. “Everything we see in our customer base is consistent with a slowdown to 2% and a flattening out from there”, he says.

FINSUM: We found these comments to be genuinely interesting because BAML has a view on the economy that few do. Not only are they the largest consumer bank, but also the biggest mortgage lender. That means they can watch the pace of deposit growth and borrowing in a very direct way, and thus can take the economy’s pulse.

(New York)

There is a lot riding on the results of the Fed’s meeting this week. Every big bank is weighing in and the consensus is that the markets have gotten too dovish in their projections and that the Fed won’t cut now, or as quickly as investors expect, all of which will lead to a decline in stocks. Both UBS and Goldman think that the pace of rate cuts forecasted by markets would only make sense in a recession, which seems unlikely. Morgan Stanley says stocks are very vulnerable to a decline if the Fed doesn’t cut as it will shift expectations and lead to tighter conditions. JP Morgan thinks equities will decline even if the Fed does cut.

FINSUM: We think the Fed will stay on hold for now but signal cuts in the Fall. We expect this will have a neutral to mildly negative effect on share prices.

(New York)

Whether investors like it or not, a recession is coming. One of the key indicators is for a yield curve inversion to last 90 days or more. If it does so, a recession is highly likely in the next 12-18 months. Well, the first point of inversion began in March and we just crossed the 90-day threshold, which means that the strongest indicator of recession has just been triggered. Here are some tips to prepare: clear out garbage holdings from your portfolio (e.g. the stock tip from your brother in law six months ago), set aside cash and come up with a plan to buy stocks when certain thresholds are hit (e.g. a 25% decline in key indexes), pay down debt (it might not be this easy to do so again for awhile).

FINSUM: For all the talk we have heard over the last year about “this time is different”, the reality is that the strongest recession indicator known has just been triggered.

(New York)

Gold has been doing well, and it is no surprise as to why. Both the economy and the trade war are having a bullish effect on gold, which has responded in line with investor fears. Additionally, worries over tensions in the Middle East and the protests in Hong Kong have offered a short-term boost to prices. Stephen Innes, managing partner at Vanguard Markets, says “Today’s price action suggests the market is not long enough gold, especially by historical standards, for this elevated level risk as investors have remained far too complacent to mounting risk in Hong Kong and the smolder explosive political powder keg in the Middle East”.

FINSUM: Gold has been in a bear market for so long that it had many times seemed to have lost its role in a portfolio. However, it appears to once again be finding its footing.

(New York)

The whole market is freaking out about the trade war. Between the yield curve inversion, plunging yields, and weakening economic indicators, investors are on bear market and recession watch. However, these worries are likely overdone, meaning the current market is a buying opportunity. There is little consensus that economic data is worsening and the economy is headed for a recession, but investors seemed compelled to believe this because the expansion is about to become the longest on record.

FINSUM: Investors seem to be feeling a sense of doom that has little basis in reality. There is no reason why the economy has to go south just because the expansion has reached a decade.