Displaying items by tag: bear market

Friday, 19 November 2021 19:45

Morgan Stanley Says Big Drop in S&P 500 Coming

In their latest strategy release Morgan Stanley is pulling no punches about its projections for 2022, warning investors to unload and underweight U.S. Stocks, Bonds and Treasuries. They see tightening monetary policy, high inflation, and higher valuations all scaring them from a more bullish U.S. stance. They see the S&P dropping to almost 6% below its current levels. In order to find the gains they need they suggest investors look to Euro-area and Japanese companies, where they are bullish on equity prices. They also see commodities providing some portfolio relief. However, Morgan Stanley’s economists aren’t predicting a rate rise until 2023, and they see the Fed being more dovish than the broader market expects.


FINSUM: Conflicting messages inside Morgan Stanley. If Monetary Policy doesn’t over tighten then don’t expect a sluggish year in the U.S.

Published in Eq: Total Market
Friday, 05 November 2021 18:28

Are Dividend Investors at Risk?

Treasury yields have been on the climb as of late. The 10 year Treasury is up as much as 30 basis points since mid September, and that climb has many dividend investors worried as to the value of the stocks they hold. Most income investors see rising yields challenging the value of income stocks, causing them to fall, but in the 15 times in the post war era that the 10-year has risen 1.5% from its low, the S&P grew by 12% annualized in this stretch. What this current Treasury climb has in common with its predecessors is inflation. The latest PCE posted a 30-year record, and that is being priced into Treasuries, which is eroding the traditional income stream. With realized gains in Treasuries lower than the nominal yields driving headlines, dividend investors might not need to be worried about stock valuations sinking. 


FINSUM: If yields were being driven by growth factors, we might see the more traditional relationship between interest rates and asset prices, but an inflation-driven cycle might not push investors away from dividend equities.

Published in Eq: Dividends
Monday, 01 November 2021 19:03

Moody’s Says this is the New Housing Bubble

Credit rating agency Moody’s Investor Service, has issued a warning to investors that the debt poses ‘systematic risk’. The factors that Moody’s sees sourcing that risk is an opaque market, eroding lending standards and liquidity concerns. Private credit has seen a flood of inflows this year to venture capital, private equity, real estate and infrastructure as the industry is more robust to the pressures from the mainstream economy on traditional bonds and equity. However, the risks in the medium sized boutique bond market are hard to capture because they fall in regulatory limbo and could cause broader economic disruption. Finally private equity relies heavily on leverage and while that's fine for the time being, it may pose serious structural issues for the illiquid market as interest rates begin to normalize.


FINSUM: The 2008 financial crisis was primarily driven by the rise of the lesser regulated shadow banking industry. Private credit’s swell is very reminiscent of the housing bubble creation.

Published in Alternatives
Friday, 22 October 2021 17:43

ESG is on the Verge of Bubbling Over

Environmental, social, and governance investing drew in almost $35 trillion last year and that number is expected to grow another 42% by 2025, and while those dollars might be better for the environment the large inflows from unseasoned investors are pushing ESG into a price bubble. Large inflows are can disregarding traditional financial discipline which can affect debt/equity ratios, dividends, and distort valuations for future mergers and acquisitions. New companies in the onset of their financial growth are already being evaluated at 15 times revenue, on top of that investments in the traditional sector are suffering as outflows continue this could cause supply shortages and further inflation. Continued inflows into ESG could swell the bubble further and risk a collapse.


FINSUM: ESG could be swelling into risky territory, investors should be cautious particularly with retirement vehicles.

Published in Eq: Tech
Tuesday, 12 October 2021 20:46

Emerging Markets Looking Bleak

(Rio de Janeiro)

The international monetary fund cut its growth projections globally this week. The advanced economies are still expected to keep pace, but the low-income developing countries are lagging. Many low-income countries are lagging in vaccine coverage and their exports are suffering because of this. These exports slowing led the IMF to cut the growth projection for Indonesia, Malaysia, Philippines, Thailand, and Vietnam from 4.3% to 2.9%. There is a slight trickle into larger economies as worker shortages have hurt American companies such as Nike. China remained robust to most of the slashes as its 2021 projection only dropped from 8.1% to 8.0%.


FINSUM: Don’t look for these growth projections to bear out in emerging markets if vaccine rates tick up. However, Fed tightening could slow growth in dollar-dependent countries.

Published in Eq: EMs
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