Why this summer's rally will look 'silly' in hindsight
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Why this summer's rally will look 'silly' in hindsight
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Why this summer's rally will look 'silly' in hindsight
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| Why this summer's rally will look 'silly' in hindsight |
Why this summer's rally will look 'silly' in hindsight
Why this summer's rally will look 'silly' in hindsight... Is this true?
The real question on the minds of big traders is Why this summer's rally will look 'silly' in hindsight, and what can they do about it, in case it happens.
The summer's market rally could run out of steam as earnings look set to disappoint yet again and retail investors continue to shun the most hated bull in history, strategists told CNBC on Wednesday.
Second-quarter corporate earnings reports point to a fourth-straight quarter of year-over-year profit declines for S&P 500 companies, and estimates for the third-quarter now see earnings down marginally. Meanwhile, the S&P has hit a number of new highs this summer.
U.S. stock prices have gotten ahead of themselves.....
Third-quarter earnings will be down roughly 1 percent from a year earlier as the energy sector struggles to turn a profit amid renewed pressure on crude prices.
Second-quarter earnings per share were down 2.6 percent through Monday, with nearly 90 percent of S&P companies having reported, according to Thomson Reuters I/B/E/S. Excluding the energy sector, they were 1.8 percent higher.
The sector's lack of profitability will continue to weigh on overall S&P earnings, Bianco said. Further, weak capital spending and excess capacity in commodities, global manufacturing and property development will create drag, he added.
Banks also will remain challenged as bond-buying by central banks suppresses interest rates, according to Bianco. Lower rates make it harder for banks to make money on plain vanilla business like lending money.
My guess is that the earnings situation is still weak. I don't think we get to better profits until Q4 or 2017,
Kristina Hooper, U.S. investment strategist at Allianz Global Investors, said the summer's rally has been "unusual" and was generated largely by the Brexit vote and assumptions about the Federal Reserve's reaction.
"There was this excitement, I think, among market participants that this would force the Fed's hand to be more accommodative, and as a result, I would argue this is not a fundamentals-based rally. So it's one that has vulnerability," she told "Squawk Box."
A more accommodative Fed would keep interest rates lower, pushing investors into stocks to find returns. But while the U.S. stock market is the "least bad alternative" for investors, the nature of the rally makes it vulnerable to external shocks, Hooper said.
"The problem is, since 2013, if you chase rallies, the Fed has burned the small investor over and over again," he told "the newscast"
That's because the Federal Reserve keeps talking up a rate hike, causing the dollar to strengthen and oil prices to weaken, raising risk, and eventually flushing investors into risk-off plays, he said.
While the Fed is unlikely to pull off a second rate hike this year following an initial quarter-point increase December, policymakers will nevertheless attempt to prepare the market for one, McDonald said.
"That's a big deal because the rest of the world is obviously easing," he said.
Looking at the chart, what is not working in anyones favor is that the market is gone into a SIDEWAYS lull for now. You can see the support resistance line below. Its in a sideways pattern, and everyone is anxious that nothing is happening. If we bust out of 2180 we could be off the the races, however a breakdown below the lows in early AUGUST of 2150 could bring the BEARS out of their hibernation and sink their claws in. Those would be the levels that are of signficance here.
One hallmark of the six-year bull rally that persists today is a lack of participation from small retail investors, said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.
"Many of them have sat on their hands for literally six years. There's nobody chasing this market. There's lots of nonbelievers out here, and the market just keeps going up," he told "Squawk on the Street."
Larry McDonald, managing director at ACG Analytics, said the only strategy that has worked for retail investors for the last two years has been buying fear. - Source : Cnbc.
Why this summer's rally will look 'silly' in hindsight... Is this true?
The real question on the minds of big traders is Why this summer's rally will look 'silly' in hindsight, and what can they do about it, in case it happens.
The summer's market rally could run out of steam as earnings look set to disappoint yet again and retail investors continue to shun the most hated bull in history, strategists told CNBC on Wednesday.
Second-quarter corporate earnings reports point to a fourth-straight quarter of year-over-year profit declines for S&P 500 companies, and estimates for the third-quarter now see earnings down marginally. Meanwhile, the S&P has hit a number of new highs this summer.
U.S. stock prices have gotten ahead of themselves.....
Third-quarter earnings will be down roughly 1 percent from a year earlier as the energy sector struggles to turn a profit amid renewed pressure on crude prices.
Second-quarter earnings per share were down 2.6 percent through Monday, with nearly 90 percent of S&P companies having reported, according to Thomson Reuters I/B/E/S. Excluding the energy sector, they were 1.8 percent higher.
The sector's lack of profitability will continue to weigh on overall S&P earnings, Bianco said. Further, weak capital spending and excess capacity in commodities, global manufacturing and property development will create drag, he added.
Banks also will remain challenged as bond-buying by central banks suppresses interest rates, according to Bianco. Lower rates make it harder for banks to make money on plain vanilla business like lending money.
My guess is that the earnings situation is still weak. I don't think we get to better profits until Q4 or 2017,
Kristina Hooper, U.S. investment strategist at Allianz Global Investors, said the summer's rally has been "unusual" and was generated largely by the Brexit vote and assumptions about the Federal Reserve's reaction.
"There was this excitement, I think, among market participants that this would force the Fed's hand to be more accommodative, and as a result, I would argue this is not a fundamentals-based rally. So it's one that has vulnerability," she told "Squawk Box."
A more accommodative Fed would keep interest rates lower, pushing investors into stocks to find returns. But while the U.S. stock market is the "least bad alternative" for investors, the nature of the rally makes it vulnerable to external shocks, Hooper said.
"The problem is, since 2013, if you chase rallies, the Fed has burned the small investor over and over again," he told "the newscast"
That's because the Federal Reserve keeps talking up a rate hike, causing the dollar to strengthen and oil prices to weaken, raising risk, and eventually flushing investors into risk-off plays, he said.
While the Fed is unlikely to pull off a second rate hike this year following an initial quarter-point increase December, policymakers will nevertheless attempt to prepare the market for one, McDonald said.
"That's a big deal because the rest of the world is obviously easing," he said.
Looking at the chart, what is not working in anyones favor is that the market is gone into a SIDEWAYS lull for now. You can see the support resistance line below. Its in a sideways pattern, and everyone is anxious that nothing is happening. If we bust out of 2180 we could be off the the races, however a breakdown below the lows in early AUGUST of 2150 could bring the BEARS out of their hibernation and sink their claws in. Those would be the levels that are of signficance here.
 |
| Why this summer's rally will look 'silly' in hindsight |
One hallmark of the six-year bull rally that persists today is a lack of participation from small retail investors, said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.
"Many of them have sat on their hands for literally six years. There's nobody chasing this market. There's lots of nonbelievers out here, and the market just keeps going up," he told "Squawk on the Street."
Larry McDonald, managing director at ACG Analytics, said the only strategy that has worked for retail investors for the last two years has been buying fear. - Source : Cnbc.
WHAT IF YOU KNEW WHICH WAY THE MARKET WAS ABOUT TO MOVE BEFORE IT HAPPENED? CLICK HERE To Join Our VIP ELITE GROUP -- FREE!
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