Market manipulators have been very successful in the last year, especially in the timely unloading of equity stocks from market peak and shorting the market at the US debt downgrade. Panic selling from market participants allow market manipulators to cover the short positions and also to make profit from derivatives.
The selling strategy works less well as market falls to low level and investors have trimmed the portfolio significantly on market fear. Market bottom should have occurred in the last quarter of last year. Many market participants realize that they have sold at market bottom and cannot buy back cheaper on anticipation of a "double dip" in market.
The European sovereign debt crisis still looms large. But market participants learn not to sell at the bottom. Instead, investors are holding large amount of cash or equivalent and waiting for an entry point to buy cheap stocks. Although market participants are worry about market collapse anytime, stock holding is already thin and panic selling is unlikely.
Market manipulators have not triggered sell-off in the first week. However, broad market have recovered much of the loss after the collapse since US debt downgrade. If market manipulators maintain the sell strategy, sell-off may be triggered anytime soon. Market appears to have strong resistance to advance further due to the worry. However, as some market participants have more confidence on macro economic condition, there is less profit taking activities to drag down market on this week's rally.
Market will remain turbulent on speculation from market participants and market manipulators. Hot money around the globe is growing and some are seeking opportunities in the financial market. The low interest rate policy have not created asset price inflation or bubble yet due to weak confidence in the stock and real estate market. However, as the world economy exhibits growth, the enormous amount of hot money will boost asset price.
BlackRock's Bob Doll sees hopeful signs in 2012
On the one hand, economic news in the U.S. has been getting steadily better. This holiday shopping season is shaping up to be the best since the Great Recession; the housing market is showing signs of life and even the job market is on the mend.
Then, there's Europe. The region's leaders have failed again to convince investors that they will be able to prevent a breakup of their 17-nation currency union. Greece could still default on its debt, causing huge losses for banks in France and elsewhere that hold Greek bonds. Investors fear that could cause a financial panic to spread around the world, like what happened in 2008 after the U.S. brokerage Lehman Brothers collapsed.
In the U.S., too, there are plenty reasons for investors to be cautious. Many companies are still wary of hiring, and banks are afraid to turn on the lending spigots.
Who better to guide investors during these uncertain times than Bob Doll, who helps oversee $3.6 trillion in assets as chief investment officer at the world's biggest money manager, BlackRock.
Q: With Europe looming large going into the New Year, what's the outlook for 2012?
A: The probability of a solution to Europe's issues is low. Nobody even knows what it will be. Or what a solution looks like.
The European authorities' attitude to dealing with their problem is to close their eyes, hold their noses and hope it might go away. Stumbling along is the most likely path forward.
The alternative is more troublesome. If there's immense pressure on politicians, there can be an accident that takes the form of a bankruptcy, or nationalizing some banks, the collapse of the euro, or that a country exits the European Union. Nobody even knows how that can potentially take place.
Muddling through is the best option. Europe can then face a mild recession and economic contagions are limited. But the darker scenario could lead to a financial contagion which will be drag the global economy down.
Investors Should Expect to See Continued Market Volatility and Modest Returns in 2012, According to BofA Merrill Lynch Global Research’s Year Ahead Outlook
Investors should expect another turbulent year of market volatility during 2012 from a mix of heightened policy risk, political uncertainty, low growth and low interest rates, all of which will translate into modest investment returns, according to BofA Merrill Lynch Global Research’s 2012 Year Ahead Outlook, released today.
Against a backdrop of a looming recession in Europe, a still-struggling U.S. economy, high oil prices and slower growth in China, BofA Merrill Lynch Global Research’s macro analysts forecast global economic growth of approximately 3.5 percent during 2012. The team anticipates that credit and commodities will outperform equities in the first half of 2012 and recommends that investors overweight corporate and emerging market bonds.
Michael Hartnett, chief Global Equity Strategist and chairman of the BofA Merrill Lynch Research Investment Committee (RIC), added, “The very real risk of policy mistakes causing a recession in the U.S. or a hard landing in China means that investors should conservatively allocate assets in 2012. Despite our short-term caution, however, we anticipate that global equities could rally by 10 percent next year from current levels, aided by liquidity, modest earnings growth and cheap valuations. In a bullish scenario, 2012 could represent the beginning of the end of the great bear market in equities.”
Yield and income will remain paramount. The year 2012 will likely be another environment of low rates and scarce yield, and investors will continue to seek assets that provide attractive yields. U.S. Credit Strategist Hans Mikkelsen is bullish on corporate credit and expects credit spreads to tighten significantly by the end of 2012. The credit strategy team forecasts total returns of 4.8 percent and 13.9 percent from U.S. investment-grade and high-yield bonds, respectively.
Modest upside for equities. Equities should offer roughly 10 percent upside in 2012. Deleveraging and slower earnings growth are expected to limit the upside, while quantitative easing, valuation and positioning limit the downside. The Global Equities team recommends focusing on sectors that provide high growth, high quality and high yields. The equity strategy teams’ 2012 year-end targets are 330 for MSCI All Country World Index and 1,350 for the S&P 500.
Large-cap equities will outperform small-cap equities. Head of U.S. Small-Cap Strategy Steven DeSanctis expects large caps to continue to outperform small caps in 2012 as earnings growth and valuations are better for larger companies. Heightened volatility and macro uncertainty offset the clean balance sheets and potential for M&A within small caps.
All That Market Volatility for This?
U.S. stock investors went to the brink and back in 2011, and all they got were these middling returns: a virtually flat finish on the Standard & Poor's 500 and a 5.5% gain on the Dow Jones Industrial Average.
U.S. companies churned out record profits, and price-to-earnings ratios of stocks dropped to their lowest levels in recent memory. But that mattered little to investors. Instead, a torrent of headlines from Europe, Asia, the Mideast and the U.S. all but drowned out the stock market's positive fundamentals. Investors fixated on geopolitical strife in the oil-producing Mideast; Japan's earthquake, tsunami and nuclear crisis; a debt crisis in Europe; and legislative gridlock in the U.S.
Amid the uncertainty, investors flocked to the safest corners of the stock markets. Dividend-paying companies rocketed higher. Blue-chip U.S. multinationals outpaced smaller companies, helping the Dow beat the Russell 2000 index of riskier small-capitalization stocks by its biggest margin in 13 years.
With pessimism so rife on Wall Street, some investors say U.S. stocks may be geared for strong gains in 2012.
These investors argue that 2011's late-year pickup in U.S. economic indicators will continue throughout the new year, powering corporate revenues and reigniting a return to stocks in the cyclical sectors that have lagged behind for the past 12 months: industrial, materials and energy stocks.
"There is so much bearishness priced into the market that, barring a systemic collapse, it's difficult to see how we can't get that positive surprise," said Andreas Utermann, the London-based global chief investment officer for money manager RCM, a subsidiary of Allianz Global Investors. He says the U.S. is the only part of the world that he is "substantially" bullish on in 2012.
And, after a year in which investors piled into Treasurys, many investors see momentum shifting back toward stocks.
"The two things that give me encouragement about the bigger stock-market picture are the very negative sentiment and the incredible financial health of the corporate sector," he added.
Schwab’s Sonders: Investors Should Be Optimistic About 2012
2011 was a difficult year for countless retail investors, money managers, hedge funds and just about everyone trading in the global markets. The S&P 500 Index returned a paltry 2.1% (counting dividends) and market volatility and economic uncertainty drove investors into U.S. Treasuries despite record low yields.
The new trading year does not mean last year's problems have been excised from investors' minds, and for some strategists, like Charles Schwab's Liz Ann Sonders, 2012 presents a lot more opportunities for investors. She tells The Daily Ticker's Daniel Gross that the "rampant volatility" that marked 2011 was "unique" and predicts the wild swings that shook the S&P and Dow in 2011 will ease this year, giving spooked investors more confidence to place their cash in equities, specifically cyclically-sensitive sectors. Dividend plays may continue to provide comfort and peace of mind to some investors, but as the U.S. economy improves (which Sonders believes it will), the risk on/risk off trading environment will fade and investors will move money out of fixed income.
No comments:
Post a Comment