Current market sentiment is unfavorable to the selling strategy of market manipulators. They are sitting on the gain of commodities position. Currently, asset values have reached a level that long term investors have appreciable gain.
The speculative trading portfolio performance is disappointing. The stock positions are struggling at bottom and show no obvious sign of support. On the other hand, the hedging position in the portfolio is losing value as the market remains strong as expected. The situation reflects the weakness of the trading skills in a competitive and manipulated environment where conventional thinking and event outcome may not match.
The outlook for short term market performance remains strong despite uncertainties ahead. Market participants are more concerned to catch up in the rally rather than fear of panic selling due to under-investing.
However, market manipulators have not yet changed the selling strategy. Therefore market participants should be cautious. Market movement appears similar to last year when it climbed to year high before consolidation and then sudden panic selling.
Stocks' correction coming? Not that again
Investors are beginning to wonder if this "Energizer Bunny" of a rally can just keep going without taking a break or a fall.
Every Friday for the past couple of months, the question has hung in the back of investors' minds: Is the stock market's rally strong enough to continue without a correction?
"We are seeing this unbelievable rally in the market and yet the market is unbelievably complacent. We haven't been this bullish for a long time," said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research, based in Austin, Texas.
Analysts Turn Bullish 6-Months Late: What Does it Say About the Rally?
And just as the S&P 500 hits its highest point since May 2008, now within 10% of its record close of 1,565 from October 2007, the thundering herd of belated bulls is finally showing up to the bash.
"We've had a monster rally since last year and analysts have been negative the whole time," says Paul Hickey, co-founder, Bespoke Investment Group in the attached video clip.
It may be fashionable to show up a little late for a party, but for Wall Street analysts the tendency to be tardy seems more like the rule, not the exception. And just as the S&P 500 hits its highest point since May 2008, now within 10% of its record close of 1,565 from October 2007, the thundering herd of belated bulls is finally showing up to the bash.
"We've had a monster rally since last year and analysts have been negative the whole time," says Paul Hickey, co-founder, Bespoke Investment Group in the attached video clip.
But guess what his research just discovered?
"Over the last four weeks, the revisions ratio (of upgrades to downgrades) just turned positive for the first time since early August," Hickey says.
In short, what that means is that six months and 30% later, stocks are just now looking good. While this is not the first time analysts have been on the exact opposite side of a trend, Hickey points out that, in and of itself, it does not mean the bull run is about to end. Quite the contrary.
The transition from fear to greed (or vice versa) is never perfect, nor should it be expected, but this round of conversion has been particularly sluggish, even at the start of the New Year when analysts are historically optimistic.
"When you start off the year, usually analysts are positive on equities and bullish on their outlooks, so you see some upgrades in the stocks they cover," he says. "This year, every single day until late February there were more downgrades of individual stocks than upgrades of individual stocks."
Some other observations include that on a valuation basis, this market may be overbought, but is still not overly expensive, as Hickey says "a strong rally but that doesn't change the fact that valuations are still below historical averages."
Goldman Sachs: Best Time in a Generation to Buy Stocks, Sell Bonds
As much as most of us could effortlessly list a dozen reasons why the next 10 years will be as hard on stock investors as the previous decade, what matters today is that Goldman Sachs is making a big call to the contrary.
"It's a curious time to do it," Macke says in the attached video. "They're either very, very late or prescient as all get out."
Do not panic: The rally in risk assets is for real
If you're waiting for the next meltdown in U.S. stocks or in commodities, you may want to get over it.
After several false dawns following the global financial crisis, more investors are starting to believe the current rally in stocks, commodities and emerging markets could be a long-lasting one.
The S&P 500 closed above 1,400 points last week for the first time since the 2008 financial crisis. Investors piled into U.S. equity funds, with the biggest weekly inflows since mid-September.
Since its recent bottom in early October, the S&P index has jumped 30 percent. But for the first time since 2007, investors are not using the gains as an opportunity to take profits and run away. Instead, the rally has been slow and steady, and investors see the sustained improvement in the U.S. economy as a sign that demand has returned and that risky assets can support higher valuations.
"The prospects for future returns in equities relative to bonds are as good as they have been in a generation," Goldman Sachs in a note Wednesday said.
Dean Junkans, chief investment officer at Wells Fargo Advisors and Wells Fargo Private Bank, said individual investors have started wading back into higher-risk, higher-yield assets, including high-yield and emerging market funds.
"For the last five years, few people wanted to talk about a long-term plan," said Junkans, who oversees $1.3 trillion in assets. Instead, investors had preferred the safety of low-yielding Treasury bills and money market funds.
"Now I'd say they are dipping their toes back into the market," he said, citing demand for high-dividend-yield stocks, high-yield corporate debt, and emerging market fixed income.
"Markets love a grizzly story," said Simon Smollett, senior currency options strategist at Credit Agricole in London. "But there is no grizzly story. The bears have left the room."
NYC’s Luxury Housing Market Booms, While American Dream Fades for Most
The housing market in New York City has largely avoided the problems afflicting other cities and towns across the country: foreclosures, falling home prices, stalled construction.
Even Wall Street layoffs and smaller bonuses are unlikely to make a dent in Manhattan real estate, one of the most expensive in the country. Jonathan Miller, the CEO of real estate appraiser Miller Samuel, says high-end properties are selling quickly and often at record prices.
High-end Manhattan real estate may be breaking new records, but the national housing market continues to stumble.
"It is not a proxy for how the rest of the market is doing," he says. "What's going on in the very high-end of the market is so disconnected from reality."
Surprise Increase in Rates Is Credited to Signs of Recovery
Investors will be closely watching for another rise in interest rates when trading resumes on Monday, after the bond market’s sharpest move in nearly six months caught some traders by surprise last week.
Despite the sudden swing higher, most Wall Street strategists are playing down the danger of a surge in interest rates, which have been historically low because of demand for bonds from both the Federal Reserve and private investors wary of all but the safest assets.
The sell-off last week was caused by increasing signs that the economy might finally be gaining steam, lifting the yield on 10-year Treasury bonds to 2.31 percent on Friday, from 2.04 percent a week earlier. That was the biggest move in bond yields, which move inversely to bond prices, since October, when rates briefly topped 2.4 percent.
Strategists, money managers and other experts said last week’s move in rates was spurred by the Federal Reserve’s statement about improving economic trends, as well as the largely upbeat results also announced on Tuesday from the stress tests performed by the Fed on 19 large banks. Regulators will now permit a host of banks to raise dividends and buy back stock, another sign of the financial sector’s recovery since the financial crisis.
“The message is that maybe things aren’t as bad as people thought,” said Carl Kaufman, a portfolio manager in San Francisco with Osterweis Capital, which has $5 billion under management. “You can’t have it both ways with healthy banks, a stronger economy, and still have a zero interest rate policy.”
In fact, the Standard & Poor’s 500-stock index gained 2.4 percent last week and now stands at its highest level since May 2008, before the collapse of Lehman Brothers and the onset of the financial crisis.
He added that if rates were to keep moving higher, the Fed would most likely step in with another round of “quantitative easing,” buying up bonds to force rates lower. In particular, the Fed wants mortgage rates to remain low in an effort to help the housing market heal. Mortgage rates have increased slightly in recent days, but remain below 4 percent.
“If you got back to 4.4 percent or 4.5 percent, the Fed would get nervous,” Mr. Jersey said.
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