Market manipulators have not been able to trigger panic selling despite bearish market sentiment. Market participants do not have much confidence in equity stocks but are not willing to dump the core holding stocks in the portfolio. Therefore trading volume comes mainly from day traders.
As market manipulators are no longer short selling stocks, market participants are less worry of market collapse and begin to pick bargains during pullback. The outlook for wealth assets in the second half year is positive since capital are flowing from low yield money market to riskier assets.
4 Catalysts to Spark an S&P 500 Rally to 1,500
Jim Paulsen, chief investment strategist at Wells Capital Management, is sticking by his year-end target of 1,500 on the S&P 500. He's zeroing in on four main catalysts that could spark a rally in the second-half of the year.
First up is Europe. Yes, Europe. Despite the market selling off on the latest round of concerns that nothing will emerge from another European Summit at the end of this week, Paulsen says we've seen this before and it's simply not the crisis it was once considered. He calls it more of a "chronic problem" that will be with us for the next decade, rather than a full-blown imminent threat.
"We've seen how this works out, the Euro fears flare, the market sells off, then they calm down and we go on to new highs," he says. "So rather than Europe fears flaring as a sell signal, I think what it has represented for the last two years is a good buying opportunity."
Second, Paulsen is as bullish on the U.S. economy as it gets these days. In his view, investors are too focused on China and Europe, and overlooking underlying strengths domestically. While overseas economies matter, he believes this year's U.S. growth data has been overstated, understated, and is now balancing out at about 2.5%.
Third, Paulsen points to emerging market economies.
"To me the biggest risk we face is not Europe, it's a recession in the emerging world. If that happens I think the global recovery is over," he states.
But Paulsen sees this as a low probability risk due to accommodative policy measures taken last Fall that will ultimately fuel those key economies to higher growth levels. He believes we'll see evidence of China's slowdown bottoming by the start of the fourth-quarter.
Finally, Paulsen points to earnings multiples. In his latest research note he cities the following:
Trailing 12-month earnings per share are now about $100. Therefore, the price-earnings multiple (PE) on trailing earnings is now slightly less than 13 times and the PE based on year-end consensus estimated earnings is currently less than 12.3 times.
"I think it's cheap," states Paulsen confidently. "We've never in the post-War era had this low of multiples when interest rates and inflation were also this low."
'Check Engine' Light for US Economic Driver Is On
If small business is the economic engine that makes America go, then it's clear the "check engine" light is now on.
New data from the small business analytics firm PayNet shows investments by small manufacturers slowed down substantially in the first quarter. Even more worrisome, those business owners are cautious about growth in the second half of this year. "It's surprising. It's a cooling off," says William Phelan, PayNet's co-founder and president. "If you see the relative changes going on here you can say they really have become more cautious and started to jam on the brakes."
If small business is the economic engine that makes America go, then it's clear the "check engine" light is now on.
New data from the small business analytics firm PayNet shows investments by small manufacturers slowed down substantially in the first quarter. Even more worrisome, those business owners are cautious about growth in the second half of this year. "It's surprising. It's a cooling off," says William Phelan, PayNet's co-founder and president. "If you see the relative changes going on here you can say they really have become more cautious and started to jam on the brakes."
Stocks to Bottom This Week: Charles Nenner
With stocks bonds and gold careening between hope and greed every few days Nenner updated his views and price targets for each of the Big Three.
Stocks
Having been true to his word and taken money off the table in stocks 3 months ago, Nenner is looking to start getting long again this week. Focused on cycles and momentum Nenner sees a cyclical low coming in the next few days
"People looking for major moves are going to be disappointed," he says. Timing and trading are key as he thinks stocks are going to be locked into a 5-10% range for an extended period.
Bonds
"First people lost their shirts on the stock market then the gold market." says Nenner. "I'm afraid that now they're going to lose a lot of money on their bond positions."
Of course people have been taking the other side of the bond bet for the better part of three decades, only to see yields drop to previously unthinkable lows.
Gold
Those unfortunate souls who lost their shirts on gold buying it at $1,900 may ultimately get bailed out by the markets but not before getting hung out to dry for a little while longer.
With Stocks Down and Yields Low, Is it Time to Buy Junk Bonds?
At a glance you can plainly see if the ocean is at high tide or low tide, and yet it's virtually impossible to detect exactly when the tide is changing until long after it has actually happened.
In much the same manner, the junk bond market looks to be undergoing a major tide change of its own, having just snapped a six-month string of withdrawals. If the tide has actually turned, then the $1.2 billion of new money that poured into high yield funds last week could be the start of a bigger trend.
In fact, over the past three months, when the S&P 500 has shed about 8%, the junk indexes are down less then 2%, and that doesn't include dividend yields of 7% t0 7.5%. It's also worth noting that within this universe Levine says the ratings agencies ''do a good job" and are still powerful—even respected, in as much as they bring order to the system and create opportunities.
Wealthy Swiss Hoard Cash, See Doom for Euro
If you want proof that the world's wealthy are worried, consider this: Swiss banking clients have nearly a third of their portfolio in cash. And one in five believe the Euro will collapse.
The findings are included in a new report from LGT Group, the Austrian banking company, conducted with Austria's Johannes Kepler University. The study found that wealthy Swiss and Austrian private-banking clients remain highly risk-averse and fearful of inflation, sovereign debt defaults and the unstable financial system.
"Private banking clients are still being influenced in their behavior by the turmoil in the financial markets and it appears increasingly likely that this will remain the case for this generation of clients for a long time yet," according to the report.
No comments:
Post a Comment