Stock Market Participants “Savvy” to Risks Under the Surface of a Rise

Stock Market Participants “Savvy” to Risks Under the Surface of a Rise

Stock Market Participants “Savvy” to Risks Under the Surface of a Rise

$DIA, $SPY, $QQQ, $VXX

Yale economist Robert Shiller admits that he does not know “what to make” of surging US stocks now

Thursday he offer some of his sage advice to savvy investors: “Markets are inherently filled with tricks and traps, be careful.”

“I don’t know what to make of US stocks right now. President Elect Trump might actually boost the market even further,” Prof. Shiller said..

“First of all, he wants to cut the corporate profits tax. That’s an immediate direct feed into the stock market. Secondly, he doesn’t care about the environment or other quality of life things. He just wants corporations to succeed. That’s also Bullish for the stock market,” Prof. Shiller said.

“And then thirdly, he is an inspiration to many people. So maybe they start spending more and maybe someone will try businesses that were considered too risky before,” Prof. Shiller said.

“So I’m tempted to be optimistic for the short run and I can I imagine that US stocks go up from here for a while even though valuations are at a high level.”

He explained that although interest rates are starting to climb,historically they’re still low.

“There is not any received wisdom about just exactly why they are so low. It’s natural to put it on to the financial crisis of 2007/08. That is because it’s a dominant narrative that everything today must be due to the financial crisis,” he said.

“That’s why I’m inclined to think that is has something to do with technology. We are living in a time where we are worried about our future because of rising inequality and jobs being replaced by robots. So people want to save but they don’t actually end up saving because they bid up prices of assets like bonds that look safe,” he said.

“It’s been a surprise that these low interest rates lasted as long as they did. So you might think it’s time even without Trump for interest rates to start going up. For instance, in the US, the Federal Reserve was already talking about raising rates even before the election,” he said.

For long-term investors this means the resiliency the markets are demonstrating at present is 1-directional, which has always implied that the risks under the surface are on the rise.

Caution is Key.

Thursday, the major US stock market indexes finished at: DJIA -42.87 at 19899.42, NAS Comp +10.93 at 5487.93, S&P 500 -1.75 at 2269.00

Volume: Trade was heavy with 1.14-B/shares exchanged on the NYSE

  • NAS Comp+2.0% YTD
  • S&P 500 +1.4% YTD
  • Russell 2000 +1.1% YTD
  • DJIA +0.7% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.37) Neutral (0.14) Bullish (0.48) Very Bullish (0.50)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.37) Neutral (0.18) Bullish (0.38) Very Bullish (0.56)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.46) Neutral (0.24) Very Bullish (0.54) Very Bullish (0.61)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.47) Bearish (-0.35) Very Bearish (-0.51) Very Bearish (-0.56)

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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