As Market Leadership Rotates, Money Manager Speak Out
$DIA, $SPY, $QQQ
Following are the views of 7 money managers and strategists on what could conceivably put a brake on the selling in this market.
This view is held by almost everyone: that a softening in Fed’s hawkish rhetoric and President Trump’s trade dispute talk would be the fastest route to relief.
Managed Money’s ideas, as follows:
The US-China Trade Dispute
Ryan Nauman, market strategist at Informa Financial Intelligence: “No. 1 could be trade. At the G-20 Summit, if we get some good news out of there and maybe some optimism building on the trade front, that could potentially give us a boost. In order for the markets to get to the next level and break through this range we’re in, the trade issue will have to be resolved. And once that is then markets will break through with some optimism.”
Kristina Hooper, chief global market strategist at Invesco Ltd: “This sell-off is largely driven by growing concerns over the trade situation and therefore it will take a positive development in trade to take pressure off markets. Now, that’s somewhat simplistic, since there is certainly concern over the slowdown that we are seeing globally but that slowdown is relatively modest. I believe it has been partially caused by concerns over trade and the economic policy uncertainty that comes with it. In my view, a positive trade development would likely be the easiest way to end this sell-off.”
Max Gokhman, head of asset allocation for Pacific Life Fund Advisors: “Another person who could help is Powell in December, but that is tricky because skipping a hike could indicate the economy is slowing down and result in further selling as investors get spooked even more. There’s room to be dovish without sounding alarmist by changing the balance sheet wind down though, but again it would be quite a tightrope to walk on.”
Tim Courtney, CIO of Exencial Wealth Advisors, said: “If the market gets more comfortable with the Fed not going bananas on raising rate, and I think they will not, the Fed has got to talk a good game, they have to talk the talk and maintain their independence, but when push comes to shove, the market will be comforted by the Fed not being as aggressive as they’ve indicated they might be. As earnings come in and continue to be strong, if we see any progress at all towards US and China working this trade situation out, the Fed’s reasonable stance or agreement on trade, that could be the catalyst to end the year strong.”
On Corporate Earnings Growth
Brad McMillan, chief investment officer for Commonwealth Financial Network, which oversees $156-B: “What’s driving this pullback is not the deterioration in fundamentals. What’s driving it is the change in confidence about future growth. Confidence has to come back. A lot of these companies may have hit the peak of the growth cycles, and investors are probably starting to realize that. It’s a healthy repricing, which will be more reality-based. If the confidence about profit growth returns, we may see prices going up again. Yes, it’s unpleasant, we haven’t seen anything like this for a while, but it’s not the end of the world, for now. The results are not that bad.”
On Tech’s Reversal
Andy Kapyrin, director of research at RegentAtlantic, which has $3.7-B in assets under management: “Tech stocks have an easy time ignoring the macro news wherever they deliver strong growth. That’s why they have done so well from April to September: investors didn’t lump them together with other assets. Now investors are not only lumping them together with other assets, but they’re hitting them harder because the good news is gone. What will be crucial for many companies, especially Apple and Amazon is this holiday shopping season. That is going to make or break their sales. If tech companies can conquer the growth outlook in the next 2 months, we may see the entire sector reverse.”
Upside Economic Data Surprises
John Iborg, portfolio manager at QS Investors: “We will have to wait and see how Q-4 earnings look in a few months. Until then, positive surprises in economic data in the US and abroad along with further clarity around or easing of trade tensions will certainly help. In the near-term, it is very tough to say with any degree of certainty at this point. For one, volatility may temporarily abate going into the end of the year, with the holiday season upon us. Aside from that, market sentiment for FAANG stocks will probably be a key driver.”
Shayne and I believe that there will be cause for optimism later this month when President’s Trump and Xi meet over the trade dust-up in Argentina, and the Fed will err on the side of prudence and soften it position on rate hikes in Y 2019.
That being the case, we see this action as healthy, and the sidelined trillions will come back in the market beginning in December rotating into new leadership.