You May Be Overthinking Threats to This Bull Market

You May Be Overthinking Threats to This Bull Market

$DIA, $SPY, $SOX, $QQQ, $RUTX

Yes, this Bull run is long in the tooth: growth is slowing, trade disputes abound, the yield curve has inverted and earnings are good but not great. Put all of the above together, and they irritate investors, but they are not that bad.

Many stratigist say they spell doom for this Bull Market, but so far every doom prophecy has fallen over

The Chief economist and strategist at Mackenzie Financial Corp writes, “investors sound a little too worried as usual. While fear is healthy and warnings are what Wall Street gets paid for, all the angst is just as likely to resolve itself in a “pain trade” in which people bail just as stocks advance.”

It is almost a bad look for a market professional to ignore these signals. There’s responsibility to try and avoid bad things when you see them. But it seems that there are forces that can give the cycle the room to run.”

While appetite for deals and new issues has been on the rise this year, partly triggered by a rally in US stocks IPO activity is hardly excessive. New issues have raised $35.90-B the most since Y 2009, and the value of announced deals in North America rose 8.6% in Q-1 compared with a year ago. Still, the value of M&A deals as a percentage of the S&P’s market cap remains below pre-crisis highs.

Forecasts for S&P 500 profits peaked in September at $177/share, just before the Fed engineered market dive to the brink of a Bear market.

They have been going down ever since and now stand at $166.50/share, a 6% drop from September highs. But, this year’s anticipated earnings growth at 4.4% according to data is still a sfe mark.

Rising rates, a source of concern in months leading to previous recessions, are not a factor now.

US Treasury yields have plunged in recent weeks and the Fed has signaled it’s prepared to act if economic conditions worsen. The FOMC will issue its latest policy decision Wednesday.

The last frames of the Bull markets in in Ys 1999 and 2007 were characterized by fewer stocks propelling the broader market, but that is not something to worry about in here.

Market breadth is near the highest level since early May.

Defensive groups such as REITs and utilities have been among the leaders this year, but it does not mean that cyclical sectors are falling behind.

The spread in returns between economically sensitive and defensive stocks in the MSCI USA Index has climbed 9% since hitting its 15-low in December.

For all the concern about the economy, the spread between junk-rated US bonds and US Treasuries hangs at 390 points, below its 5 year average of 441 points, signaling that anticipation of corporate defaults is going down.

Over the past 10 years, there have been moments when animal spirits ran high among stock investors, but for most of this Bull market’s run, investors have acted as though they hated owning stocks again and every 5% drop was seen as the next recession.

With the S&P 500 Index just at a record high, investor exuberance is nowhere to be found.

Hedge funds’ exposure to stocks dropped to 20%, data compiled by SentimenTrader show, the lowest level in 5 years.

Investors haven not been this pessimistic since the global financial crisis of Y 2008, according to the latest Bank of America Merrill Lynch survey of money managers with $528-B between them.

On the Bull Vs Bear Book the Bears are in the lead, as the market climbs a wall of worry.

New highs may be elusive until there are clear signs that the current trade tensions with China are dissipating or that the Fed is ready to ease more than once under the specter of a trade dispute escalation.

We do not see the Fed engineering a recession as long as President Trump is in the Oval Office

Tuesday, the major US stock market indexes finished at: DJIA +353.01 at 26465.54, NAS Comp+108.86 at 7953.87, S&P 500 +28.08 at 2917.75

Volume: Trade on the NYSE came in light again at 773-M/shares exchanged.

  • NAS Comp +19.9% YTD
  • S&P 500 +16.4% YTD
  • Russell 2000 +15.0% YTD
  • DJIA+13.5% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish across the board in here, and our Key technical indicators are flashing Very Bullish now.

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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