Today's Market
by Dr Invest
There are really no new surprises in the market. The breath taking fall of 2.5% is a continuation of a declining market moving to lower lows. 2015 began with excuses that weather had temporarily caused a decline in the market, then there was "oil gate" and the sudden decline in oil prices, and later other excuses were made for a declining market in 2015 such as the Chinese economy. Still, economists and analysts believed that 2015 would be the defining year in which the economy would "take off" and GDP would reach 3% with the S&P growing 10% to 12%. At this late season of 2015, most of these perma-bulls are readjusting their projections, only because to maintain them would be outright embarrassing. Let look at some of these new projections.
Goldman Sachs
After stock prices slumped in late August, the analysts at Goldman Sachs were quick to argue that we could see a rapid snap back in prices as we did in 1998. But in a new note to clients, they've changed their tone. "We have lowered both our S&P 500 earnings estimates and price targets," Goldman's David Kostin writes. "The impetus for these reductions is that our models now incorporate a slower pace of economic activity in the US and China and a lower oil price than we had been previously assuming." Kostin now sees the S&P 500 ending the year at 2,000, down from his previous target of 2,100.
Janus Capital
In a tweet on Tuesday morning, Janus Capital's Bill Gross said: "Stock market refrain from a few months ago: "Where else are you gonna put your money?" LOL ... Ever considered cash?" Put another way, Gross is laughing at people who invested in the stock market because there was nothing else to invest in. Folks who have been reading Gross' investment updates over the past year or so most likely know that Gross would prefer holding cash to being invested in the stock market — or almost anything else. Early in September, Gross' monthly missive basically said everything sucked.
Gross wrote:
Global fiscal (and monetary) policy is not now constructive nor growth enhancing, nor is it likely to be. If that be the case, then equity market capital gains and future returns are likely to be limited if not downward sloping. High quality global bond markets offer little reward relative to durational risk. Private equity and hedge related returns cannot long prosper if global growth remains anemic. Cash or better yet "near cash" such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression – "I'm not so much concerned about the return on my money as the return of my money."
Early Tuesday, stocks were falling after getting crushed on Monday.
Merrill Lynch
The fourth quarter looks like it will be bumpy, and investors shouldn't plan on taking on extra risk in the final months of 2015, Bank of America Merrill Lynch's Christopher Wolfe said Wednesday. Three big fears are looming for the chief investment officer: a corporate earnings recession, uncertainty swirling around worldwide monetary policy and downward revisions to corporate sales and guidance for the remainder of 2015 and likely part of 2016.
RCB
Barbara Kolmeyer
Welcome to the worst day of the year for investors, though you wouldn’t know it by looking at stock futures this morning. Thank the portfolio window-dressers or bouncy dead cats, but the market looks set to fly. Anyway, that gloomy prognosis for the day fits nicely with the disastrous end to the quarter we’re headed for, set to finish with 8% to 9% losses for the big U.S. indexes. The quarter has delivered the biggest point declines for the Dow industrialsDJIA, +1.24% and the Nasdaq Composite COMP, +1.70% since the end of 2008, and the biggest for the S&P 500 since 2011.
Wall Street, though, is hoping to brush the quarter under the rug. A Reuters poll of 40 strategists found that most think the worst is over for stocks. (Less bullish, perhaps, is Goldman Sachs, which cut its S&P 500 target to 2,000 yesterday, though its strategist David Kostin cushioned that with a “flat-is-the-new-up” mantra.) Those strategists polled think the S&P will end up at 2,094 by the end of 2015 — a gain of 2% for the year, but 7% below where they thought it would be when asked a few months ago.
If these market magicians know anything, it’s that stocks needs a catalyst to go up. They can no longer count on the Fed, as one CIO quoted by Reuters rightly pointed out. (Note that Goldman also called for more QE.) This column discussed yesterday how that catalyst will be earnings, and companies themselves will need to put up or shut up to keep the bull from dying. A 2% gain would keep the bull market going, but not by much.
Figuring out a year-end target for the S&P 500 is clearly a guessing game. And some really aren’t buying any sort of stock-market optimism at all. Take our call of the day, which warns that Wall Street is pulling the wool over the peasant’s eyes right now.
Carl Icahn
Icahn calls for taxes to be lowered for corporations and raised for hedge fund managers. He also reiterates his previous warning that interest rates hovering close to zero are creating investment bubbles in real estate, art, corporate earnings and high-yield bonds.
"The middle-class investor has nowhere to go with their money but into the (stock) market, or even more concerning, high-yield bonds, which are very risky," Icahn said in the video, which is posted on his website CarlIcahn.com.
Yet, for months, the consensus has continued to believe in the “second-half rebound” following the “weather-related” first-quarter weakness. That narrative is finally falling apart, with the dawning realization that the reality is 180 degrees from that popular view.
In a recent interview with The Wall Street Journal, New York Fed President Bill Dudley finally acknowledged that the "second half of the year will probably be a little bit weaker than the first half of the year." Some Wall Street houses are also starting to recognize that reality.
After all, as we pointed out over the summer, "a service sector slowdown has already joined the manufacturing slowdown that started last fall, and so the slowdown in overall growth is likely to intensify in the coming months. As such, hopes for a 'second-half rebound' are likely to be dashed."
The good news is that, notwithstanding the continued slowdown, ECRI’s indexes are not yet pointing to recession.
by Dr Invest
There are really no new surprises in the market. The breath taking fall of 2.5% is a continuation of a declining market moving to lower lows. 2015 began with excuses that weather had temporarily caused a decline in the market, then there was "oil gate" and the sudden decline in oil prices, and later other excuses were made for a declining market in 2015 such as the Chinese economy. Still, economists and analysts believed that 2015 would be the defining year in which the economy would "take off" and GDP would reach 3% with the S&P growing 10% to 12%. At this late season of 2015, most of these perma-bulls are readjusting their projections, only because to maintain them would be outright embarrassing. Let look at some of these new projections.
Goldman Sachs
After stock prices slumped in late August, the analysts at Goldman Sachs were quick to argue that we could see a rapid snap back in prices as we did in 1998. But in a new note to clients, they've changed their tone. "We have lowered both our S&P 500 earnings estimates and price targets," Goldman's David Kostin writes. "The impetus for these reductions is that our models now incorporate a slower pace of economic activity in the US and China and a lower oil price than we had been previously assuming." Kostin now sees the S&P 500 ending the year at 2,000, down from his previous target of 2,100.
Janus Capital
Gross wrote:
Global fiscal (and monetary) policy is not now constructive nor growth enhancing, nor is it likely to be. If that be the case, then equity market capital gains and future returns are likely to be limited if not downward sloping. High quality global bond markets offer little reward relative to durational risk. Private equity and hedge related returns cannot long prosper if global growth remains anemic. Cash or better yet "near cash" such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression – "I'm not so much concerned about the return on my money as the return of my money."
Early Tuesday, stocks were falling after getting crushed on Monday.
Merrill Lynch
The fourth quarter looks like it will be bumpy, and investors shouldn't plan on taking on extra risk in the final months of 2015, Bank of America Merrill Lynch's Christopher Wolfe said Wednesday. Three big fears are looming for the chief investment officer: a corporate earnings recession, uncertainty swirling around worldwide monetary policy and downward revisions to corporate sales and guidance for the remainder of 2015 and likely part of 2016.
RCB
Another top Wall Street bull has lowered his stock market forecast for the year. At the end of last year, Golub's forecast for the S&P 500 for 2015 was 2,325, "consistent with 12% potential upside". Of the strategists followed by Business Insider, Golub was tied for most bullish forecast. But in a note to clients on Monday, Golub lowered his forecast to 2,100, which would see the S&P 500 gain just 2% for the year. The benchmark index opened at 1,911.75 on Monday; it would need a roughly 10% rally to hit RBC's forecast.
Barbara Kolmeyer
Welcome to the worst day of the year for investors, though you wouldn’t know it by looking at stock futures this morning. Thank the portfolio window-dressers or bouncy dead cats, but the market looks set to fly. Anyway, that gloomy prognosis for the day fits nicely with the disastrous end to the quarter we’re headed for, set to finish with 8% to 9% losses for the big U.S. indexes. The quarter has delivered the biggest point declines for the Dow industrialsDJIA, +1.24% and the Nasdaq Composite COMP, +1.70% since the end of 2008, and the biggest for the S&P 500 since 2011.
Wall Street, though, is hoping to brush the quarter under the rug. A Reuters poll of 40 strategists found that most think the worst is over for stocks. (Less bullish, perhaps, is Goldman Sachs, which cut its S&P 500 target to 2,000 yesterday, though its strategist David Kostin cushioned that with a “flat-is-the-new-up” mantra.) Those strategists polled think the S&P will end up at 2,094 by the end of 2015 — a gain of 2% for the year, but 7% below where they thought it would be when asked a few months ago.
If these market magicians know anything, it’s that stocks needs a catalyst to go up. They can no longer count on the Fed, as one CIO quoted by Reuters rightly pointed out. (Note that Goldman also called for more QE.) This column discussed yesterday how that catalyst will be earnings, and companies themselves will need to put up or shut up to keep the bull from dying. A 2% gain would keep the bull market going, but not by much.
Figuring out a year-end target for the S&P 500 is clearly a guessing game. And some really aren’t buying any sort of stock-market optimism at all. Take our call of the day, which warns that Wall Street is pulling the wool over the peasant’s eyes right now.
Carl Icahn
Icahn calls for taxes to be lowered for corporations and raised for hedge fund managers. He also reiterates his previous warning that interest rates hovering close to zero are creating investment bubbles in real estate, art, corporate earnings and high-yield bonds.
"The middle-class investor has nowhere to go with their money but into the (stock) market, or even more concerning, high-yield bonds, which are very risky," Icahn said in the video, which is posted on his website CarlIcahn.com.
- Jobs Report Should Boost Fed's Plan to Hike Rates This Year
- Bank of America to announce layoffs
- HP Resorts to Layoffs to Control Costs, Boost Earnings per Share
- Chesapeake Energy lays off 740 workers companywide
- BP plans layoffs at Texas City, Texas, chemical plant -sources
- Mortgage applications drop 6.7% on rate swings
Conclusion
Economic Cycles Research Institute defines more realistically what is happening. Here is what they say: What most may not realize is that U.S. economic growth has actually been falling since early 2015. Year-over-year (yoy) growth in ECRI’s U.S. Coincident Index, a broad measure of economic activity that includes GDP, employment, income and sales, has fallen to a one-and-a-half-year low.
Yet, for months, the consensus has continued to believe in the “second-half rebound” following the “weather-related” first-quarter weakness. That narrative is finally falling apart, with the dawning realization that the reality is 180 degrees from that popular view.
In a recent interview with The Wall Street Journal, New York Fed President Bill Dudley finally acknowledged that the "second half of the year will probably be a little bit weaker than the first half of the year." Some Wall Street houses are also starting to recognize that reality.
After all, as we pointed out over the summer, "a service sector slowdown has already joined the manufacturing slowdown that started last fall, and so the slowdown in overall growth is likely to intensify in the coming months. As such, hopes for a 'second-half rebound' are likely to be dashed."
The good news is that, notwithstanding the continued slowdown, ECRI’s indexes are not yet pointing to recession.
My View
Market swings are made up of two things, data and emotion. The data tells us that there is a slow down, but we are not in a recession. Emotion, on the other hand, is heightened because we are at the end of a bear market, the losses of 2008 are still fresh on investor's minds, and you can smell the fear in investors.
Many investors have seen QE dry up and now have to face the reality of rising interest rates and uncertainty in the market. When these sell-offs occur in a weak and tepid market, people want to take their profit. The use of Stop-sells by individual traders and the execution of trades during a market sell-off brings the brokerage houses to almost a crawl. Though we haven't entered a recession, it feels like a recession and is likely to continue that course in the months to come.
Protecting Yourself
Return to the fundamentals of investing you have learned. If you buy a security, buy it knowing how much you are willing to lose (for example 6%), if the security goes down below 6%, sell it immediately. If the security goes up 10%, move your stop-sell to 6% below the current price. If it moves down 6%, sell it immediately and take your 4% PROFIT.
Having hard fast rules protects you from your emotion. It is easy to say to yourself, "I know I have a big loss here, but it will come back." Some years ago, I bought into GE (general electric), when it fell, I sold half of my position, but kept GE because I was sure that it would rebound..... it didn't! By the time I sold GE, I had lost all my previous profit. Don't out guess your RULES. Live by your RULES and you won't get hurt.
(Note: the above information is for entertainment purposes only and not to be used as investment advice.)
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