Opinion: Investors avoiding both stocks and bonds looks bearish for market – MarketWatch 11-05-15

Salient to Investors:

Conrad de Aenlle at Conrad de Aenlle’s Funds for Thought writes:

Louise Yamada at Louise Yamada Technical Research Advisors says ICI’s report of net withdrawals from both stock and bond mutual funds in July and August is a pattern not seen since the fall of 2008.

Todd Rosenbluth at S&P Capital IQ says mutual fund withdrawals around August were soaked up by ETFs: mom-and-pop investors accounted for the majority of mutual fund flows and institutions were behind the ETF flows – The trend away from mutual funds and toward ETFs represents an ongoing shift to passive products as people do not want to pay up to lose money.

Morningstar found 5 prior months over the last decade when investors had net withdrawals from stock mutual funds and ETFs combined, and from bond funds: 2 coincided with minor blips in long bull markets, and 3 occurred just before or in the middle of corrections or bear markets.

Read the full article at http://www.marketwatch.com/story/investors-avoiding-both-stocks-and-bonds-looks-bearish-for-market-2015-11-05

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Retail investors are the most bullish, and least bearish, in 8 months – MarketWatch 10-29-15

Salient to Investors:

AAII report 40.4% of individual investors expect the stock market to rise over the next 6 months, versus 34.8% a week ago, and the highest since February. 20.6% were bearish, the lowest since February.

Retail investor sentiment is often cited as a contrarian indicator.

Read the full article at http://www.marketwatch.com/story/retail-investors-are-the-most-bullish-and-least-bearish-in-8-months-2015-10-29

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Looking for the lifeboats – The Economist 09-19-15

Salient to Investors:

  • Both equities and government bonds are overvalued but are unlikely to fall in tandem. Long-term investors should ignore short-term market declines because over the long-term, asset prices rise – US equities overcame the dotcom bubble and 2008 financial crisis to reach record highs in 2015.
  • However, equities could be in for a long slow decline, a la Japan, the first rich country to fight deflation and zero interest rates. Japanese equities are still down 50% since the end of 1989, while bond yields have remained very low since the late 1990s. At least Japanese investors could have escaped into foreign assets, but that option is narrowing because all the developed world faces deflation, including emerging markets.
  • Robert Shiller at Yale said more investors fear US stocks are overvalued than at any time since 2000. Deutsche Bank says government bonds are the most expensive they have ever been.
  • AQR research found that:
    • In the 10 worst quarters for global equities between 1972 and 2014, equities lost more than 18% on average, bonds gained 4.8%, commodities and gold gained. Corporate bonds lost value, relative to government bonds.
    • In the 8 bad equity quarters since 1990, hedge funds lost and average of 5.2%, excluding trading costs and fees, but a combination of value, momentum, carry, defensive and trend-following strategies would have produced very good returns, excluding trading costs and fees.
    • In the 10 worst quarters for government bonds between 1972 and 2014, bonds lost 3.9% on average, while equities gained 3.5% on average thanks to a big gain in Q2, 2009, gaining in 6 of the 10, and commodities rose.
  • In the 10 worst quarters for government bonds, cash averaged a small gain.
  • Back-testing strategies is unsafe because there is no guarantee that they will be as successful in future.

Read the full article at http://www.economist.com/news/finance-and-economics/21665026-which-investments-work-best-when-markets-decline-looking-lifeboats

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Get ready for a lousy September as investor sentiment slips – MarketWatch 09-06-15

Salient to Investors:

The market is bearish. Investor sentiment is unlikely to improve short-term as international concerns overshadow domestic ones.

Brad McMillan at Commonwealth Financial said it will be another month or so before investor confidence bounces back, and if the S&P 500 falls to as low as 1,790 the likelihood for a September interest rate increase drops below 50%.

Tobias Levkovich at Citi Research said his Panic/Euphoria indicator broke into “panic” territory for the first time since late 2012 – a level from which stocks have historically risen 96% of the time over the next 12 months.

Read the full article at http://www.marketwatch.com/story/get-ready-for-a-lousy-september-as-investor-sentiment-slips-2015-09-06

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Don’t Worry About the Bull Market; Worry About the Dollar: Richard Bernstein – ThinkAdvisor 06-22-15

Salient to Investors:

Richard Bernstein at Richard Bernstein Advisors writes:

  • The bull market is intact. Markets rise after the Fed starts raising as earnings trump rising rates, and there is no end of cycle behavior, like excessive leverage or a big buildup in inventories except for energy.
  • The MSCI European stock index is up 11% year-to-date, but only 5% in dollar terms.
  • Currency is the most important issue when investing globally: between 2002 and 2008 the decline in the dollar accounted for 80% of the gain in the Euro Stoxx 50 index for US investors.
  • The dollar rise since 2011 will continue so US investors should hedge this risk.
  • Bullish on South Korea, which is where Japan was 2 years ago. South Korea has terrible corporate profits and is slipping into deflation so has no choice but to depreciate the won.
  • China is at a competitive disadvantage because their currency is somewhat pegged to the dollar and their companies have a lot of dollar-denominated debt, so they are unable to depreciate and will lose market share.
  • India is unable to depreciate because of high inflation so will lose market share to Japan and South Korea.

FactSet predicts S&P 500 earnings will fall 4.7% in Q2, rise 2% excluding energy: for all of 2015 rise 1.6%, 8.2% excluding energy.

Bank of America Merrill Lynch says fund investors remain bullish on European stocks.

Read the full article at http://www.thinkadvisor.com/2015/06/22/dont-worry-about-the-bull-market-worry-about-the-d?eNL=55886aae150ba045336e3852&utm_source=earlywire062315&utm_medium=enewsletter&utm_campaign=earlywire&_LID=179068825

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The Stock Market’s Missing Ingredient – Bloomberg 08-21-14

Salient to Investors:

Barry Ritholtz writes:

  • Rarely have conditions for market gains been so promising at a time when investor psychology has been so negative.
  • Only 7% in a Gallup poll were aware of the S&P 500’s 30% increase in 2013, while more than 50% would put new cash into bank accounts or CDs rather than equities.
  • Stephen Suttmeier at Bank of America Merrill Lynch said the present rally is the 5th longest since 1928, the S&P 500 Index has not closed below its 200-day moving average on a daily basis for 21 months versus the record of 30 months between 11/25/1953 and 5/23/1956. Suttmeier said the last streak of 21 months was between 7/27/1950 and 4/30/1952 and coincided with the S&P 500 secular bull market breakout in 1950.
  • The deluge of Internet warnings, along with post-crash traumatic stress syndrome, has investors obsessively fearing the next market meltdown.
  • Shiller’s CAPE at 26.3 versus its average of 16.6 and Tobin’s Q ratio at 1.17 versus its average of 0.68 both show markets to be significantly overvalued, while most other metrics show them to be fully valued, or slightly rich.
  • We can slowly grow our way out of high CAPE valuations. Salil Mehta at Georgetown University said the CAPE is not a tool for predicting crash timings, though it would take a high, single-digit number of years where prices underperform earnings, in order to drive it back to its normal long-term average of 15-16.


Read the full article at  http://www.bloombergview.com/articles/2014-08-21/the-stock-market-s-missing-ingredient

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S&P 500 Tumbles, Treasuries Rally on Crises in Ukraine and Middle East – Bloomberg 07-17-14

Salient to Investors:

  • Todd Lowenstein at Highmark Capital Mgmt said people are selling out of fear in a market that is really acute to geopolitical risk, given current valuations.
  • John Canally at LPL Financial said markets have to determine if this is an escalation of the conflict.
  • 60 percent of financial professionals said the equity market is close to unsustainable levels and 14 percent said it was already in a bubble. Almost 33% said the lower-rated corporate debt market is overheated. The majority expect increased volatility within six months.
  • James Bullard at FRB St. Louis said US labor market gains and inflation accelerating towards 2 percent may prompt an earlier Fed exit from stimulus.
  • Fed Chair Yellen said asset valuations are not out of line with historical norms.
  • The S&P 500 is at 18 times earnings, close to a 4-year high valuation.

Read the full article at http://www.bloomberg.com/news/2014-07-16/u-s-futures-drop-after-dow-record-as-oil-extends-advance.html

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Asian Stocks Plunge on U.S. Manufacturing, Extending Rout – Bloomberg 02-03-13

Salient to Investors:

Angus Gluskie at White Funds Mgmt said people are alert to some of the risks in China and some emerging economies, but very few people are concluding that it is going to run away too far.

51 percent of the 195 MSCI Asia Pacific Index companies reporting since the beginning of January and for which estimates are available beat analyst estimates. The Index is at  12.6 times estimated earnings versus 14.8 for the S&P 500 and 13.5 for the Stoxx Europe 600.

Matthew Sherwood at Perpetual said there are fresh concerns about the strength of the global economy, and the risk-off sentiment is now well entrenched across the globe. Sherwood said US manufacturing data disappointed even the most pessimistic economist and suggests we are not at the end of this recent bout of market volatility. 

Read the full article at http://www.bloomberg.com/news/2014-02-04/asian-stocks-fall-as-u-s-manufacturing-growth-slows.html

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January Reflecting a Neutral to Bearish 2014 Forecast – Chartwatchers 01-25-14

Salient to Investors:

Tom Bowley at Invested Central/EarningsBeats.com writes:

Market technicals have slowly deteriorated with the highly influential banking industry reversing hard last week with a long-term negative divergence present on its weekly chart.

Longer-term momentum on the buy side is slowing. The latest rally in the S&P 500 actually saw banks underperform on a relative basis – a form of a negative divergence and a warning sign.

The bond market is much smarter than the stock market.  Historically, the 10-yr treasury yield and S&P 500 trend in the same direction, but temporarily not during QE, when they moved inversely to each other. Many times the 10 yr treasury yield changed direction before the S&P 500, as it did in early January.

Since 1950, stock market performance from February 1st through December 31st is highly correlated to January performance within the same year. Since 1950, half of the 24 lower Januarys saw a flat or lower market over the next 11 months and the average 11-month returns for negative January years was -0.16%. 

Read the full article at http://blogs.stockcharts.com/chartwatchers/2014/01/january-reflecting-a-neutral-to-bearish-2014-forecast.html

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Americans in Poll Doubt Economy Rebound – Bloomberg 09-24-13

Salient to Investors:

Bloomberg poll:

  • 27 percent say economic growth will increase, down from 39 percent 3 months ago, while 44 percent expect it to stay the same and 28 percent see it weakening.
  • 25 percent said the US is on the right track, the lowest since September 2011, while 68 percent say the country is on the wrong track.
  • Over 80 percent do not plan to borrow to make ends meet.
  • 36 percent expect employment to strengthen versus 42 percent 3 months ago.
  • 42 percent see the housing market improving versus 51 percent 3 months ago.
  • 56 percent feel they are moving closer to achieving career and financial goals, versus 50 percent 3 months ago. 35 percent feel they are losing ground on attaining their goals.
  • 38 percent approve of the job Obama is doing to make people feel more economically secure versus 42 percent 3 months ago, and 45 percent 6 months ago. 53 percent disapprove of his performance.
  • 42 percent say they are unable to save what they need for retirement. 40 percent say they cannot put more money aside for costly items such as health care and education.
  • Almost 25 percent of those making under $50,000 a year expect to borrow money in the next year to make ends meet, more than twice the percentage of those earning between $50,000 and $99,000 who plan on such borrowings.

The median economist expects growth of 1.60 percent in 2013 and 2.65 percent in 2014, and reach a 3 percent rate by Q3 2014.

Read the full article at  http://www.bloomberg.com/news/2013-09-25/americans-in-poll-doubt-economy-rebound-in-defiance-of-forecasts.html

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