Take advantage while the “hot” moment of the stock market lasts because the reality is that the shares could be devalued at the end of January 2020.
Veteran New York Stockbroker Tim Anderson said that “some people expect a 6% to 8% decline in January.
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More and more voices on Wall Street speak of a bubble in the stock market, despite the fact that the “rule” says that one does not know about the existence of one until it explodes. Photo: Getty Images
Jim Smigiel, director of information systems for unconventional strategies at SEIHe adds: “It is always good for investors to remember that we are talking about the stock market. Although volatility has been incredibly low in recent years, investors are likely to always remember that it is there. So a 6% to 8% retracement [en enero] It would be relatively normal and should be expected for everyone. Virtually anything could cause it. ”” Data-reactid = “24”>Jim Smigiel, director of information systems for unconventional strategies at SEIHe adds: “It is always good for investors to remember that we are talking about the stock market. Although volatility has been incredibly low in recent years, investors are likely to always remember that it is there. So a 6% to 8% retracement [en enero] It would be relatively normal and should be expected for everyone. Virtually anything could cause it. ”
Choose your poison and wait to see what could cause a good cut in the market in early 2020.
United States and China.No need to look too far to detect such complacency: “data-reactid =” 26 “> The most logical thing is that complacency has permeated Wall Street to close the year amid an upward trend motivated by the effect of the three interest rate cuts and the principle of trade agreement between the United States and China. No need to look too far to detect such complacency:
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On Thursday, the Nasdaq Composite (^ IXIC) reached the limit of 11 consecutive earnings sessions, which brought the technology-focused index beyond 9,000, points for the first time. Investors have continued to venture into the actions of the microchip sector, for example, Advanced Micro Devices, which has inflated valuations. They also keep holding up tech actors with difficulties, like Intel, which now has a historical high of 19 years.
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The put / call ratio of the S&P 500 (^ GSPC) is at its minimum levels since June 2014, says Sun Dial Capital Research. In other words, investors are not betting on a short-term market liquidation.
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For its part, Sun Dial Capital Research notes that the S&P 500 has spent 52 days without any daily movement above +/- 1%. Low volatility – a telltale sign of investor complacency – has been the term most used for months.
These are just a few examples that are worth mentioning.
At some point – sooner rather than later – that complacency will have to be overcome by investors, since it does not match the realistic assumptions about global economic growth and corporate profits.
Too much optimism
Wall Street professionals believe the estimated earnings in 2020 for the S&P 500 they are too high and will have to be revised down. The components of the S&P 500 are expected to generate at least 10% profit growth in 2020, which seems too ambitious given the slow global growth and risks of the trade war. If earnings estimates start to fall as many people believe on Wall Street, that would probably push stock valuations. “Data-reactid =” 34 “> Speaking of company earnings, most of the Wall Street professionals believe the estimated earnings in 2020 for the S&P 500 they are too high and will have to be revised down. The components of the S&P 500 are expected to generate at least 10% profit growth in 2020, which seems too ambitious given the slow global growth and risks of the trade war. If earnings estimates start to fall as many people believe on Wall Street, that would probably press stock valuations.
Even if it could be justified that the S&P 500 offers a 10% profit growth in 2020, the shares do not seem too attractive compared to the valuable multiple of 19 in the earnings index at this time.
“We do not believe that earnings expectations will fall, they tend to do so all year. They start with a high mark and we end the year considerably below that. We believe that the 10% growth in earnings in 2020 is a bit more aggressive for us, ”says Smigiel.
Rise without foundation
United States and China, but that was expected months ago. Amazon announced on Thursday a record season of Christmas sales, but even that should have been seen coming in the midst of strong online sales data for Black Friday and Cyber Monday. “data-reactid =” 38 “> Last but not least, in terms of a market decline in January, this month shares have risen without further developments. Of course there was a principle of agreement between States United and China, but that was expected months ago. And yes, Amazon announced on Thursday a record season of Christmas sales, but even that should have been seen coming in the midst of strong online sales data for Black Friday and Cyber Monday.
Tom Essaye, founder of Sevens Report Research. “data-reactid =” 39 “>” I take advantage of the market when it is hot more than anyone, but there is also a disadvantage, as we saw in January / February 2018 and I do not want anyone to start 2020 with a bad footing, “he warns. Tom Essaye, founder of Sevens Report Research.
So while there is no reason to try to be at the forefront of this market until the end of the year, since there is almost no news or events in sight that will derail the rally train in the coming days, I want to point out that almost all December earnings (which now approach 4%) have been practically produced without material news and that should moderate optimism a bit. ”
hot market while it lasts.
“data-reactid =” 41 “> As we said, enjoy the hot market while it lasts.
Brian Sozzi“data-reactid =” 49 “>Brian Sozzi
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