R. Schiller: Investors to be careful with US Indexes!

One of the most respected economists and winner of the Nobel Prize for Economics, Robert Schiller, warned investors about US stocks.
Based on the cyclical cost-benefit ratio (CAPE), Schiller believes that US stocks are expensive. The index is calculated on the basis of the S&P 500 price divided by the average annual earnings of its components over the past 10 years.
According to some analysts, when this ratio is close to record values, similar to those of 1929 and 2000, the market is shrinking.
Currently, the CAPE ratio is close to 27x, which is well above the average of 15x and near its record highs.
The last time the ratio was at such high rates was a decade ago, followed by a substantial drop in stock prices, according to Oliver Jones and John Higgins of Capital Economics, in a letter to their clients.
Long-term investors must be warned, Schiller claims.
But Schiller recalls that this indicator is not very good at predicting market slumps. In other words, it is entirely possible that the index will continue to rise before it drops significantly.

Apple with capitalization over $1 trillion, growth for US indices

The big news of yesterday's day is the rise in Apple's market capitalization above the psychological limit of $1 trillion. The question now is, how long will the tech giant hold there.
The US indexes ended yesterday mainly on positive territory.
Best results, of course, had the technological Nasdaq. Driven by Apple's appreciation of 2.8%, the index added 1.2% to its value.
The broad S&P 500 added 0.5% to its value, while the blue chip index Dow Jones recorded a drop of 7 points.
The yield on 10-year US bonds declined again below 3%, although it remained extremely close - at 2.986%. Interest on long-term 30-year government bonds reached a level of 3.118%.

The S&P 500 tested the key resistance level at 2,800 points

Big news for stock market investors. The US S&P 500, accounting for about half of the world stock market capitalization, overcame key psychological resistance.
According to technical analysts, if the index succeeds permanently to keep above that barrier, it may be heading for a test of its historic peak.
We can recall that since the index reached new record levels at nearly 3,000 points at the beginning of the year, followed by a sharp decline in February, it took over 10% of its value.
And now the question is - will we see a test at the top and will the indicator keep permanently above the 2,800 level?
If the S&P 500 fails to last above 2,800, its weakness can recover and we could witness its strong frustration. Quarterly reports by US companies for the second quarter will be published soon, also volatile August is expected, which has repeatedly proven that it can surprise investors very imprecisely.

Almost a record period of correction for US indices

US stocks are a few days away from a worrying event that will not delight all investors in these markets.
The Dow Jones and the S & P 500 are within a few days of reaching a key level. Be in the corrective phase during February 8th.
It was then that we witnessed the massive sell-offs that brought down the index by about 10% after new records were reached.
Rarely in history, after more serious adjustments of 10%, the indices move in such narrow ranges. Or the indices are in a narrow range of 10% already five months.
By Thursday, both indices - Dow and S & P are in an adjustment phase of 98 trading days. This is the longest such series since the financial crisis.
Then it was 108 days before the market came out of its correction phase.
In other words, if the two indexes remain in the adjustment phase for another 11 trading sessions by July 16, this will outperform this 2008 period and will be the longest similar period since 1984.
In 1984, the S & P 500's broad US index required 122 days to go through the adjustment phase, according to data from the WSJ Market Data Group.

80% of US companies with better-than-expected results

About 80 percent of the S&P 500 companies reported better-than-expected results for the first quarter of the year. Still, the index has fallen by 1.2 percent for the year to March, after investors are increasingly beginning to fear an upcoming recession for the US economy.
Volatility index VIX rose to 37 points, momentarily in February, after the sharp decline in the indexes in the second month of the year.
And although the broad US index has seen an increase or a decline of more than 1% only eight times in the past year, in 2018, movements over that figure were already registered for 35 days.
This poses the question to investors whether the 2019th year will end the second longest bullish market.
The US economy posted an increase of 2.2% in the first three months of this year, with inflation at the current US level.

Nasdaq Composite with a new historic record on Monday

The Nasdaq Composite tech index rose yesterday to levels above its highest historic closing. The benchmark was traded at 7,600 points or above its highest closing level of 7,588.32 points.
It should be borne in mind that the highest value reached in the index was momentary at 7 637.27 points on March 13 this year.
The rise in the technology index, as well as the other US indices, has become a reality in a context of lowering political tensions in Europe and declining the dollar.
The Dow Jones Industrial Average rose 174.7 points, or 0.71 percent to 24,809.91 points, while the S&P 500 added only 8.01 points, or 0.29 percent to 2,742.63 points.
The MSCI Global Monetary Index rose 0.54%. European indexes added 0.22% to their value.

US stocks fell due to Trump's decision to withdraw from the Iranian contract

US stocks fell on Tuesday after President Trump announced his intention to abandon a nuclear deal with Iran. The S&P 500 fell 0.03% to 2,671.92. At the same time, seven of the 11 main sectors completed trading in the red zone. The Dow Jones index added 0.01% to 24360.21. The Nasdaq index rose by 0.02% to 7130.70. Strengthening of the dollar continued: the ICE dollar index, which rates the US dollar to a basket of six major currencies, rose by 0.3% to 90,055 and now it continues to grow. Futures on the stock indices indicate mixed opening today.
President Trump's statement that the US is withdrawing from a multilateral nuclear deal with Iran, concluded in 2015, has become the main driver of the market, as the reporting season for the first quarter ends. So far, 78% of S&P 500 component companies reported earnings that were higher than expected. But optimistic reports have not provided the expected increase in the stock market, as investors are concerned about the impact of tightening the monetary policy of the Fed and the possibility of a trade war between the US and China.

US indices continue upward

US indices continued with recovery after last week's record sales. The Dow blue chip index rose above 25,000 points for the first time in two weeks.
The index added more than 300 points yesterday, in its fifth consecutive increase. This was his longest winning series of about 9 weeks, and at the same time the highest value for the benchmark of at least 2 weeks.
The S&P 500 index also rose 1.2% to 2,731 points, while the Nasdaq rose also above 1%, driven by the appreciation of Apple shares. The latter added nearly 3.4% to their value after the news that Warren Buffett had raised its holdings in the company.

Something unseen happened on US markets yesterday: S&P 500 lost 4%

The collapse in stocks in the US markets yesterday reached unprecedented levels. The S&P 500 index lost 4.1% of its value, ending at 2 648.94 points.
Losses in the other indices were no less, with the Dow Jones Index dropping by more than 1,175 points, or 4.6%. With a bit lower losses was the Nasdaq technology index, which lost 3.8% of its value.
From now on, the good news for investors is that the long-awaited correction is a fact, and even painful, may not be particularly long. The bad thing is that it is still unclear whether this is the beginning of something more serious as a trend in financial markets.
The broad index S&P 500 has already lost nearly 10% of its peak. So, the statistics for long periods without a 3% correction, or 5% correction, is already in the history. The record session was interrupted, so counting could start again.

Swan dive for stock markets

Yesterday's session can be described as crazy. With the markets rising by the opening, they quickly dropped seriously. However, there was a real fall in the indices once the S&P 500 overcame its 50-day moving average, at a level of 2,730 points, and the Dow index fell below 25,000 points.
How and when the correction is going to be done, hardly many experts would be willing to say. But one thing is certain - the end of the world has not come, and investors can start looking for positions that did not react seriously to the index decline.
Last week, it was the worst for markets since 2016, with both Dow and S&P 500 recording more than 2% loss on Friday.
Decline on Monday was driven by energy companies such as Exxon Mobil, whose shares declined by more than 4%, while companies like Johnson & Johnson and Pfizer lost more than 2% of their value.
Only four of Dow's blue chips traded in positive territory yesterday.
The decline in the indexes came to the attention of the Trump administration, from where they said they were always worried when value was lost on the market.

Interest on 10-year US government bonds continues to raise concerns among investors. They are at levels of 2.84% after last week reached their highest level of four years at 2.85%.

Dive for US indices

The record start of the year for the US indices could not last forever. And that was known by all market players. So, yesterday's stock sellouts should not be surprising to investors.
The Dow index lost 360 points, or 1.4% to 26 076.89 points, and the broad S&P 500 declined 1.1 percent to 2 822.43 points. This was the biggest drop for broad index since August last year.
Serious sales also has the technological Nasdaq, falling 0.9% to 7 402.48 points.
The big winner in this case was the volatility index, which is already over 40% above its lowest levels last month.
What were the reasons for yesterday's correction, in a state of good performance from US companies? Many and various. From the general belief that the growth since the beginning of the year has been excessive and too fast to the expectations of an aggressive policy by the Fed and the change of leadership of the reserve, which traditionally leads to shocks, at least historically.

S&P 500 with a record period without a 5% loss

US indexes continue with their tireless record-breaking growth. This is largely unprecedented.
Indeed, the broad S&P 500, except for a new historical record as a value, is close to another record highlighting its strong upward trend.
The index already has 393 sessions without a 5% correction. This is the second longest similar period in the indicator's history, according to statistics by the US investment bank Goldman Sachs.
Until now, the record-long series, with no 5% correction, was 394 trading sessions, which happened between 1994 and 1996.
The S&P 500 index ended with higher levels in nine of the 11 trading sessions since the beginning of the new 2018 year. New record value was achieved on each of the trading sessions.
In fact, investors have witnessed the best start of a trading year since 2003.
The broad US index has already the longest in its history series without a 3% correction, which to a great extent points to the trend of the current growth. Without such a correction, the indicator is traded from November 7/2016.
The indicator rose by 19.4% in the past year, which was also the best performance since 2013. It has risen for 14 consecutive months.

Credit Suisse: The bullish market does not end here

Following an outstanding performance in 2017, US indices will continue to rise next year, at least according to analysts of the investment bank Credit Suisse.
In a letter to their clients last week, the bank predicts that the broad US state's S&P 500 index will rise to 3,000 points by the end of 2018, which translates as a new two-digit growth for the benchmark.
If the indicator reaches the specified psychological limit of 3000 points, it would be an increase of 12% over the next 12 months. This figure, however, would have been far below the 20% growth rate registered in the year 2017.
The bank added that the profits of US companies are expected to receive an additional one-time incentive of between 8-9% also as a consequence of the tax reform.
Growth of the economy accelerates its pace while at the same time the level of inflation is kept low. Although the "bullish market" is entering its 10th year, the prospects for it are still relatively good, the bank said.

Nasdaq passed 7,000 points for the first time in history

The Nasdaq Technology Index has passed the psychological limit of 7,000 points for the first time in its history on Monday. The other two indexes, S&P and Dow, rose to new record highs. The hopes that tax cuts will be the Christmas gift to investors were at the core of stock market growth.
The broad S&P 500 rose to nearly 2,700 points, from which the border only separated a few points.
The US indices enjoyed an almost year-round rally this year, focusing on their best performance in 2013.
Twitter's stocks were among the highest rising for the day, adding over 8%. This happened after JPMorgan predicted double-digit growth in social networking users next year.

Here's why the US indices are overestimated (2)

The S&P 500 is currently trading at 25% above its 200-day moving average, and the RSI index is at a level of 83.4 points or far out of overpriced territory.
The premium above the 200-day average is close to that of 2007.
Therefore, according to some analysts, the market is currently extremely volatile on news that could lead to sales.
Experts who forecast a potential downward correction in the short run are becoming more and more.
Whether it will continue the rally next year will depend mainly on banks, energy and healthcare companies.

Here's why the US indices are overestimated (1)

Today, US indices rose to new historical records, following expectations for a recent introduction of US tax reform. Now, however, it is entirely possible that they are in overpriced territory.
Indeed, the broad S&P 500 index is close to the next psychological limit of 2,700 points. And this level is only 4% of the consensus opinion of the analysts for an index value of 2,800 points by the end of the year.
In other words, most of the market participants do not count on a significant increase in the index next year. By comparison, if the current S&P 500 index ends the year at current level, it would be an increase by over 20% for the year.
On the other hand, investors are good at following the "buy news, sell rumors" principle. That is, a very good time to get out of the market could be - the adoption of tax reforms. This may give the final impetus to the indexes that will lead them to new peaks that will last for a long time.

US indexes with new records

At the end of the week, US indices rose to new record highs. The Dow Index passed the 24,000 limit for the first time in its history on Thursday when the market was opened.
A new historical maximum of more than 2,650 points has marked the other major US index - the broad S&P 500. Apparently nothing can stop the US indices on their way up...
Now the question is whether the experts' forecasts for growth of the broad index to 2,800 points for the next year are not too conservative. This level appears to be getting closer and far from a distance of 10% from the current values ​​of the indicator.
It is entirely possible that the indicator growth will continue until the end of the year, especially when the tax reform is announced. Apparently, the strategy to delay the announcement of this reform has been positive, as investors wait to buy US stocks and indices while they wait.

The US dollar and the US indices ended Friday with declines

The US dollar ended the last day of last week with a loss, in line with the US indices. The latter ended at their lowest values ​​for the day as a result of skepticism about Trump's tax reform.
Interest on US government bonds declined as well as those in 10-year German bonds, as a consequence of risk exclusion on the part of investors.
Good data on US home construction in October raised investor stakes for further interest rates, at the Fed meeting in December.
The dollar index fell 0.28%, with the euro adding 0.2% to 1.1793 at the end of last week.
The blue Dow Jones Industrial Average index lost 100.12 points, or 0.43% to 23,358.24 points, while the S&P 500 fell 6.79 points, or 0.26% to 2 578.85 points. Technological Nasdaq Composite lost 10.5 points, or 0.15% to 6 782.79 points.
Two-year interest on US bonds reached a new nine-year high at 1.73%.

Oil pulled the US indices down

US indices dropped yesterday, driven by oil price losses for the fourth consecutive day. This has led to a drop in the shares of energy companies. In addition, investors continue to worry about the lack of presentation of tax reforms.
This has begun to increase speculation whether reforms will meet the analysts' increased expectations.
The fall in oil prices came after the surprise growth in oil and petroleum stocks last week.
Metal prices also fell due to fears about the state of the Chinese economy and the possibility of slowing significantly.
The Dow Jones Industrial Average declined by nearly 95 points and the S&P 500 lost 9.3 points.
The volatility index reached a two-month high at 14.51 points.
Financial shares were among the few profitable, and they are expected to benefit from the potential rise in interest rates next month.

The Trump Rally is the fourth best since the 1936's

Since the election of Donald Trump as president last November, the US indices enjoyed a very good performance.
And while the growth of over 20% for the S & P 500 index and 30% for the Dow blue chip index, sending indexes to new records is far from being their best performance compared to modern US presidents.
According to data from the US investment bank Goldman Sachs, the rise in US elections after Trump's election victory is the fourth best since 1936. With a better performance for such a period of election victory, the markets were distinct during presidents George Bush, John Kennedy and Bill Clinton.
The market rally after Clinton's 1996 election victory raises the S & P 500 from nearly 30% a year and over 50% over the next 24 months. This is the biggest rise after a presidential election victory.
It can also be argued about the motives behind the growth of the market. To a large extent, the current one is predetermined by the hopes for tax reforms that will mainly ease major US corporations.
However, as Goldman mentions, shares of companies that are expected to benefit most from tax reform have been worse off the market as a whole this year.
In addition, there are warnings, including from the US Treasury Secretary, that if the tax reform is not adopted, we may see a substantial fall in stock prices.