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%.

Nothing new from the Fed. How did the markets react?

Fully expected, the Fed kept the interest rate unchanged, with Powell emphasizing the good state of the US economy. This was taken as an impulse to preserve the policy rate of the interest rate reserve.
This negatively affected the US indices and sent the dollar upwards, initiating a decline in metals and raw materials.
The Dow Jones blue chip index lost 81 points, with its most lost components being the industrial Caterpillar and 3M lost 3.4 and 2.3%.
The broad S&P 500 declined by 0.1%, with the industry declining by more than 1%. The Nasdaq Technology reduced its value by 0.5%.
Global financial markets continue to focus on a US-led trade war, especially after the White House administration announced on Wednesday that President Donald Trump offered a higher 25 percent duty for Chinese goods totaling $200 billion.
The euro fell slightly by 0.1%, to 1.16505 dollars.

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.

Mark Mobius: The trade war is a prelude to the next financial crisis

The veteran investor, Mark Mobius, has one warning for investors who quickly forgot what happened in February with the indexes.
According to the expert, the trade war between the US and China is a precursor to the next financial crisis. Still, worst in US-China relations is ahead, in the light of the imposition of new tariffs on Chinese goods worth more than 200 billion dollars.
The worst is yet to come, commented Mobius in an interview with Bloomberg.
What does Mobius mean by "the worst"?
Mobius expects a further 10% decline in emerging markets and, ultimately, a financial crisis in the US and around the world.
According to him, tensions between the US and China will rise, with Trump not giving up on his plans to impose tariffs. Inflationary pressures will rise from wage growth in an environment of full employment in the world's largest economy, says the investment expert.
Good news, according to Mobius, is that damages to stock markets will eventually be a good opportunity to buy. He himself is currently raising his capital to take advantage of these potential opportunities in the future.

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.

D. Kostin: There will be a difficult second half of the year for the markets

US indices closed the first day of the new quarter slightly on positive territory. Investors, however, should not be granted much, because they may be in difficult months.
We can only recall that historically July and August are one of the most volatile months of the year. Remember what happened in August of 2016?
The number of financial experts who warn stock market investors to watch out for the second half of the year is rising. And one of them is David Kostin, the head of the Goldman Sachs Equity Investment Unit.
Kostin commented that, on the one hand, there is a serious geopolitical tension and, on the other hand, the Fed's rise in interest rates, from which they seem to be seriously worried about inflation.
In addition, Kostin predicts further interest rates on 10-year US government bonds rise, which should also cause problems for stock markets.
Of course, the situation is not entirely "black" according to Kostin. He believes companies with good balance, such as Facebook, will perform well in the second half of the year, even in an environment of further rising interest rates.

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.

Time to buy VIX? (2)

Why is VIX perfect?

Because the index is traditionally moving in the opposite direction of the US indices. But, unlike them, its downward potential is limited to about 10, or just below that limit - about 20 percent of its current levels.
Unlike six months ago, however, when US indices suffered from total lack of volatility and traded only at new and new record values, the unthinkable happened and volatility erupted, bringing this index to levels over 30 for a moment.
After a long recovery of indices, the indicator returned again to its lowest values. But the danger of a new eruption is much greater than half a year ago.
Or, the index can easily and quickly double, and why not, even tripling its value, with limited potential for decline. Or a yield-risk ratio of 5 - 20% drop, versus 100% growth.

Time to buy VIX? (1)

What's happening on US stock markets can be described as extremely dynamic and dramatic. But, as they say, we've already seen something like that before. Two times. And just before a drastic drop in US indices by more than 40 percent. Yes, I recall 2000 and 2007.
And while it does not necessarily have to end the same way - with crisis and crash (although it is possible, given that it has already passed 10 years since the last crisis), at least we can enter the "bearish cycle" - that is, a decrease in indices of more than 20%.


How?

The scenarios of the events in above mentioned two years, and then witnessing a fall in the index of more than 40%, seemed this way:
Reporting a historical record => Correction between 8 and 13% for about four weeks => Upward test for the next three or four months => Unsuccessful breakthrough or minimal false break at the top => Direction down to test the lowest value of the correction => And finally break down when breakthrough at the stated lowest value. Does it seem familiar to you?
If you think that a similar scenario can be formed at the moment, you can trade it with the VIX.
And the moment of his purchase is "ripening" again. Because the volatility index is again starting to look like an "asymmetric investment" - one with a limited drop potential and unlimited growth.

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.

Bulls had to moderate the heat in the US trading session

On Monday, April 9, the key stock indexes of the United States of America completed trading in positive territory due to the easing of tensions between China and the United States. Last weekend a number of high-ranking officials of the American government spoke out about the situation with China, while the tone of their statements softened, which somewhat calmed investors. In particular, the US Treasury Secretary Stephen Mnuchin noted that the government intends to continue discussion of the disputable issues with China.
Nevertheless, under the curtain of the trades, optimism has faded away, and the news was that the Federal Security Service conducted searches in the office of Michael Cohen, Donald Trump's personal lawyer. It is reported that the Federal Reserve Bank seized personal correspondence between Cohen and his clients, as well as tax documents and commercial documentation.
An important macroeconomic statistics was not published on Monday. Following the auction, the blue chip indicator Dow Jones Industrial Average advanced 0.19% to close at 23979.10 points, the broader S & P 500 index went up by 0.33% to a level of 2,613.16 points, and the index high-tech companies Nasdaq grew by 0.51% to a mark of 6950.34 points.

Losses on world exchanges bigger than the GDP of Canada and the UK cumulatively (2)

Recently the Bank of England's head Mark Carney said that the British Central Bank may need to raise interest rates earlier than expected.
There are still a number of market observers who believe that the observed correction is a consequence of rebalancing market portfolios and may not last much longer.
There is a change in the environment. People were positioned for low volatility, low interest rates, and low inflation. Now investors are changing their portfolios. And one or two days of sales will not be enough. It will take some time in ajusting of markets.
Still, despite recent sell-offs, investors who staked on stock markets in 2017 are still in positive territory. For the past three months, global financial markets have added $9.5 trillion, while the broad S&P 500 has added $3.6 trillion.

Losses on world exchanges bigger than the GDP of Canada and the UK cumulatively (1)

World stock indexes may have recovered some of their losses on the last day of last week, but the correction still raises serious problems for investors.
From the record high on January 26 for the Dow Jones Industrial Average and S&P 500 indices, the global market capitalization fell by as much as $5.2 trillion, according to S&P Dow Jones Indices.
This amount exceeds the GDP of the UK and Canada combined. In 2016, Canada's GDP amounted to $1.5 trillion, and the UK's $2.7 trillion.
In the same period, only the S&P 500 companies have erased about 2.5 trillion of market capitalization.
This happened after the fall in indexes brought the global exchanges into a correction phase or a moment when there was a fall of more than 10% on the indices.
With the recovery of the global economy, investors became more and more worried about central bank policies around the world, and rather its normalization and interest rate hikes.

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.

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.