Summer stock rally could cause more pain – CNN | Omd Cialis

What’s happening: The S&P 500 gained more than 9% in July, its best month since November 2020. Investors’ hope was that the Federal Reserve could begin to weaken, reducing the risk that the central bank’s aggressive rate hikes could push America’s economy into recession this year or next.

But real enthusiasm for pop is hard to come by. Many traders are interpreting the gains as a “bear market rally” or a short-lived rise within a broader downturn.

“We think the market may have been complacent too soon about the easing risks of a recession,” Goldman Sachs strategists told clients this week. “We believe markets will be prone to aggressive surprises.”

When stocks start posting consistent losses again, it could be painful. That’s because many investors have kept their money in the market despite recent volatility.

“We haven’t seen any broad-based outflows,” Karim Chedid, head of investment strategy for BlackRock’s iShares business in Europe, Middle East and Africa, told me. “There’s still money in stocks.”

The main reason investors haven’t dumped stocks, according to Chedid, is that they entered 2022 with a lot of cash. When inflation rises and dilutes the value of that cash, they’re not keen on holding more. And so far, attractive alternatives have been limited.

“That means the pain trade is on the downtrend,” Chedid said. In other words, those who still have skin in play could get hammered.

You know that phrase: Strategists have been waiting for a moment known as “capitulation,” when losses become too brutal to sustain, and even the most hesitant traders are heading for the exits. It often means that the bottom of a sell-off could be near.

Cash flow data refutes the notion that capitulation has already arrived. There’s still plenty of engagement, which means the vagaries of the market could bring even more misery.

Full-throated cops might be hard to come by these days, but not everyone is a total cynic.

“While the economic outlook remains challenging, we believe the risk/reward trade-off for equities looks more attractive over time [the second half of the year]’ JPMorgan Chase’s Marko Kolanovic told clients this week, noting that valuations seem enticing compared to future earnings.

But Bank of America’s Savita Subramanian notes that even as economic growth slows, many companies still won’t lower their earnings estimates. This presents a major weakness should conditions deteriorate rapidly.

Pelosi Taiwan visits rattle markets

The expected visit of US House Speaker Nancy Pelosi to Taiwan on Tuesday rocked Asian markets as investors showed concerns the trip could escalate tensions between the world’s two largest economies.

The Latest: Hong Kong’s Hang Seng Index is down 2.4%, reports my CNN Business colleague Laura He. Mainland China’s Shanghai Composite ended down 2.3%. Taiwan’s Taiex closed 1.6% lower.

The Taiwan dollar weakened 0.1% against the US dollar. Meanwhile, the Japanese yen, a traditional safe-haven currency, rose 0.6% against the greenback.

Investors also bought US government bonds, which are considered safe investments.

Step back: Pelosi is expected to visit Taiwan as part of her Asia trip, according to a senior Taiwanese government official and a US official.

The decision comes despite warnings from Biden administration officials concerned about China’s response to such a high-profile visit. The speaker of the House of Representatives, who is second in line to the throne after the vice president, has not visited Taiwan for 25 years.

“Neither party wants a real war, but the risk of mishap or even an aggressive escalation of the war game is real, which could always lead to a tactical error,” Stephen Innes, managing partner at SPI Asset Management, told clients on Tuesday.

The long road to normal supply chains

In a recent Before the Bell, I wrote about how global supply chains are showing signs of improvement, a development that could ultimately crush decades-long inflation.

But I noted that the timeline for a return to normal conditions is still unclear — a thesis supported by Maersk’s recent guidance to investors.

The container shipping giant raised its full-year profit guidance on Tuesday. It now expects earnings of $37 billion, up from $30 billion previously.

The reasoning: “The congestion in global supply chains, which is leading to higher freight rates, is lasting longer than originally expected.”

Maersk said it now expects a “gradual normalization” of seaborne cargo traffic in the final quarter of this year. In May, the company assumed that this process would take place “early” in the second half of 2022.

My conclusion: The cost of shipping a 40ft container keeps going down, which is good news. But it’s hard to put too much stock in schedules that have been repeatedly delayed. And the shipping industry continues to be subject to a multitude of variables, from Covid-19 and war in Europe to an uncertain economic environment.

“Given the war in Ukraine, the ongoing disruptions to global supply chains and the impact of the Covid-19 pandemic, the forecast is subject to considerable uncertainty,” said Maersk competitor Hapag-Lloyd when raising its annual profit forecast last week.

Next

Ferrari (RUN), Caterpillar (CAT), JetBlue Airways (JBLU), Marriott (TO DAMAGE) and Above (ABOVE) Report results before US markets open. Airbnb, playgroup (MTCH), PayPal (PYPL) and Starbucks (SBUX) Follow after closing.

Also today: US job openings data for June posts at 10am ET.

Coming tomorrow: result of modern (MRNA), Clorox (CLX) and Robinhood.

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