NEWS AND ANALYSIS

Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
 
+ Show blog menu

Categories

Menu

Expand 2017 <span class='blogcount'>(308)</span>2017 (308)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Expand June <span class='blogcount'>(42)</span>June (42)
Expand May <span class='blogcount'>(42)</span>May (42)
Collapse April <span class='blogcount'>(45)</span>April (45)
PM Bulletin: Exxon Mobil - a proxy for crude?
29 Apr 2016
AM Bulletin: Equity sell-off continues
29 Apr 2016
PM Bulletin: JPY update
28 Apr 2016
AM Bulletin: BOJ disappoints
28 Apr 2016
Holiday Schedule: Early May Bank Holiday
27 Apr 2016
PM Bulletin: BOJ meeting
27 Apr 2016
AM Bulletin: FOMC in focus
27 Apr 2016
PM Bulletin: GBPUSD
26 Apr 2016
AM Bulletin: Markets directionless
26 Apr 2016
PM Bulletin: Apple
25 Apr 2016
Weekly Bulletin: Party like it’s 1999?
25 Apr 2016
PM Bulletin: Big move in USDJPY
22 Apr 2016
AM Bulletin: Weaker earnings weigh on US indices
22 Apr 2016
PM Bulletin: Silver’s pump and dump
21 Apr 2016
AM Bulletin: US indices edge closer to all-time highs
21 Apr 2016
PM Bulletin: ECB meeting look-ahead
20 Apr 2016
AM Bulletin: Silver surge drags gold higher
20 Apr 2016
PM Bulletin: Silver update
19 Apr 2016
AM Bulletin: Dow tops 18,000
19 Apr 2016
PM Bulletin: US indices continue to push higher
18 Apr 2016
Weekly Bulletin: The Fed, China, oil and the yen
18 Apr 2016
PM Bulletin: Brent crude
15 Apr 2016
AM Bulletin: Quiet start to Friday’s trade
15 Apr 2016
PM Bulletin: EURUSD chart
14 Apr 2016
AM Bulletin: Equity rally continues
14 Apr 2016
AM Bulletin: Equities push higher
14 Apr 2016
PM Bulletin: JP Morgan Chase
13 Apr 2016
PM Bulletin: Silver chart
12 Apr 2016
AM Bulletin: Equity rally runs out of steam
12 Apr 2016
PM Bulletin: Schlumberger
11 Apr 2016
Weekly Bulletin: Yen strength remains a concern
11 Apr 2016
PM Bulletin: Stock indices ending the week on a high
08 Apr 2016
AM Bulletin: “Risk-on” again as yen retreats
08 Apr 2016
PM Bulletin: JPY update
07 Apr 2016
AM Bulletin: Oil surge boosts equities
07 Apr 2016
PM Bulletin: Gold struggling to build on Q1 gains
06 Apr 2016
AM Bulletin: Firmer start for global indices
06 Apr 2016
PM Bulletin: USDJPY heading towards 110.00
05 Apr 2016
AM Bulletin: Crude weighs on equities
05 Apr 2016
Weekly Bulletin: Yellen or the data – what to believe?
04 Apr 2016
PM Bulletin: Holiday spending money
04 Apr 2016
April: Non Farm Payrolls Out Today
01 Apr 2016
AM Bulletin: Waiting for Non-Farms
01 Apr 2016
PM Bulletin: Non-Farm Payroll post mortem
01 Apr 2016
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)
 
 
 

 

It feels as if nothing can halt the ongoing rally in US equities. Every sell-off or hiccup is met with a wave of fresh buying. Even today’s response to the failed OPEC/non-OPEC meeting in Doha on Sunday has been bullish. Meanwhile the first quarter earnings season has been terrible so far, with the four biggest US banks by market capitalisation posting yet further year-on-year declines in revenues and earnings. If this continues (and it probably will) this will mark the third consecutive quarter of decline in corporate earnings. But investors don’t seem to care as long as the numbers come in better-than-expected. In other words, they beat the heavily discounted analyst estimates.

Yet the actions of central bankers suggest that the global economy is still stuck on life support with the adoption of negative interest rates and ongoing bond-buying programmes being extended in some cases. Even the US Federal Reserve which raised rates in December for the first time since June 2006 is still providing stimulus. It may have stopped its monthly bond purchase programme, but it continues reinvesting maturing bonds into new issues so as to keep downward pressure on interest rates. In other words, it still maintains the size of its balance sheet.

Perhaps this is all that matters. As long as the Fed remains accommodative and doesn’t hike rates again then investors will cling on to the “worry wall” with their fingertips. In which case last year’s highs for the major US indices are the next upside target.

But one has to be really careful buying up here. Sure, we could have more upside to come but it won’t be plain-sailing from here on in. There’s just too much uncertainty out there and so much that could go wrong. While it is an impressive feat that the major US indices are back within a few percentage points of their all-time highs, just look at the pull-backs we had in August and January. And it’s worth noting that it was missteps in China that were broadly responsible both times (although the Fed’s December rate hike didn’t help). Markets don’t go up (or down) in straight lines forever. And a look at the Dow chart since 2009 shows the severity of the two most recent sell-offs. In addition, the top chart also shows quite clearly the slide in the Average True Range as the market has rallied. This suggests that investors continue to lose interest, or don’t have faith, in the ongoing push higher.
  



     




Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


Add a comment Add comment            

 

 
© 2017 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.