Reuters blog archive
The common refrain, five years after the end of the market's worst performance in decades (excluding the technology arena, yet to recover its highs from the tech bubble), is that this bull market is getting long in the tooth: It's gone too far, too fast, and therefore, is due to end. We examined this in a story by Caroline Valetkevitch, just setting aside the hand-wringing about things ending or not, and throwing out a few things that really get at people. (Full Story)
One of those is the idea that the market hasn't seen a correction in more than two years or so, though there's some semantics here per Dan Greenhaus of BTIG. He notes that the 19.4-percent drop (peak to trough) in 2011 only doesn't qualify as an ever-so-brief bear market by the slimmest of margins, and if you accept the idea that this was a bear, "the current rally isn’t five years old, it's just two and a quarter."
He adds that "bull markets do not die of old age and a rally’s length is an arbitrary concern, far less important than the ultimate arbiter of expected returns, valuation."
Schaeffer's Investment Research analysts point out that the Russell 2000 (or its ETF, really) is starting to head into an overbought area, usually something that coincides with a pullback of sorts. They also note that in the equity options market, buyers of calls have "done so at a rate of more than 2.25-to-1 in the past five days," similar to the peaks around the end of the year.
Opinions vary right now as to whether we're seeing the return of bubble-like qualities across a broad swath of the market or just in select names (which really isn't a bubble, then, bubeleh, just overvalued stocks).
With the Ukraine issue subsiding a bit, investors had a chance to sink their teeth back into the market, including a number of areas that seemed ripe for buying, like small-cap names, which saw a very strong 2.6 percent increase on Tuesday that outdid the larger-cap stocks.
United States markets have hit a relatively calm period. Where problems in Ukraine and Russia are giving a modest safety bid to treasuries, the U.S. stock market continues its climb after a better-than-expected earnings season, though concerns remain over the weather's impact on some recent weak economic data.
The more interesting action is taking place in the world of bitcoin, where the biggest exchange Mt. Gox, filed for bankruptcy after several months of dwindling as the most influential exchange in this fledgling market.
Without a lot of fanfare, the U.S. equity market has worked its way back to a few points of all-time highs, as concerns over emerging markets (largely related to Ukraine) have magnified, as have worries over China's struggling growth.
That's once again produced the "best house in a bad neighborhood" effect for the U.S. stock market; bond yields remain range-bound in the 2.70 to 2.75 percent area, the 10-year still reflects a value that doesn't suggest economic acceleration or worries over massive slowing either.
By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The standalone Vodafone is starting to look healthier. The mobile telecom operator will become dramatically smaller after it quits the United States and returns $84 billion to its shareholders. Elsewhere, its sales have been falling faster and faster. Now it looks like the worst is past and Vodafone hopes to ride a boom in mobile data. Yet for investors, the top question is what part the group will play in future M&A.
Monday was the worst day in the stock market since June. And while you can go through all the machinations and point out that the market is still down just 5 to 6 percent from its record high - and you'd be right - that doesn't really translate to a strong environment at this time.
Not when the selloff continues through to overseas markets, with the Nikkei down 4 percent, Hong Kong losing more than 2 percent and ending at the day's lows, and Europe down as well. So far the US market is experiencing something of a dead-cat bounce, but we’ll see how long that can last.
from Expert Zone:
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The focus is back where it should be for equity investors - fundamentals.
In the past few years, markets around the world have swayed to the wave of liquidity unleashed by central banks in a bid to get their economies back on track. The U.S. Federal Reserve, for one, was buying as much as $85 billion of bonds a month since September 2012. But that tap is beginning to taper with the Fed reducing purchases by $10 billion in January and another $10 billion in February.
We feel that this, together with a host of factors at home, sets the stage for a more sanguine approach to equities. I indicated in my note last month that we expect 2014 to be a year of fragile recovery for the Indian economy. The scenario will be similar for Indian equities.
The messy sell-off in emerging markets was stemmed overnight after Turkey surprised everyone by raising rates to 12 percent – but it didn’t last. Major averages in Britain and Germany opened at their highs of the day but have since faded, and even though the big rate increases in Turkey, South Africa and India are meant to stem capital flight, so far the market’s shooting first and asking questions later. S&P futures were up about 20 points after the Turkey rate hike – an odd move for such a localized event – and we’re seeing the reaction now, which, to quote Tom the cat about the ‘white mouse no longer being dangerous,’ “DON’T…YOU…BELIEVE…IT.” So we’re lower, and continue to head lower, and for those of you new to the markets, this is what’s called a selloff.
The big question: Will the Federal Reserve defer its tapering campaign in recognition of emerging-markets difficulty? One could say the Fed cannot be expected to act as the underwriter for global risk-taking, but you’d be laughed out of the room, given the performance of assets around the world in the last several years as the Fed went into full-QE mode.
In the words of Inigo Montoya, let me explain. No, there is too much. Let me sum up.
The market's most immediate issues remain tied specifically to what's going on overseas, particularly in Turkey. There, monetary authorities are meeting on a potential interest rate hike as a way of getting on top of the inflation problem (inflation's at 7.5 percent, and the central bank's lending rate is, uh, 7.75 percent).
It takes a lot to overshadow the heart of earnings season and a Federal Reserve meeting but the rout in emerging markets has managed to make that happen. This week is an important one. As my Reuters London colleague Mike Dolan pointed out, it will go a long way toward determining whether this is a rapid hot-money flight that gets stemmed after a brief correction or the start of a prolonged rout.
Fund withdrawals in recent weeks have shown a steady pullback from the emerging markets, though strategists at Bank of America-Merrill Lynch believe a "contagion" point hasn't been reached yet - that would take several more weeks of similar outflows. It remains to be seen whether that will happen or not.