Don't Expect The Stock Market Rally To Last Much Longer

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Don't Expect The Stock Market Rally To Last Much Longer

seekingalpha2021-03-12

Summary Equities appear to be bouncing back from oversold conditions. Yields are still high and that means nothing has changed since last week. With the ECB now upping the pace of bond purchases, the...

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XiaTian
·2021-03-15
Let’s see how
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDon't Expect The Stock Market Rally To Last Much Longer\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-03-12 17:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4413301-dont-expect-stock-market-rally-to-last-much-longer><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nEquities appear to be bouncing back from oversold conditions.\nYields are still high and that means nothing has changed since last week.\nWith the ECB now upping the pace of bond purchases, the...</p>\n\n<a href=\"https://seekingalpha.com/article/4413301-dont-expect-stock-market-rally-to-last-much-longer\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".DJI","symbol_name":"道琼斯","start_time":0,"source_url":"https://seekingalpha.com/article/4413301-dont-expect-stock-market-rally-to-last-much-longer","article_id":"1176366226","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1176366226","pubTimestamp":1615542522,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nEquities appear to be bouncing back from oversold conditions.\nYields are still high and tha","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".DJI":"道琼斯",".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite"},"translate_title":"我不指望股市的涨势会持续太久","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".DJI":0.9,".IXIC":0.9,".SPX":0.9},"content_text":"Summary\n\nEquities appear to be bouncing back from oversold conditions.\nYields are still high and that means nothing has changed since last week.\nWith the ECB now upping the pace of bond purchases, the dollar should begin to strengthen.\n\nStocks are rebounding from last week's decline, with the S&P 500 even managing to set a new all-time high. But one has to wonder what has really changed since then, besides nothing. Yields on the 10-year are still over 1.5%, and now with the S&P 500 at or near its all-time highs, any hope investors had of the Fed doing something is over.\nShould one be a believer in this rally? Tough question to answer, but probably not. The rally has been predicated on easy money, a falling dollar, lots of stimulus, and low rates for a really long time. But the underpinnings are shifting, and the ECB announcement today may have sealed the fate of the equity market.\nTechnology and growth stocks have been hammered over the past few weeks and have done very little to recoup the majority of these losses. The NASDAQ 100 is still a good 5% off its highs, despite rallying 7% off its lows. Clearly, the higher rate environment to this point is affecting parts of the market. But the question remains why is the S&P 500 outperforming the Nasdaq.\nThe S&P 500 is more diversified, which has helped buffer much of the blow witnessed in the Nasdaq. Financial, industrials, energy, and material stocks have largely been responsible. But that will become a tough trade in the weeks ahead, especially if the ECB is determined to keep rates down and wants to push the euro lower, which it seems it does. The ECB is planning to boost bond purchases to help keep yields lower, and if those yields stay at current levels or lower, that will help strengthen the dollar. That, in turn, will negatively impact the three sectors that have helped to hold the S&P 500 up as the NASDAQ has fallen.\n\nThe spread between US and German rates on the 10-year has risen to nearly 1.9%, from a low of 1% over the summer. Should it remain at current levels or widen further, that spread is likely to push the euro down and the dollar higher, which will negatively affect commodity prices, which will weigh on energy and commodity stocks. Additionally, it will hurt the earnings and revenue prospects for multi-nationals, creating an FX headwind.\nEven recently, the number of speculators in the euro futures have been trimming their long euro futures positions and adding to the short euro futures positioning.\n\nWe are also beginning to see the positioning of the dollar shift from net short back to neutral. In fact, we see that amount that is net short of the dollar is historically low. It could indicate that the next major move in the dollar is higher.\n\nIf the tailwind of low rates and the weak dollar continues to trend in a direction that results in higher rates and a strong dollar, the equity market's pressure is only likely to grow worse from here. Couple that with what will become tougher comparables in the second half of the year for many companies, specifically any company that benefited from the pandemic. The S&P 500 could lose a big portion of its growth drive.\nIt places the S&P 500's currently high P/E multiple of 20.2 times 18-month forward earnings estimate at risk. While it is easy to think that the S&P 500 will grow its way out of its high valuation with an improving economy, which would help boost earnings, that may not be the case. Month-over-month earnings estimate changes have slowed more recently.\n\nEven on a relative basis versus the 10-year, the earnings yield on those earnings is currently 3.41%. The problem is that the higher the 10-year climbs, the more expensive the S&P 500 gets relative to the 10-Year. This is even as the earnings yield of the S&P 500 has been relatively sideways over the past several weeks.\n\nAdditionally, there is also the possibility that earnings estimates for the S&P 500 begin to drop. With all of this talk of inflation, investors have forgotten to ask the simple question. What if companies are unable to pass on their higher cost to their customers. Yesterday's CPI came in as expected at 1.7%, but the PPI reading for March 12 is expected at 2.7%. If the trend continues, where PPI gains are moving up faster than the CPI gains, does the market need to begin worrying about falling margins. Meaning that cost and expenses are rising faster than revenue. That will result in lower margins and put further pressure on earnings multiples.\nThis has already been witnessed to some degree in the Semiconductor sector. Stocks such as Qualcomm (QCOM), AMD (AMD), and Nvidia (NVDA) have seen their stocks hammered in recent weeks, as much of their big revenue gains last quarter were offset by sharply higher expenses and was also presented in their forward guidance.\nWhile it may seem like the equity party is starting all over again, the risk may actually be getting worse.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":322046017,"gmtCreate":1615757333939,"gmtModify":1704786082802,"author":{"id":"3575368380492738","authorId":"3575368380492738","name":"XiaTian","avatar":"https://community-static.tradeup.com/news/71777f1a5ae276e73064272b5ae7df92","vip":1,"crmLevel":3,"crmLevelSwitch":1,"idStr":"3575368380492738","authorIdStr":"3575368380492738"},"htmlText":"Let’s see how&nbsp;","listText":"Let’s see how&nbsp;","text":"Let’s see how","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/322046017","repostId":1176366226,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":41,"commentSize":1,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}