It seems stocks are going in just one direction these days—up. Major U.S. stock indexes closed at or near record highs on Tuesday extending a bull rally that has seen the S&P 500, the Dow Jones Industrial Average and Nasdaq Composite indexes surge 75.8%, 69.7% and 104.8%, respectively, since March 23 lows last year. As of Tuesday, the S&P 500 had a trailing twelve month price-earnings ratio of 40.04 – the highest level since October 2009.
Laila Pence, president of Pence Wealth Management in Newport Beach, Cal., which manages $1.6 billion in assets, does not expect a “substantial, long lasting correction because market dynamics have changed over the last year,” citing that “there is no real alternative to equities at present and a ton of new buyers.”
But David Rosenberg, president of Rosenberg Research and Associates, an economic consulting firm based in Toronto, is more bearish and says he expects a market correction most likely in the second half of the year, noting that valuations are now “in the top 1% strata of all time.
“If we don’t get a large stimulus package, we could see a small pullback in the stock market, but I find that very unlikely,” Lloyd notes. “With Democrats controlling the House of Representatives, Senate and [White House], the likelihood of multiple stimulus packages over the next four years is high. The market will like any additional stimulus in the short-term.
Philip S. Blancato, CEO of Ladenburg Thalmann Asset Management in New York, which manages $3.5 billion in assets, thinks consumer discretionary and technology stocks should benefit from a new stimulus package. “Consumer spending comprises 70% of GDP and consumer-focused industries are critical components of the U.S. economy,” he says. “Putting more money in consumer’s hands should have a positive impact on consumer-focused companies.
In the event of a correction, Pence says, high flying IPO stocks are the most likely to drop the most. “The market in 2019 was characterized by investors shunning IPOs that were unprofitable yet highly valued — evidenced by both the Uber and Lyft IPOs,” she says. “The market has completely shifted its tone over the last year, with the average first day return [of IPOs] at 41%, and a drop in sentiment could hit that segment [of the market] particularly hard.
“When we do get the next [correction], either via a run-up in bond yields, earnings disappointments, [or] delays in achieving herd immunity… I sense that the valuation support is so weak and the Fed so spent, that the drawdown could be akin to what we saw in late 2018.”
EconguyRosie Von Greyerz: How Will It All End? What is now crystal clear is that this excess dose of fake assets and fake liabilities will totally poison the financial system and the world economy. DON’T EXPECT IT TO BE DIFFERENT THIS TIME!
EconguyRosie FWIW I do own energy and some funky commodity stocks...Fertilizer namely...Out of tech and banks..
EconguyRosie ...sell a SaaS company trading at 35x+ sales (growing at 5%)....
EconguyRosie 1) 'There are still record levels of cash on the sidelines' - there is no such thing (J. Hussman explains brilliantly) 2) “there is no real alternative to equities at present'. 10 more bps on the 10 year and you are roughly at S&P yield. Maybe, just maybe, someone might...
EconguyRosie Only if the stock market corrects at least 30% can you maybe pat yourself on the back. Still wouldn’t come close to meeting your 2020 highly confident call of retesting the March lows.
Subirán mientras los estados sigan endeudadándose. Y los estados se endeudarán mientras no haya inflación. En cuanto asome la inflación se acabó el rally alcista.
So 7 out of 8 think the market keeps going up and the only bear among these market experts thinks a correction comes in the second half of 2021. Is that a cheery consensus yet?
EconguyRosie Are we allowed to use logic, fundamentals and common sense to answer the question? Or just zeitgest?
Esta semana ficarei com a segunda opção🧸..
Only up 😂😂