For stocks, ‘buying the dip’ is likely to be a ‘losing proposition,’ says UBS

“Buy the dip” has been a rewarding strategy for much of this long-running bull market, but analysts at UBS said there’s something investors need to know.

PMIs are survey-based indicators that measure private-sector business activity. In the U.S., the Institute for Supply Management’s readings, particularly the manufacturing index and its components, such as the new-orders sub-index, are closely followed for clues to the economic outlook. A reading above 50 indicates activity is expanding, while a reading below signals contraction.

Risk-on, risk-off But Trahan and Blackman said that history shows over the last nine full economic cycles, going back to 1974, that buy-the-dip works the best when leading economic indicators, like PMIs, are accelerating. 3-item checklist There’s more to it. Determining the phase of the cycle is one part of a three-item checklist, the analysts said. The ideal risk-reward scenario is in place when the “risk-on” phase of the cycle is accompanied by interest rates that are supportive of an expansion in the price/earnings ratio and the earnings outlook is favorable. Right now, would-be dip buyers are 0-for-3, they said.

Singapore Singapore Latest News, Singapore Singapore Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

The charts are pointing to a rally for Cisco on earnings, says traderCisco is reporting earnings Wednesday, and one trader says the stock's about to bounce back.
Source: CNBC - 🏆 12. / 72 Read more »

The economy is not falling into a recession, but the slowdown stocks are working, Cramer says'The day-to-day action is going to favor the slowdown stocks and wreak havoc for the industrials, the technology stocks, and worst of all the financials,' Jim Cramer says. Sure buddy Yeah sure. You didn’t know about the last downturn either so you have zero credibility
Source: CNBC - 🏆 12. / 72 Read more »