'Euphoric' investors trigger alarm bells over the stock market

If the trade optimism really feeds these shareholdings, you must make the confessions clear.

Reports that the US may release some China tariffs to seal a "phase one" deal, stock futures increase on Tuesday. It is a day after all the three major US indexes that are nailed record have closed.

But Lori Calvasina, RBC Capital Markets' head of US stock strategy, is wary of these highlights and provides five reasons why investors should be, too, in our Today's Call .

In a note to clients, she states that she adheres to RBC's year-end S&P 500

SPX, + 0.01%

target of 2,950, even when the index is pushing above 3000. This is why:

1) Euphoric's US stock futures placement among asset managers is approaching July 2019 , September 2018 and January 2019 peaks in line with the highlights seen just before the global financial crisis. That means stocks can be vulnerable to bad news.

2) Valuations in the US stock market are back to the end of the 2017 highs, and Calvasina says improvement from this could be tough given the Federal Reserve is expected to pause at further interest rate cuts.

3) Earnings forecasts for 2020 are too high.

4) Shares are already accounting for the benefits of phasing a trade agreement, which Calvasina doubts will undo any harm done to the business trust.

5) As of November 4, the S&P 500 has increased more than 30% from the lowest December 2018. This corresponds to rallies seen from the index losses in 2010, 2011 and 2016, and as the chart shows, each of these years had market breaks along the way: [19659011] “The new idea we are offering this week is that we have not learned anything in the current reporting season that justifies euphoric positioning and top values. The reporting season has been better than feared, but the general tone around demand / macro, tariffs and cost savings sounds very familiar – that's what the companies have been saying all year, says Calvasina.



YM00, + 0.15% ,


ES00, + 0.03%

and Nasdaq

NQ00, + 0.04%

futures are higher. European shares

SXXP, + 0.16%

is near four-year highs, and Asian markets also ended.

The chart

Our chart comes from the World Gold Council. On Tuesday, the industry body reported the largest exchange-traded fund volumes for gold in three years, due to accommodating monetary policy, safe harbor demand and investors chasing some big gains.

First column shows gold demand in Q32018, second shows Q32019

It has been a strong year for gold

GC00, -1.06% ,

which is up 17% so far this year and puts it on par with Dow industrials.

The buzz

Pharmaceutical group Mylan

MYL, + 1.34%

topped estimates and Allergan

AGN, + 0.16% ,

also delivered positive revenue news. Meanwhile, equipment manufacturer Peloton is training

PTON, -8.78%

revenue hit a larger than expected loss.


UBER, -7.35%

shares stumble after the drive reported another mega loss. Shares of fast food restaurant Shake Shack

SHAK, -17.06%

also slides as sales of the same store and prospects for lost forecasts.

The Economy

The US trade deficit was reduced in September. The Markit services for purchasing managers index, non-producing ISM index and positions are still ahead. There are also many Fed speakers this week.


$ 1.8 million – That is the cost of a single-dose drug developed by Bluebird Bio

BLUE, + 0.02%

for a rare blood disease that has plagued Sicilians for centuries. ]] Deadly Laugh Over a Wildly Popular Chicken Sandwich

It's another word to be single: self-partnered

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