Business

“So bad, that’s good.” This besieged stock market has one major resource on its side, say strategists.




A tough month for equities is coming to an end, and many investors will probably not be sad to see the back of it. And trading on the last day of April looks weak as Apple and Amazon failed to raise the level of a mixed season for technology revenues.

Spring today’s conversation comes from Keith Lerner, marketing strategist at Truist Advisory Services, who said that “depressed” investor sentiment is the reason why he has not switched to a completely negative attitude towards equities right now.

“With markets, it’s actually not about good or bad – it’s about better or worse in relation to expectations. When expectations are low, some good news can go a long way. That’s why markets tend to go down when fear and uncertainty is at its extreme, Lerner said in a recent note to customers.

He downgraded his equity position to neutral in April after two years of a positive stance, noting that although the range of potential outcomes is wide, the risk / reward is less positive.

He pointed to the latest survey from the American Association of Individual Investors (AAII), which showed that the percentage of investors with negative / bearish prospects rose to 59.4%. It was the highest since the beginning of March 2009, just a few weeks from a major stock market crash following the 2008-09 financial crisis.

“To be fair, investors were correctly negative in January 2008 in the early stages of that market downturn,”[ads1]; he said.

The percentage of bullish investors is currently 16%, also close to a record low level, leaving the bull / bear spread at -43%, a level that has been exceeded twice in the last 35 years – autumn 1990 and March 2009 period, said Lerner.

Truist counseling services

A similar theme was heard from Thomas Lee, founder of Fundstrat Global Advisors, who told clients that the AAII sentiment survey was a “big bottom line”, based on history. “So bad, that’s good,” he said.

Lee gave this chart that shows when such a weak reading marked a stock bottom:

A footnote from Lee is that the AAII survey tends to try older investors, and not the Reddit audience.

Read: Boomers are leaving the stock market. Here’s what’s going on next.

Lerner adds other evidence of investor negativity, such as the $ 45 billion that flowed out of mutual funds over the past two weeks. “This is an extreme that we have also seen in times of increased uncertainty and volatility,” Lerner said.

For example: the post-Lehman Brothers bankruptcy, the US debt downgrade, the COVID-19 pandemic and two months before the US presidential election in 2020. While the Lehman Brothers signal was “premature”, strong price returns followed the other periods, he said.

In short, Lerner said Truist follows the “weight-of-the-evidence” approach, which tells it that depressed investor views and a “low barrier to positive surprises” are the stock market’s biggest assets.

The fuss

The Federal Reserve’s preferred measure of inflation – the core price index for personal consumption expenditure – rose sharply 0.9%, and employment costs also rose. The one followed by the University of Michigan’s consumer sentiment index is still to come, and next week we will have a Fed meeting.

Amazon AMZN
is down 8% after its first loss in seven years. Apple AAPL
is down over 2% after the technology giant topped earnings and set revenue records, but warned of billions in extra costs from supply chain problems.

Tesla TSLA
the stock is higher after CEO Elon Musk tweeted that no more sales were planned for now, after selling nearly $ 4 billion.

Revenue from the Chevron CVX,
Exxon XOM
has left these stocks softer, while Honeywell HON
is up on results, while AbbVie ABBV,
Bristol-Myers Squibb BMY
and Colgate-Palmolive CL
are also all down to results.

Opinion: Big Tech no longer wins as big, but these two stocks still seem safe

Elsewhere, Intel INTC
is down for results, while investors cheer on Roku ROKU
earnings. Shares of Robinhood HOOD are also falling,
who missed forecasts and said fewer people shopped on the app.

And Digital World Acquisition Corp. DWAC,
The special acquisition company that buys the company behind former President Donald Trump’s Truth Social is rising after Trump reappeared with a message on the platform.

Ukraine’s leader has accused Russia of trying to humiliate the UN by firing rockets at Kyiv during a visit by Secretary-General António Guterres. And efforts to get captured civilians out of crisis-stricken Mariupol continue.

The Chinese government has promised more support for its economy, as it fights COVID-19 outbreaks.

The Ministry of Labor is concerned that Fidelity’s plan to allow Bitcoin in 401 (k) plans is risky for retirees.

The markets

Shares DJIA

SPX

COMP
is lower, with bond yields BX: TMUBMUSD10Y

BX: TMUBMUSD02Y
higher and crude oil prices CL00
up. Gold climbs, while the dollar DXY
has cooled after Thursday’s massive rally, especially against the yen USDJPY,
which continues to sink. The Russian central bank cut interest rates to 14% and the ruble USDRUB
is returning.

Bitcoin BTCUSD
and other cryptocurrencies are modest of.

The diagram

Naomi Poole and a team of strategists at Morgan Stanley have rolled out a new Market Sentiment Indicator (MSI) to provide “tactical guidance on ‘risky assets’.” It collects survey, positioning, volatility and momentum data to measure market stress and sentiment.

MSCI All-Country World Index (you can track it via the exchange-traded fund iShares MSCI ACWI ACWI
) is used as a proxy for the performance of risk assets.

“Our analysis suggests that improving / worsening sentiment is a stronger signal for future returns than just extreme levels,” said Poole and the team. By using the stress level and direction, MSI is currently neutral and does not give buy signals yet, they said.

The bitches

These were the best-selling tickers on MarketWatch from kl. 06.00 Eastern Time:

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