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Home / Business / Stock market dip? Continue to buy, says Bank of America Merrill Lynch

Stock market dip? Continue to buy, says Bank of America Merrill Lynch



Stock market action over the last 24 hours tells us that either investors are looking for excuses to sell, or reality has caught up with everyone in a big way.

Wall Street met a wall of sales on Thursday, but nothing like the ugly days of December, which worries about global growth and commerce came together and overall blew up some confidence. Given it's Friday, and many investors will see if this move has bones, there may not be too many bravehearts out there, ready to dive in again. At least that is how things evolve.

With regard to the twisting of the latest developments in trade negotiations in the US and China, some have had enough.

"It has been a year now. Trump is not going to meet [Chinese President] Xi after the deadline, so the market goes down. I do not remember that Trump meets XI who is ever part of the plan or is it clear "Do they both meet? Don't they have phones? Is it possible that an agreement between the two countries will be prepared by the deadline … and then signed in April? Or maybe March 2?" Says Mott Capital Management's Michael Kramer, in a blog post.

The bottom line, Trump will get a deal because he will add it to his list of achievements before 2020. "He also doesn't want the stock market to go down, that's his approval for Jobs," says Kramer, who gives us diagram of the day below showing that the S & P 500 is still in good shape.

On our the day of the Bank of America is called Merrill Lynch, whose weekly "Flow Show" update says investors should remain loyal, for now, to a rebuilding market mantle.

"The right strategy in 201

8 was" sell-it-rip "; Positioning, politics, profits and populism argues for the right early 2019 trading strategy is to" buy-the-dip, "wrote BofA strategists, who say indicators they looks at – Philadelphia Semiconductor Index

SOX, -2.24%

SPDR S & P Homebuilders ETF

XHB, + 0.87%

and the South Korean Kospi index

SEU, -1.20%

– remain bullish.

But they are concerned about a "still stubborn flat" yield curve and the fact that an ETF tracking of US dealers

XRT, -0.67%

has broken below its 50-day moving average.

In the case of bull case, here is the breakdown of their four P: Placement: streams show a rush back to credit but not equity, and if the cash level falls from 4.9% to 4.6 % or lower in next week's fund manager survey that would "temper" their bullish call. Policy: The global central bank's action cycle has clearly ended. Populism: The biggest threat to earnings per share over the next three years – through taxation, regulation and government intervention. But "populism simply means investors discount higher budget deficits (US government already spends $ 1 billion every 2 hours) and avoids government bonds … stocks will benefit." Profits: Businesses must stop reversing earnings forecasts lower before markets can set new heights, unless investors go on a 1999-style buying frenzy.


But they really do not expect investors to return to "irrational extinction" territory. In a deep dive with private clients, the bank finds that since 2012, of every $ 100 invested, $ 55 has gone into debt, $ 35 in shares and $ 10 in cash and other alternative investments. And the last three years have not seen any hunt for this stock market higher, they say.

Here's a look at their latest bull-bear indicator, which sits roughly in neutral territory:


Market

Dow

YMH9, -0.53%

S & P 500

ESH9, -0.60%

and Nasdaq

NQH9, -0.86%

futures are in red, follow through on Thursday's action, again losing around 1% for DJIA

DJIA, -0.87%

S & P

SPX, -0.94%

and Nasdaq Composite

COMP, -1.18%

Crude

CLH9, -0.46%

is slightly softer, gold

GCH9, + 0.21%

is flat, along with the dollar

DXY, -0.03%

Europe shares

SXXP, -0.29%

treading won, but Asia had a rough session, with Nikkei

NIK, [2] 01%

fell 2%. China markets remain closed for Lunar New Year holidays. But these markets will be open on Monday, so watch out for some termination actions.

Read: How the European economy claims fresh global growth fear

Deutsche Bank: Cocktail of macro risk can lead to decline as "rival's global financial crisis

Chart

Tough enough, it's S&P 500, according to our day chart from Mott Capitals Michael Kramer, who notes that the index held an important level of support at 2,690 in Thursday, not just once, but four times. who started Thursday, he says? One and done.


Buzz

With the trade theme red hot again, a report that the Trump administration is planning to ban China telecom equipment from US networks later this month can go down as a leading balloon in Beijing, 19659002 Amazon

-1.58%

CEO Jeff Bezos has accused the National Inquirer of trying to extort him and say that the tabloid threatened to publish embarrassing images if he did not call a Washington Post survey about a former postponement of his romantic life .

It's a quiet day on the earnings front, with Hasbro

HAS, -0.82%

and Phillips 66

PSX, -2.84%

Arconic

ARNC, -3.18%

and Goodyear tires

GT, -2.19%

among the reporters.

Apple


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