Latest news with #USEquity
Yahoo
7 days ago
- Business
- Yahoo
Why These Market Forecasters Expect Stocks To End the Year at Record Highs
Deutsche Bank analysts led by Chief US Equity & Global Strategist Binky Chadha on Tuesday raised their year-end S&P 500 target to 6,550. That suggests about 10% upside from Tuesday's close. And it would be nearly 7% above the index's record close from earlier this year. Investor positioning, they said, is close to neutral and assumes tariffs will be a slight drag on earnings growth this Wall Street forecasters see stocks closing out 2025 at record highs—despite a shaky start to the year. Deutsche Bank analysts led by Chief US Equity & Global Strategist Binky Chadha on Tuesday raised their year-end S&P 500 target to 6,550, a number suggesting about 10% upside from Tuesday's close. That would be nearly 7% above the index's record close from earlier this year. Investor positioning, they said, is close to neutral and assumes tariffs will be a slight drag on earnings growth this year. 'However, if there is confidence that tariff impacts will be modest and temporary, we expect discretionary investors to look through any slowing in growth and turn overweight in anticipation of a rebound,' they wrote. The analysts expect robust corporate demand to shrink the supply of stock on public markets. They forecast companies will spend $1.1 trillion on stock buybacks this year, thanks to resilient earnings. Deutsche Bank raised its estimate of the S&P 500's aggregate full-year earnings per share to $267 from $240. The firm entered the year forecasting index-level earnings of $282 per share. But it slashed that outlook in mid-April shortly after President Trump paused 'Liberation Day' tariffs for 90 days and lifted rates on Chinese goods to 145% at a minimum. Earnings, they estimated, would suffer from a prohibitively high effective tariff rate and the lingering possibility of a prolonged trade war. The outlook improved last month when the U.S. and China agreed to slash their respective tariff rates while officials negotiated a more comprehensive trade deal. Tensions between the world's two largest economies linger: This weekend each party accusing the other of violating their tentative agreement. Still, the White House's approach to tariff negotiations has some market watchers feeling optimistic. Deutsche Bank's analysts take the White House's decision to pause 'Liberation Day' tariffs just hours after they took effect, 'before the emergence of any legal barriers or economic or political pain,' as a sign that 'if negative impacts of tariffs do materialize, we will get further relents.' As such, Deutsche Bank expects this year's rally to 6,550 to benefit investors who bet on Trump relenting. 'Despite the rhetoric to the contrary, the 2018-2019 dynamic of repeated cycles of escalation and de-escalation predicated on the market looks to be alive and well.' Read the original article on Investopedia
Zawya
27-05-2025
- Business
- Zawya
Banks and hedge funds fuel US dividend trading boom: IFR
Trading in derivatives linked to dividends from US companies has surged to record levels this year following a sharp growth in the number of banks, multi-strategy hedge funds and other investors using the contracts to hedge – or wager – on changing dynamics in this corner of equity markets. Volumes in futures and options on dividends linked to US equity indices are up nearly 80% in 2025 to an average of about 9,400 contracts a day, according to CME Group. Trading volumes peaked in early April at the height of the US tariff turmoil when plunging stock markets sent hedge funds rushing to close out bets on short-dated dividend contracts and dealers had to hedge structured product exposures, traders said. That flurry of activity underlines how trading dividends – a mainstay of European equity markets for years – has now become big business in the US as greater investment opportunities have emerged following rapid growth in the closely linked business of banks selling structured products. 'The change we have observed in the marketplace over the last five years is the proliferation of hedge fund pods and the growth of delta one trading more broadly,' said Jeremy Rosen, head of delta one solutions for the Americas at BNP Paribas. 'There has been meaningful growth among hedge fund pods and that has led to US delta one products such as dividends [being] more discussed and relevant across many different equity trading desks.' Derivatives linked to company dividends emerged in the early 2000s for investors and traders to hedge or take a view on the future payouts companies are expected to make to shareholders, without taking exposure to moves in underlying stock markets. These contracts proved particularly popular in Europe where banks needed ways to manage exposure to dividends stemming from their structured products businesses. A typical structured product might involve a bank selling a retail investor a note that returns them their money along with a chunky coupon provided an equity index or stock reaches a certain level in a year's time. The expected dividend of the underlying shares usually forms part of that coupon, leaving bank trading desks sensitive to dividend payouts. Germany's Eurex launched dividend futures in 2008, aided by Europe's vast market for retail structured products. Last year, an average of over 82,000 contracts per day changed hands on the exchange. Playing catch-up Dividend trading has been slower to catch on in the US, in part because of differences in how the two equity markets operate. US companies pay smaller dividends, with most preferring to return money to shareholders mainly through stock buybacks. The US's smaller structured product market has been another factor capping growth – at least until recently when activity has mushroomed. Issuance of US SEC-registered structured notes rose by around a third last year to a record of about US$160bn, according to Goldman Sachs, amid widespread demand for US technology stocks from local and international investors. Elsewhere, there has been sharp growth in registered index-linked annuities, a product popular among US life insurers that encourages hedging with dividend futures. More than US$60bn of these RILAs were sold in 2024, according to Goldman, compared with less than US$20bn five years earlier. Riddhi Prasad, an equity derivatives strategist at Bank of America, said this activity may be behind a "steady flattening" of the US dividend curve in recent years because dealers use longer-dated contracts to hedge their positions. However, Prasad said the majority of the growth in dividend trading has been concentrated in shorter maturities. "This would suggest that, in addition to exotic product hedging by dealers, there are also numerous market participants engaging with US dividends for their fundamental value proposition," said Prasad. Appealing growth The number of unique accounts trading US dividends on CME has more than tripled over the last five years to 776 in 2024, the exchange group said. Traders say multi-strategy hedge funds that run numerous trading pods have become active in the market as structured product-related hedging has grown in prominence and made dividend trading more interesting. "Trading dividends in the US always used to be less attractive for investors than in Europe because there was less structured products activity creating an interesting opportunity set," said Luca Valitutti, managing director in exotics and hybrids trading at Citigroup. "Now there's been a surge in structured products issuance in the US since 2020. Various market parameters such as dividends have been affected by dealer hedging activity and that has increased the appeal for the buyside of allocating capital to dividend trading." Things came to a head in April when stock markets plunged after US president Donald Trump announced sweeping tariffs on US trading partners. Prasad said long-dated dividend futures briefly fell below shorter-dated contracts around this time – a phenomenon that could be linked to dealers hedging structured products. However, traders said the heaviest volumes came in shorter-dated futures as hedge funds suffered large mark-to-market losses in the turmoil, forcing many to close positions. Despite the recent volatility, the US dividend trading boom isn't over. Ironically, traders say that one appeal of the US market is that dividend yields are typically lower than in other regions, limiting the potential losses for investors. "If the dividend yield is 1% rather than 4%, the risk that a company cuts that cashflow is much lower in stressed scenarios," said Valitutti. 'The downside risk is much less pronounced in the US versus the rest of the world."
Bloomberg
23-05-2025
- Business
- Bloomberg
Bloomberg Surveillance TV: May 23, 2025
- Jim Bianco, president and founder at Bianco Research - Nadia Lovell, Senior Strategist: US Equity at UBS - Dana Telsey, CEO at Telsey Advisory Group - Russell Brownback, Head: Global Macro Positioning at BlackRock Jim Bianco, president and founder at Bianco Research and Nadia Lovell, Senior Strategist: US Equity at UBS, join to offer their outlook on US equities and whether it could sustain its post-Liberation Day rebound. Dana Telsey, CEO at Telsey Advisory Group, discusses consumer health and the outlook for luxury goods in the US and globally. Russell Brownback, Head: Global Macro Positioning at BlackRock, talks about signals from the bond market globally after the House passed its tax bill.
Bloomberg
15-05-2025
- Business
- Bloomberg
Stock Returns From Now Will Be Modest: UBS's Lovell
UBS Financial Services Senior Strategist of US Equity Nadia Lovell gives her outlook on the markets in an interview with Scarlet Fu on "Bloomberg Markets." (Source: Bloomberg)
