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Business Times
a day ago
- Business
- Business Times
Traders scour for ‘elusive' catalyst to push S&P 500 to record
For stock traders there's little to fear at the moment. Corporate America keeps churning out solid earnings. The chances of a recession aren't blaring. And President Donald Trump's tariff policy is expected to become more clear before long. So what's there to worry about? Despite sitting just 2.3 per cent away from a new all-time high, the S&P 500 Index has been struggling to get there, meeting resistance at 6,000 – a key psychological threshold. Prior to Friday (Jun 6), the equity benchmark had not seen a move exceeding 0.6 per cent in either direction for seven straight sessions – the longest stretch of calm since December, according to data compiled by Bloomberg. With a key inflation read on tap Wednesday as the Federal Reserve enters a blackout period before its June 18 interest-rate decision, money managers are wrestling with what could propel the S&P 500 back to a record after the index soared 20 per cent from its April lows. 'For US stocks to get back to all-time highs we have to get rid of uncertainty, but most catalysts are elusive for now until the trade war chaos is resolved,' said Eric Diton, president and managing director of the Wealth Alliance, whose firm is now putting on hedges in portfolios to protect against a sell-off. From US job growth moderating in May to sluggish US services and manufacturing activity, weakening economic data have been piling up recently. Yet, the market has been blowing it all off, with traders pricing in little risk over the next month on optimism that the worst effects of Trump's tariffs may be avoided. The Nasdaq 100 Index is just 1.9 per cent away from a record. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'My concern is investors are becoming too numb to the trade war and economic risks, so when red flags appear they start dismissing them,' said Oliver Pursche, senior vice-president and adviser at Wealthspire Advisors. Some traders are preparing for sticky inflation. The consumer price index report is forecast to show the core reading – which excludes food and energy costs – rose by 0.3 per cent in May from a month earlier, above April's 0.2 per cent print. That would leave the core gauge up 2.9 per cent year-over-year – above the Fed's 2 per cent target. Wells Fargo economists see inflation picking up in the second half of the year. Signs of a better-than-expected economic outlook has revived hopes that chair Jerome Powell will resume reducing borrowing costs as soon as September. At the same time, some are wary that any surprises in inflation and eventual return of volatility may fuel an unwind of wagers on riskier investments and spark another sell-off. With the S&P 500 trailing the MSCI All Country World Index excluding the US Index by almost 12 percentage points in 2025 – marking the worst start to a year against its global peers since 1993 – Bank of America strategist Michael Hartnett says global stocks are getting close to triggering a technical 'sell' signal after investors rushed into risk assets, leaving positioning stretched. 'Once there's too much complacency there's a risk of surprise, so I'm more cautious heading into the summer,' said Patrick Fruzzetti, portfolio manager at Rose Advisors, who is snapping up shares of health care and staples companies that tend to have comparatively low valuations and offer robust dividends. Traders are, however, still obsessed with macroeconomic data. Over the past three months, the S&P 500's average realised volatility on days when the CPI report, the government's monthly jobs data and Fed rate decisions are released has been nearly 42 per cent, compared with a reading of 29 per cent on all other sessions, according to data complied by Asym 500. After fund managers reduced cash holdings and invested heavily in US equities over the past two months, the boom has left demand for loss protection muted. The market is vulnerable to being caught off-guard if CPI comes out hotter than expected, Wealthspire's Pursche said. 'I fear many are not paying attention to these threats because most are thinking 'everything will be fine,' but they're ignoring warning signs,' Pursche added. Still, rules-based and discretionary investors remain moderately underweight equities, data compiled by Deutsche Bank show. That means traders still have dry powder to buy stocks in the weeks ahead. One key challenge for investors will be assessing the lagging impact of tariffs on inflation, which has money managers split on where stocks are headed in the coming months. 'We've become desensitised with inflation because everyone is betting that it will take months before tariffs will flow through into the economic data,' said Brooke May, managing partner at Evans May Wealth. 'But if there's a hot CPI print, it could lead to another sell-off in stocks, though will investors use any drawdown to keep buying the dip, or sell?' BLOOMBERG
SBS Australia
01-05-2025
- Business
- SBS Australia
Trump blames Biden for US economy's shrinkage since he assumed the presidency
One hundred days into his presidency, Donald Trump has received a less-than-glowing report card from his rivals - and the economy. The United States economy had been predicted to grow 0.3 per cent. Instead, it shrank by the same figure, signalling the first decline in three years. When the news broke, senior Democratic Leader Chuck Shumer [[shoo-mer]] had strong words for the President. "Today's new economic news showed that Donald Trump is running the American economy the way he ran his family business - into the ground." That rebuke came as President Trump used a Cabinet meeting to pin the poor economic performance to the policies of his predecessor. He described the lowered growth as a removal of what he called "distortions" of the figure in previous quarters, including high government spending. "And I have to start off by saying that's Biden, that's not Trump, because we came in on January, these are quarterly numbers, and we came in and I was very against everything that Biden was doing in terms of the economy, destroying our country in so many ways." But the lowering of the U-S G-D-P is linked to a surge in imports ahead of a new policy: the escalating tariffs placed on imported goods across industries, from almost all countries. Economists say businesses have used the past quarter to buy up goods, as an unpredictable trade policy takes effect. The President has imposed a 90-day pause on steep tariffs on imports, after dozens of countries approached his administration for reprieves. The Wealth Alliance Managing Director, Robert Conzo, says Mr Trump must follow through with negotiations, fast. "What he has is this 90-day reprieve, which is ticking down. He has to get some deals under his belt. That message has to come clear that countries not only came to the table, but they actually did negotiate." One country does not have a seat at the table - China. 150 per cent tariffs have been levelled on all Chinese imports and they have been excluded from the 90-day reprieve given to other trading partners. Speaking to his Cabinet, Mr Trump downplayed concerns over price rises on goods. He said the U-S is doing well with tariffs, but China - which he calls the "Chief ripper-offer of the United States" - is not. "Look, right now, and I told you before, they're having tremendous difficulty because their factories are not doing business. They made a trillion dollars with Biden - a trillion dollars, even a trillion-one with Biden selling their stuff. Much of it we don't need. You know, somebody said, oh, the shelves are going to be open. Well, maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more than they would normally." The NASDAQ - which represents the top 3,500 U-S stocks - dipped on the back of the news, before recovering to end Wednesday higher than it opened. Economists report the country is inching closer toward a possible recession but the broader picture remains uncertain. That is because the latest data is a mixed bag; consumer spending slowed to 1.8 per cent - its weakest rate since mid-2023, it powers two-thirds of the economy and represents American households cutting back on household purchases. The lacklustre figure combines with lower-than-expected employment numbers and the negative G-D-P. Government spending dropped to minus 5.1 per cent ((-5.1%)) during the first three months of Donald Trump's term; in the previous quarter it hit four per cent growth. But businesses bought big; investment grew almost 10 per cent in the quarter [[9.8%]] ahead of price rises from expected tariffs. Private U-S investment boomed in the past three months, too, hitting its highest rate since late 2021. U-S strategists are reporting on the news, which we've voiced. Mark Hackett, chief market strategist at Nationwide, says the contradictory data muddied an already-unclear economic outlook. "It's more frustration for the long-term investor because you're not getting a really good read on what the actual economy is doing. We need to know what's happening in the economy ... and reports like this don't give us a lot of useful data on that." Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, points to the uncertainty around trade. "There's just massive distortion and volatility in the economic data right now because of the pull-through of tariffs. The GDP report doesn't help shake off this economic contraction fear that has been gripping markets." Peter Andersen, founder of Andersen, Capital Management in Boston, agrees. "This period where tariffs are trying to be negotiated and acknowledged by the market makes things extremely difficult to model and predict." Meanwhile, the President is urging patience for his tariffs plan. Hosting bosses of major companies at the White House, he listed big brands who have promised to do business in the U-S, including Novartis, G-E Aerospace, Toyota and Hyundai. And as a volatile Wall Street reacts and rebounds off the latest reports, a coup from Kyiv. Ukraine has signed a 10-year, US-Ukraine reconstruction investment fund, which would see the U-S pocket half the revenue from new rare earth mining licences in Ukraine. In exchange, Ukraine has a measure of assurance of continued U-S support in its ongoing war with Russia. The deal still needs to be ratified by the Ukrainian Parliament before it can take effect.
Japan Times
28-04-2025
- Business
- Japan Times
Trump promised a markets boom. 100 days in, stocks have only seen damage
Donald Trump promised Americans a "boom like no other' if they elected him president. But based on the stock market's performance during his first 100 days in office, it depends on what you mean by "boom.' The action certainly has been explosive — just not in the way investors were hoping. By April 30, Trump will have closed out his first 100 days in office. Despite last week's rally, the S&P 500 Index is down about 8% since his inauguration and on track for its worst run during a president's first 100 days since Gerald Ford in 1974, following Richard Nixon's resignation. It's a U-turn few on Wall Street saw coming after two straight years of over 20% gains and what was expected to be a pro-growth agenda. Instead, markets swung wildly as Trump slapped tariffs on basically every country where U.S. companies operate — and then suspended some, carved out exceptions for certain industries, and ratcheted up the trade war with China. The disruptions, combined with the administration's aggressive push to deport undocumented workers and its mass firings of federal employees, unnerved investors and sent the S&P 500 spinning into its seventh-fastest correction since 1929. "It was an extreme, for-the-textbooks, systematic risk in its purest form,' said Mark Malek, chief investment officer at Siebert. "The volatility has been wholly different from anything we have experienced in the past, and it indiscriminately spread through all sectors and asset classes like a wildfire, constantly being fueled by random sound bites and shifting policy moves.' Traders went all in on the "America First" bet immediately after Trump's election victory, sending the S&P 500 to its best post-election gain ever. The thinking was the administration would loosen regulations and lower taxes, which would boost growth. But the president has, instead, focused on his tariff fight, sending markets spinning with each new announcement of levies on trade partners. "What he was elected for was 'Make America Great Again,' the 'economy will be booming,'' said Eric Diton, president and managing director at Wealth Alliance. "But all the trade uncertainty has actually detracted from economic growth.' Whiplash after whiplash The S&P 500 lost more than 10% in two sessions earlier this month after Trump imposed the steepest U.S. tariffs in a century on April 2. It then soared a week later when the administration reversed direction and delayed most of the duties for 90 days. Stocks have bounced around since then, but traders have struggled to find a direction. "It was whiplash after whiplash after whiplash,' said Dave Lutz, macro strategist at JonesTrading and a 30-year Wall Street veteran. And Wall Street is bracing for more. Speculators just widened their net-short position on S&P 500 futures to the highest since December, according to the latest CFTC data released on Friday. A trader works on the floor of the NYSE at the opening bell on April 21. | AFP-JIJI The declines in equities since Trump's inauguration on Jan. 20 have been led by the consumer discretionary and information technology sectors, with footwear company Deckers Outdoor, semiconductor equipment manufacturer Teradyne and specialty chemicals producer Albemarle among the biggest losers. Other companies with struggling share prices include Elon Musk's electric-vehicle maker Tesla, United Airlines Holdings, Delta Air Lines, and Norwegian Cruise Line Holdings. Consumer goods makers and the chip industry are grappling with the risk of higher costs from new tariffs, while travel companies are expected to feel the pinch as consumers tighten their purse strings if the economy starts struggling. "There is irreparable damage done,' Malek said. "Trend and momentum are extremely important in the stock market and they really reflect investor sentiment. Unfortunately, these things are very hard to turn back around when they go down so fast.' Equity positioning remains near the bottom of its historical range, according to data from Deutsche Bank AG, whose strategists last week threw in the towel on predictions for a large advance in the S&P 500 this year. Meanwhile, Bank of America strategists warned on Friday that the conditions for a sustained stock market rebound are missing and encouraged investors to sell into the most recent rebound in U.S. equities and the dollar. Foreign investors already got the memo and have been dumping American shares since the start of March, according to Goldman Sachs. Cloud of uncertainty There's one word money managers use to sum up Trump's trade plans and their impact on the stock market: uncertainty. "We still don't know what it is that we are trying to achieve with Vietnam, or Canada, or Europe, and we have no idea what success looks like,' said Paul Nolte, market strategist and senior wealth manager at Murphy & Sylvest Wealth Management. This lack of clarity has prompted investors to turn defensive, wary of headfakes and preferring to wait on the sidelines until there are more concrete policy details. But that's not the only risk. The NYSE Wall Street entrance on April 7 | REUTERS "We need to get past this cloud of trade policy uncertainty as it's holding back businesses from capital expenditures and hiring plans and may also dampen consumer spending,' said Eric Sterner, chief investment officer at Apollon Wealth. A tariff-induced slowdown in economic activity, and the higher costs associated with it, will crimp earnings growth, according to David Lefkowitz, head of U.S. equities at UBS' global wealth management arm. He expects profits for S&P 500 companies to be flat this year. The first-quarter earnings season is showing how Corporate America is equally in the dark. Companies are withdrawing guidance, lowering earnings outlooks, and resorting to unusual solutions to manage the swings. For example, United Airlines issued two sets of profit forecasts, one if everything stays stable and the other if the economy falls into a recession. "If you look at recessions, they are started by corporations, when they stop hiring people, then start firing people, then stop spending money,' said Siebert's Malek. He's looking for opportunities in high quality growth stocks that have been beaten down, but added that he's buying cautiously. The latest Bloomberg survey of economists showed that forecasters anticipate the trade war to hit economic growth this year and next, as prices rise and consumer spending takes a hit. Jim Worden, chief investment officer of Wealth Consulting Group, is looking at health care, financials and consumer staples shares, as well as stocks that have been unnecessarily crushed in the selloff. Meanwhile, James Abate, head of fundamental strategies at Horizon Investments, said the firm is picking up regional banks stocks. This is "a bad environment for index participation, but potentially an opportunity for active managers to prove their mettle,' he said. Still, Wall Street is approaching the stock market with a sense of caution. After all, who knows what the next 100 days will hold. "We are not past the turmoil, and I don't think we can pass the turmoil anytime soon,' Wealth Alliance's Diton said. "Trump is who he is.'
