Latest news with #strategists
Bloomberg
a day ago
- Business
- Bloomberg
JPMorgan Warns of Stocks Complacency as Earnings Outlook Dims
Signs of stock-market complacency are emerging as the searing equities rally coincides with an acceleration in earnings downgrades, according to JPMorgan Chase & Co. quantitative strategists. Stocks have bounced back from April's slump at an even faster pace than after the Covid pandemic, sending the MSCI World Index and many regional benchmarks to record highs. At the same time, consensus data shows downgrades outpacing upgrades sharply in global earnings revisions, the JPMorgan team led by Khuram Chaudhry said.
Bloomberg
2 days ago
- Business
- Bloomberg
Japan's Trade Deal a Positive Surprise for Markets, Analysts Say
Japan's trade deal with the US is a positive surprise for investors, giving a welcome bit of good news to a country currently gripped by political uncertainty, say strategists. US President Donald Trump said he had reached a trade deal with Japan that would set US tariffs on its goods at 15%, a relative reprieve from earlier threats of 25% tariffs. The deal came just days after the party of Prime Minister Shigeru Ishiba failed to win a majority in an upper house election, raising questions about how long he will remain in power.
Yahoo
3 days ago
- Business
- Yahoo
Stocks are at records. Investors should keep an eye on 5 things that could break the rally.
The steep rally in stocks faces big risks through the rest of the year, HSBC said. In a note, the bank highlighted five warning signs for investors to watch out for. Strategists said one risk factor, investor sentiment, was already flashing a "strong sell signal." The stock market is on a record-breaking rally, but investors are approaching some big hurdles they'll have to clear through the rest of this year if they want the gains to keep coming. Strategists at HSBC Global said on Monday that they see a handful of key risks facing stock prices through the second half of 2025. The risk factors could jeopardize the market's post-Liberation Day rally, the strategists wrote, adding that "there's an expiration date to our bullish stance — the question is where we could be wrong and therefore what we will have to look out for in terms of downside risks." Here are five things the bank says investors should monitor. 1. The market returns to the "Danger Zone" The "Danger Zone" is when US Treasury yields rise past a certain threshold that's painful for stocks. Higher yields globally also jeopardize the carry trade in markets, which is where investors borrow cheaper currency and covert it to dollars to invest in US assets. Turmoil related to the carry trade has most recently been seen amid rising yields in Japan, which sparked an unwind of the yen carry trade and a subsequent sell-off in global markets. The Danger Zone could be reached in two ways, strategists said: Fewer rate cuts. The economy's resilience could cause investors to push out their expectations for Fed rate cuts, driving up yields on the short end. Traders have already pushed out their rate expectations from the start of the year, and are now pricing in around 4-5 rate cuts through the end of 2026, according to the CME FedWatch tool. Inflation from tariffs. Consumer have begun to tick slightly higher in the lastest CPI readings. The June consumer price index report showed that prices for durables grew 0.7% year-over-year in June, the second-straight month of growth after more than two years of annualized declines. The headline number also drifted higher, hitting 2.7%, from 2.4% in May. Hotter inflation gives the Fed less room to cut interest rates, which would also drive yields higher. "This would put us right back into the Danger Zone in UST yields," strategists wrote of a more hawkish rate cut path. "Apart from the USD, we think the only places to hide out would be asset classes such as short-dated credit, value vs growth in equities or gold." 2. Investor sentiment sours HSBC's gauge for short-term investor sentiment and position is now sending a "strong sell signal," with 20%-30% of inputs within the gauge telling investors to sell, strategists said. "We don't think this is the time to pull the plug on risk assets just yet," the bank wrote, pointing to possible positive earnings surprises for companies reporting second-quarter results. "But clearly sentiment and positions are no longer as supportive a factor as it has been in the last three months." 3. The job market weakens A softer labor market is one of the biggest downside risks to economic growth in the second half, strategists said. The job market remains on strong footing overall. The US added 147,000 payrolls in June, more than economists expected, while the unemployment rate unexpectedly ticked lower to 4.1%, remaining near historic lows. But jobless claims could rise higher through late-July, the bank predicted, pointing to factors like the school holiday, several auto factories being shut down, the hurricane season, and "typical seasonal patterns" in the job market. They added that firms could also become more concerned about the impact of tariffs and slow down hiring in the second half. "A marked softening of the labour market could spark expectations for more aggressive rate cuts from the Fed over concerns to its mandate of maximum employment. From a market perspective, a classic risk-off backdrop would dominate, strategists wrote. 4. Markets sour on AI Much of the rally in US stocks this year has been driven by mega-cap tech and semiconductor stocks, which are seen to be the biggest beneficiaries of the AI boom. The Roundhill Magnificent Seven ETF, for instance, has soared 41% from its post-Liberation Day low on April 8. But investors have been growing more concerned with whether companies will be able to keep up the heavy AI spend, HSBC said. Strategists pointed to comments from Fed Vice Chair Michael Barr earlier this year, who suggested that the hype over artificial intelligence could be "overblown." It's also possible that tariffs on semiconductors could be renewed this year, which would hurt the AI trade, they added. "This adds to the growing sense that the tech-led rally may start to lose steam, which is a risk to our positive H2 view." 5. Trump keeps meddling with the Fed Trump has approached the idea of firing Fed Chair Powell a few times this year. If the president follows through — or if Powell were to unexpectedly resign from his post — that could spark another Liberation Day-style sell-off in the market, the strategists said. The market could also see a negative, but more mild reaction if Trump were to announce a shadow Fed Chair, a new Fed Chair named months in advance to suggest where monetary policy might be headed after Powell's term ends next year, strategists speculated. "We would view any unexpected changes at the Fed as initially US asset negative across the board, much in the fashion of how markets reacted in April," the bank wrote. "Markets would likely view this as a challenge to the institutional framework of the United States, likely prompting USD weakness, steeper US Treasury curves, and an initial drawdown in US equities." Markets were jolted last week after several reports claimed that Trump was getting ready to oust Powell from the Fed soon. Trump appeared to refute the reports, saying it was "highly unlikely" he would fire Powell when speaking at the White House last week. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
6 days ago
- Business
- Bloomberg
BofA Says Share of US Stocks in Global Flows Has Plunged in 2025
The share of global equity flows heading to the US has plunged in 2025, strategists at Bank of America Corp. said, as the trade war raises doubts about so-called American exceptionalism. US stock funds attracted just under half of total flows so far this year, compared with 72% in 2024, the BofA team said in a note, citing figures from EPFR Global. Foreign inflows slowed to less than $2 billion in the past three months from $34 billion in January.
Bloomberg
6 days ago
- Business
- Bloomberg
Top Strategists See Trade Woes Curbing Gains for European Stocks
Investors may have to wait for 2026 to see further major gains in European stocks, as worries over damaging trade tariffs take hold in the coming months, according to strategists. The Stoxx Europe 600 Index is expected to end the year at around 554 points, according to the average of 18 strategists polled by Bloomberg, about 2% up from Wednesday's close.
