For a while now, we’ve seen major indices track close to record highs – the S&P 500 and the Dow Jones industrial average are still both within shouting distance of their respective peaks after taking a major haircut in the 2008 financial crisis (and afterward!). However, we haven’t seen these indices rally enough to break up and give us a new bull market that outpaces prior chart activity.
Early this year, we were talking about how Federal Reserve interest rate hike pauses led to some investor confidence. We talked about how after a tense and volatile session of trade uncertainty with China, conciliatory indicators from the two countries seems to mollify investors.
But all of this calm water is getting some scrutiny from analysts.
Even today, experts are looking at what might appear in the future after what some see as healthy activity on the U.S. benchmarks.
The outcome of trade talks between America and China and any developments in Britain’s tortuous exit of the European Union could help determine sentiment from here,” write Rita Nazareth and Sarah Ponczek in a Bloomberg post breaking last night. “The pound turned higher as a Brexit hardliner indicated he’s willing to back Theresa May’s deal, a move that could be a game-changer for the prime minister if others follow suit. Gains across all but one sector helped the Stoxx Europe 600 into the green. Japan’s Topix Index jumped more than 2.5 percent, a day after it had its biggest slide this year. Emerging-market stocks rose.”
Here’s an interesting remark by chief economist Christopher Lowe at FTN Financial: in the same Bloomberg article, Low suggests that there’s not too much backing for some of the rosier numbers we’ve seen lately.
“The market has run quite far in a short period without much economic news supporting it,” Low reportedly writes. “As a result, we are not surprised to see higher yields today. A breather makes sense, and rates could back up further before the rally resumes.”
Further, in an auxiliary video, Eleanor Creagh, market strategist at Saxo Capital Markets talks about the potential for a market correction, albeit one that might come on with quite a bit of subtlety.
“For investors looking at the yield curve now, it’s more of a flashing amber alert signal rather than an overt alarm signal.” she said.
Keep an eye on not just the indices, but the underlying market conditions. Hedging is always a good idea – especially when you have this kind of sentiment spreading publicly.