Snap a chart of the S&P 500 this morning, and you’ll see the index well off its recent high mark of $3000 – meanwhile, the Dow Jones remains sunken from $26,900 Friday afternoon to around $26,800 Monday ($26,709 at press time.)
SP500 is struggling to reach its previous close at $2,975.95, clawing up from around $2,965 at open.
Citing drops in European stocks overnight, Bloomberg reported before the bell that the S&P is “poised for a third session of drops,” and investors are buckling in for what might be a wild ride. What this analysis misses is that the S&P is still riding on top of one month and six months charts, and a razor’s distance from all-time highs around $3,000. So it’s not “tanking” – just down a bit. Still, some investors are getting decidedly skittish.
A video segment with Peter Dixon of Commerzbank starts with an anchor referring to ‘warning shots’ on the market and asking about the safety of holding U.S. and European bonds.
Dixon agrees that these bonds are “treacherous” to hold, and that there’s likely to be some sort of “snap back” in the bond market over upcoming Fed comments.
However, he indicated the market is probably correct in pricing in three rate cuts, although when those will happen and how large they will be is a matter of uncertainty. “Will they, won’t they” on ate cuts has been making big headlines for days now…
Asked about what investors should do on today’s market, Dixon emphatically suggested avoiding equity markets.
“I think a lot of investors who are already in the market are thinking that it’s time to get out,” Dixon said, urging investors to second-guess an impulse to go up the down staircase now and into equities that stand to get battered, if not this week, then later.
As for the underlying reasons for an upcoming bear market, or even a recession, the primary culprit is obvious – ongoing fears over trade conflicts that have expanded beyond US/China relations to include unlikely counterparties like Mexico and the European Union.
Against this backdrop, the market may very well, as the Bloomberg commentators suggested, throw a “bond market tantrum,” not to mention other gyrations if the investment community the doesn’t get the rate cut that they feel they need, and that the president has been demanding for some time now.
As Dixon says, it may be time for investors to consider some form of alternate holdings for the duration.