### Summary
The S&P 500 returns over the last one, five, and ten years are only slightly above their long-term averages, suggesting that the stock market is not unanchored from reality. However, the performance of long-term US Treasuries has been poor, with even 10-year Treasuries resulting in losses over the last five years. Slower economic growth may be on the horizon, but it remains uncertain whether it will be enough to bring down inflation rates.
### Facts
- The S&P 500 returns over the last one, five, and ten years are only slightly above their long-term averages.
- The performance of long-term US Treasuries has been weak, resulting in losses for investors even after accounting for coupon payments.
- Slower economic growth may be on the horizon, but it remains uncertain if it will bring down inflation rates.
- The nature of the stock market rally suggests that investors are still searching for buying opportunities rather than thinking about selling.
- Energy, industrials, and financials have become favored sectors, while technology stocks have started to decline.
- The Chinese economy is struggling, with retail sales and industrial production growth slowing down.
- The Federal Reserve has expressed concerns about inflation but also noted downside risks to the economy.
###
US bond-market selloff continues as resilient economy prompts investors to anticipate elevated interest rates even after the Federal Reserve finishes its hikes, leading to a 16-year high in 10-year yields and increased inflation expectations.
A stock market rally is likely to occur in the near future, as recent data indicates that a bounce is expected after a period of selling pressure, with several sectors and markets reaching oversold levels and trading below their normal risk ranges. Additionally, analysis suggests that sectors such as Utilities, Consumer Staples, Real Estate, Financials, and Bonds, which have been underperforming, could provide upside potential in 2024 if there is a decline in interest rates driven by the Federal Reserve.
Fundstrat's head of research, Tom Lee, suggests that the August sell-off in stocks presents a great opportunity for investors to buy the dip before stocks resume their rally, despite near-term downside risks influenced by China's weakening economy and rising interest rates.
Volatility and rising interest rates have caused a pullback in U.S. equity markets, particularly impacting the technology sector, but investors should not panic as pullbacks are normal in a bull market and present buying opportunities. China's deteriorating economic conditions and weak seasonal trends have also contributed to the selling pressure. However, support is expected to be found in the 4,200 to 4,300 range in the S&P 500, and the Federal Reserve's likely end to the rate-hiking cycle and improved earnings should provide fundamental support for investors to buy the dip.
The stock market has been riding high in 2023, but recent market trends and uncertainties about interest rates and inflation have led to a pullback in August, leaving investors unsure about the future direction of the market. It is advised to stick to a long-term investment plan and remain focused on investment objectives and risk tolerance.
HSBC's chief multi-asset strategist advises against investors getting tempted by the recent broad-based sell-off, noting that US equities have a bigger recovery potential given their unchanged view on growth, inflation, and fundamentals.
Bitcoin's recent correction and regulatory news have caused a wave of selling, but analysts from JPMorgan believe that the sell-off may be nearing its end phase, with limited downside predicted for the crypto market in the near term.
The fundamentals and technicals support a demographically driven bull market in stocks until 2034, but potential risks include inflation, interest rate-induced debt crisis, and refinancing problems, which could lead to a drop in the stock market. Comparing the S&P 500's score in August 2023 to historical patterns, the market seems confident and not indicating an imminent debt crisis or severe recession. Credit spreads also appear tame compared to previous crisis periods. However, the article notes the possibility of abrupt changes in the market and encourages openness to a wide range of outcomes.
Despite the volatility in August, U.S. equities are still having a solid year with gains in the Nasdaq of over 34%, but caution is advised due to stretched valuations and the possibility of sell-offs in the market amidst global economic troubles and stagflation scenarios in Europe.
The top 25 stocks in the S&P 500 outperformed the index in the 35th week of 2023, with tech stocks leading the way, suggesting a return of bull markets and a decrease in recessionary fears; however, market health, the balance between developed and emerging markets, and investor behavior still need to be addressed. Additionally, market correlations have dropped since COVID, and on "down-market" days, correlations are 5% higher than on "up-market" days. Market correlations also decrease during upward economic cycles. Retail investors are showing a preference for dividend-driven investing and investing in AI stocks. The global subsidies race is impacting valuations in tech and leading to supply chain inefficiencies. As a result, there are opportunities for diversification and investment in a wide variety of equities and bonds.
Large institutional traders such as Jump Trading, Wintermute, and Abraxas Capital deposited significant amounts of BTC, ETH, and ARB tokens to crypto exchanges during Monday's market sell-off, potentially signaling their intent to sell or providing liquidity.
Equities edge down as inflation increases more than expected, mortgage applications reach lowest level since 1996, Apple's iPhone updates disappoint investors, UBS initiates coverage on Ford with a buy rating, China denies ban on government workers using foreign-branded devices, JPMorgan downgrades Oracle, antitrust lawsuits against Google begin, and Arm Holdings' IPO is expected to be the largest listing of the year.
Investors are becoming increasingly cautious about the US stock market and the economy as 2023 draws to a close, leading to a more defensive investment approach by Wall Street banks and experts warning of potential pain ahead.
Despite Beijing's efforts to revive Chinese markets, key indicators show that traders are continuing to sell off their equity positions, resulting in the lowest levels of Chinese stocks in about 10 months and a significant withdrawal of global funds from the market.
Investors are selling and bringing the market down due to reasons like interest rates, macroeconomic weakness, fear of giving up on gains, the Federal Reserve, the political climate, and potential strikes, according to CNBC's Jim Cramer.
Investors withdrew $19 billion from the stock market, the highest outflow of the year, as rising bond yields and uncertainty about interest rates raised concerns of a market bubble, according to Bank of America, warning that the situation could lead to a difficult 2024.
The Federal Reserve's decision to hold interest rates and the possibility of rates remaining higher for longer may have triggered a sell-off in the US equities and cryptocurrency markets, with risk assets typically underperforming in a high-interest-rate environment.
The Federal Reserve's updated projections suggest a potential shift in focus towards increased vigilance on unemployment and GDP growth, which may impact inflation; the US economy is expected to face significant constraints in 2024; active stock picking is recommended over passive index investing as valuations for the S&P 500 remain fair but not necessarily cheap; investment opportunities lie in tech product category expansion, penetration rate, and customer growth for struggling small and mid-cap companies, as well as in e-commerce; overall, investors should research alpha opportunities and be selective in their portfolio positioning for 2024.
Higher interest rates are causing a downturn in the stock market, but technological advancements in recent decades may provide some hope for investors.
A majority of Wall Street investors are concerned about the stock market's gains in 2023 and believe that it could retreat further as the risk for a recession increases.
The recent selloff in the Treasury market may present a good investing opportunity due to the current stage of the cycle, according to Andrew Szczurowski of Morgan Stanley Investment Management, however, it is also causing fear among investors.
A potential government shutdown is causing some investors to worry, contributing to the stock market's recent dip, but experts believe the impact on asset markets is already priced in, while previous shutdowns have shown to have little long-term effect on stocks.
Investors are becoming increasingly concerned about sustained high interest rates, with the bond and foreign-exchange markets already showing signs of adjusting, and if stock markets do not follow suit, the coming months could be particularly challenging.
Investors are concerned about the recent stock market decline due to surging oil prices, rising bond yields, and worries about economic growth, leading to a sell-off even in major tech companies and potentially impacting President Biden's approval ratings.
Pending home sales in the U.S. plummeted due to high mortgage rates, deterring buyers and sellers from making deals, exacerbating the ongoing inventory shortage and driving up home prices.
Fidelity Investments' global macro director believes that a recession could lead to a significant rally for Bitcoin, with the potential for prices to reach $96,210 by the end of 2025 if interest rates decline. He also suggests that Bitcoin's correlation with equities has decreased, making it a potential source of uncorrelated returns in the next market cycle.
The selloff in Treasuries has intensified as yields reach multiyear highs on speculation that the Federal Reserve will continue raising interest rates, causing losses for investors and impacting stock valuations.
Stocks continued to sell-off due to concerns over labor market data, ongoing labor strikes, surging oil prices, and fears of the Federal Reserve raising interest rates, with the bond market being seen as the main driver behind the market action.
The sell-off in US Treasuries has caused shockwaves in global financial markets, leading to a decline in Indian stocks and sparking caution among investors ahead of the Reserve Bank of India's Monetary Policy Committee meeting, with expectations that the key repo rate will remain unchanged.
Stocks are selling off due to concerns about a recession, but Goldman Sachs analysts have identified 24 top stock picks that they believe will provide strong risk-adjusted returns.
The sell-off in Treasury bonds with maturities of 10 years or more, which has caused yields to soar, is surpassing some of the most severe market downturns in history, with losses of 46% and 53% since March 2020, comparable to stock-market losses during the dot-com bubble burst and the 2008 financial crisis.
Equity markets are prone to boom-and-bust cycles, and a recent study suggests that valuations, macroeconomic factors, and technical variables can help predict large drawdowns in these markets, with the US acting as a fundamental driver of global equity market fragility. The research also highlights the importance of expensive valuations in predicting lower future returns and increased market fragility, indicating the need for caution among investors. Increasing allocations to international equities and small-value stocks may help mitigate these risks. However, it's important to approach forecasts with skepticism and consider a wide range of potential outcomes.
Investors are wary of rising Treasury yields and may be ready to sell equities if yields exceed 5%, which could compound selling pressure and potentially lead to losses in stocks, according to Bank of America's Michael Hartnett.
Wall Street executives have warned investors that any significant gains in dealmaking profits may not occur until 2024, as five big banks reported a 2% drop in investment banking fees and a lack of optimism for the future.
