Why markets could be higher in two weeks. So maybe DON'T PANIC. Here's what you need to know about the S&P500, ASX200, potential top performers, how to read the tea leaves
Last nights stronger than expected US retail sales data (following on from the stronger than expected jobs data) is yet another reminder that the economy is stronger than thought. And maybe the Fed does not even need to cut rates at all.
We have been saying markets would probably rub out rate cut expectations. It's happening now. And you might expect more steam to come out of markets before markets likely resume their rally. This is a timely reminder that markets (stocks) don't go up in a straight line. Also note that investment managers will likely be buying into pullbacks, buying those quality stocks they like at cheaper prices.
I have interviewed a lot of investment managers and CEOs in my career and most of them have become wealthy in their own right and for clients, by investing for the long term. Rome was not built in a day, neither should your investment portfolio. By waiting for market pull backs to buy stocks and investing in companies with strong cashflows as well as steady and growing customers, you too could reap a fortune in the long run.
But for now... please note, markets seem to be blowing off steam...so maybe...don't panic Here is what you need to know and how I red the tea leaves.
- the $S&P/ASX 200(.XJO.AU$ ASX200 trades at 7,619, down 3.6% from its high. Market consensus sees ASX200 $XJO +3.5% in 12months, with stocks like lithium company $Arcadium Lithium(ALTM.US$, payment giant $Block Inc(SQ2.AU$ , and met coal group $Coronado Global Resources Inc(CRN.AU$ to rise 51%+ each.
- the #SPX S&P500 trades at 5,062, down 3.9% from its high. Market consensus sees S&P500 $SPX+12.7% in 12months, with stocks like insurance group $Globe Life(GL.US$ , and discretionary names $Warner Bros Discovery(WBD.US$, $Carnival(CCL.US$ to rise the most, to rise 117%, 62%, 52% respectively.
Markets are just blowing off steam...so maybe don't panic if you read the tea leaves.
$S&P 500 Index(.SPX.US$ S&P500 options now indicate market sentiment is weak with more bets the market would be lower on options expiry April 19. There are 35,876 contracts for the market to fall vs 29,823 contracts for it to rise. But in two weeks time, there are more bets for the market to be higher.
Simply put, this means, you might expect markets to fall, maybe on Friday and Monday as options need to be exercised. And then the market could potentially head higher. This would likely be supported by company earnings season, given we could be primed for good news surprises (as the earnings expectation bar is so slow) and - earnings beats should support the market.
But why are we saying markets could head lower this week...and why are sophisticated traders using options to express that view?
Well inflation is proving to be sticker, and the US economy is yet again growing stronger than expected. As we have been warning, this would likely occur. Now the Fed said it's not in any rush to cut rates. And bobs your uncle and fanny is your aunty. Now bets are being rubbed out for the Fed to cut rates. So... markets will need to price out (remove) rate cut expectations. **
As we can see below, there is now less than a 50% chance of a cut in September and less than a 50% chance of a cut in December. But if you listen to what US investment managers and money makers are saying, they're saying maybe the Fed will cut once, or not at all. The risk to markets is, that the US economy again blows off stronger economic prints, then bets of a cut, could drop even further. And that could again, cause markets to correct.
S&P 500 consensus estimates suggest the market will be 13% higher in 12 months.
ASX200 consensus estimates suggest the market will be 3.5% higher in 12 months.
We have been speaking about a potential pull back for some time now. Here is one of my media interivews from Ausbiz, about a likely pull back.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
Investment strategist. I dissect markets and share investment opportunities. I am featured on TV & radio etc
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THEWIZARD : Rate cuts, earnings ... Small things.
Middle East events and the actions of their usual groups of instigators - These are the real deals.
Will check back on this post, in 2 weeks and 2 months for the reality of the market.