The clock may be ticking, but risk-on not yet short on time
Dow up ~0.9%, S&P 500 modestly green, Nasdaq dips
Energy leads S&P 500 sector gainers; Tech weakest group
Euro STOXX 600 index up ~0.7%
Dollar off; gold up; crude up ~1%; bitcoin down >5%
U.S. 10-Year Treasury yield edges up to ~4.27%
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THE CLOCK MAY BE TICKING, BUT RISK-ON NOT YET SHORT ON TIME
Asset markets continue to face various crosscurrents.
Indeed, in his latest "Deliberations," Bob Doll, chief investment officer at Crossmark Global Investments, says that the U.S. economy is showing, and GDP estimates for the current quarter are mixed.
"Although the outlook is still positive, recent worries about a deteriorating U.S. consumer sector have surfaced. Non-U.S. developed economies remain mixed. Central banks are embracing further easing in inflation. The notable exception is the U.S., where inflation has firmed slightly this year and remains well above the Fed’s 2% target," writes Doll.
That said, Doll notes that stocks and bonds remain "reasonably well bid" given a good corporate earnings outlook and the prospect of Fed rate cuts at some point in the future.
As Doll sees it, equity leadership remains uncomfortably narrow and focused on secular growth plays because investors are uncertain about the durability of the economic cycle, and thus lack the conviction to bet on lagging equity markets and sectors, especially outside the U.S.
Doll does believe a rotation out of the U.S. mega-cap “tech” shares awaits investors gaining conviction that the global economic expansion is both broadening and rolling along at a healthy clip. Alternatively, he says that a weakening economy would likely cause across the board earnings estimate cuts, creating risk asset weakness.
Doll's bottom line is that risk-on will likely persist until after developed market bond yields resume climbing, which he says still doesn't appear to be an imminent threat.
"Longer term, the lifting of the Fed’s estimate of the long-run neutral rate is bond-bearish. Counter to that, in the near/intermediate term is further evidence of economic slowdown in the U.S.—not yet far enough or long enough for earnings estimates to be cut—stay tuned," writes Doll.
(Terence Gabriel)
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FOR MONDAY'S EARLIER LIVE MARKET POSTS:
FOREIGN DEMAND, POWERED BY CHIPS, RECOVERING DESPITE STRONG DOLLAR - CLICK HERE
U.S. INDEXES GAIN, BUT TECH, CHIPS DRAG - CLICK HERE
MARKET FOCUS SHIFTING TO GROWTH FROM INFLATION - CLICK HERE
S&P 500 INDEX: HITTING A WALL? - CLICK HERE
TWITCHY FX TRADERS ARE BACK ON YEN WATCH - CLICK HERE
GOOD ENTRY POINT TO BUY EU EQUITIES IN H2? - CLICK HERE
BARCLAYS MODEL POINTS TO MONTH-END DOLLAR SELLING - CLICK HERE
AU REVOIR, FRENCH EXPECTIONALISM - CLICK HERE
DRIVE TIME - CLICK HERE
CAUTIOUSLY HIGHER - CLICK HERE
ON ALERT FOR YEN INTERVENTION, US INFLATION - CLICK HERE
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