{"id":39092,"date":"2023-07-22T10:23:05","date_gmt":"2023-07-22T14:23:05","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/these-stock-watchers-nailed-the-markets-melt-up-but-now-theyre-bracing-for-a-fall-heres-what-to-watch\/"},"modified":"2023-07-22T10:23:07","modified_gmt":"2023-07-22T14:23:07","slug":"these-stock-watchers-nailed-the-markets-melt-up-but-now-theyre-bracing-for-a-fall-heres-what-to-watch","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=39092","title":{"rendered":"These stock watchers nailed the market\u2019s melt-up, but now they\u2019re bracing for a fall. Here\u2019s what to watch."},"content":{"rendered":"

Similar to the buzzy intrigue behind the mashup viewing of the tonally different Barbie and the Oppenheimer movies, the market is rallying to its own oddball double feature: higher interest rates and economic uncertainty. <\/p>\n

What could go wrong? That is what some stock-market specialists are wondering. <\/p>\n

\n

On Friday, the Dow Jones Industrial Average
\n DJIA,
\n -0.13%<\/bg-quote>
\n notched a 10th consecutive positive close, marking the longest win streak for the blue-chip benchmark since Aug. 7, 2017, according to the team at Dow Jones Market Data. <\/p>\n

To say that it has been a remarkable run-up is, perhaps, an understatement for some assets. Carvana
\n CVNA,
\n -2.38%<\/bg-quote>,<\/span>
\n a left-for-dead used-car retailer, whose stock had surged by 1,100% at its peak so far this year, before retreating somewhat, is a perfect example of the fervor surrounding risky assets.<\/p>\n

It feels as if buyers are crazed, even as the Federal Reserve is set next week to raise interest rates a quarter of a percentage point, marking the 11th time (since March of 2022) that the central bank has increased benchmark interest rates after pausing in June to assess the inflation backdrop. <\/p>\n

Read:\u00a0<\/strong>U.S. inflation slows again, CPI shows<\/p>\n

The Wall Street Journal this week described the investing environment as hitting a \u201cfever pitch\u201d with \u201crisk-on\u201d assets the most popular they have been since late 2021\u2014right before stocks entered the longest bear market in decades.\u201d<\/p>\n

The surprising velocity at which the bearish miasma from earlier this year has dissipated is also noteworthy, considering the concerns around stubbornly high inflation and incessant fear of a Fed-induced recession. <\/p>\n

At Friday\u2019s close of trade, the Dow was off a mere 4.3% from its January record high reached in 2022, the S&P 500 is about 5.4% shy of its Jan. 2, 2022 closing high. Soberingly, the tech-weighted Nasdaq Composite Index
\n COMP,
\n -0.22%<\/bg-quote>
\n remains off nearly 13%.<\/p>\n

Now, however, may be time to take profits, some pros seem to caution.<\/p>\n

Stifel\u2019s chief equity strategist\u00a0Barry Bannister told MarketWatch via email that the lagged effects of the Fed\u2019s barrage of tightening, combined with stingy lending \u2014 among other factors \u2014 would likely be triggers for a market pullback, if not an economic retrenchment. <\/p>\n

\u00a0\u201cIn total, those leading indicators will keep economic growth soft,\u201d Bannister said, also referencing flagging manufacturing. <\/p>\n

In large part, that is why he\u2019s calling for sideways action or a possible retreat of about 3% for the S&P 500
\n SPX,
\n +0.03%<\/bg-quote>
\n to 4,400. <\/p>\n

Bannister\u2019s recent call is worth heeding because he nailed the first part of a two-pronged prediction for 2023, when he referred to it as a year of two halves.<\/p>\n

Back in January, he wrote: <\/p>\n

2023 may be a year of 2 halves, with the S&P 500 peaking mid-2023. The S&P 500 in late 2023 may give back some or all of 2023 gains. <\/p><\/blockquote>\n

The Stifel analyst sees a heightened recession risk for 2024. <\/p>\n

Meanwhile, Michael Gayed, who also runs the Lead-Lag Report and is a portfolio manager at Tidal Financial Group, warned of the perils of investors\u2019 rabid buying, in a recent report. Similar to Bannister, he also predicted a strong first half of 2023 followed by a retreat in latter part of the year. <\/p>\n

Jacques Cesar, a former managing partner at Oliver Wyman who now works on market valuation for the firm, shared a similar sentiment to those two\u2026but with some nuances, in an interview with MarketWatch. <\/p>\n

\u201cRight now, we are in a melt-up,\u201d he said. \u201cAnd Rule No. 1 about a melt-up, don\u2019t short a melt-up,\u201d he said, referring to making bearish bets that the market will fall soon.<\/p>\n

\u201cIs the market too high? Yes,\u201d Cesar said. \u201cBut is there a signal to short? Absolutely not,\u201d he said. <\/p>\n

The market valuation pro, says investors find themselves in a Russian nesting doll of market conditions: \u201cWe are in a sub-cyclical bull in a cyclical bear in a suprasecular bull.\u201d <\/p>\n

His assumption is that the current melt-up in markets will reverse but cautions that predicting the precise timing is impossible. <\/p>\n

Useful signs to look for will be decelerating market pricing and then reversing coupled with trading volume picking up as stocks slide. <\/p>\n

Cesar also predicts a pullback in 2024, if not a recession, and said that downturn will be followed by a return to a suprasecular, long-term bull run in 2025. <\/p>\n

Although, there won\u2019t be an apparent trigger for the market and economic slump, Cesar says eroding consumer savings. built up during the pandemic, will be depleted by the end of 2023. <\/p>\n

As for inflation, Cesar says it has been dropping like a stone and pointed to the New York Fed\u2019s Underlying Inflation Gauge as an early (but perhaps unheeded) signal that pricing pressures have been steadily receding. <\/p>\n

So much so that disinflation, a slowdown in the rate of inflation, may be a corporate concern in coming quarters. <\/p>\n

He said companies, which enjoyed healthy pricing power during the inflationary period, will be hurt in the short-term by disinflation in the short term. <\/p>\n

\u201cAs you go into disinflation, the margins get squeezed,\u201d he said. <\/p>\n

Bannister says oversold parts of the market like banks
\n KRE,
\n -1.26%<\/bg-quote><\/p>\n

KBE,
\n -1.20%<\/bg-quote>,<\/span>
\n industrials
\n XLI,
\n -0.47%<\/bg-quote>
\n and basic materials
\n XLB,
\n +0.01%<\/bg-quote>,<\/span>
\n might be better opportunities for investors in the third quarter than growth-oriented tech plays like Tesla
\n TSLA,
\n -1.10%<\/bg-quote>,<\/span>
\n for example. <\/p>\n

In the end, bulls (and bears), similar to moviegoers are wading back into a market that had been written off at the start of the year. The major cinematic question? Will they will be partying with Barbie or getting blown up with Oppenheimer? <\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Similar to the buzzy intrigue behind the mashup viewing of the tonally different Barbie and the Oppenheimer movies, the market is rallying to its own oddball double feature: higher interest rates and economic uncertainty. What could go wrong? That is what some stock-market specialists are wondering. On Friday, the Dow Jones Industrial Average DJIA, -0.13% […]<\/p>\n","protected":false},"author":1,"featured_media":39093,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-39092","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nThese stock watchers nailed the market\u2019s melt-up, but now they\u2019re bracing for a fall. 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