Stock Market

Why this sideways stock-market action will be ‘resolved to the upside’, according to one analyst

It’s been a largely sideways move for the stock market since early June, but one Wall Street bull is telling clients that this bout of consolidation is likely to be “resolved to the upside” due in part to historic levels of credit and liquidity.

“Over the past week, the economic data continued to surpass expectations at a historic rate, there was further indication of a broad recovery in the global economy, and excess liquidity that has supported financial assets surged to an even more historic level,” wrote Tony Dwyer, chief market strategist at Canaccord Genuity, in a Monday note. At the same time, an increase in COVID-19 cases and presumptive Democratic presidential nominee Joe Biden’s lead over President Donald Trump in the polls have “kept the markets in a consolidation pattern.”

The S&P 500

on Monday rose 1.3%, putting it within striking distance of its June 8 close near 3,233, which was the U.S. large-cap benchmark’s highest finish since its record close on Feb. 21. The Dow Jones Industrial Average

was up more than 500 points, or nearly 2%. The S&P 500 and Dow have traded largely sideways since June 8, while the tech-heavy Nasdaq Composite

has set a string of records.

Related News  Biden to pick Katherine Tai as U.S. Trade Representative

Dwyer’s optimism, meanwhile, is based on a trio of factors, including a run of positive economic data that have pushed the Citigroup Economic Surprise Index “off the charts” signs the global economy is in the early stage of recovery, based on improved readings for the composite leading indicators for the 37-nation Organization for Economic Cooperation and Development; and data that show that “real liquidity” never been higher.

Real liquidity, Dwyer explained, measures the amount of liquid money available using the M2 measure of money supply plus equity and fixed-income mutual funds versus what is needed for economic activity based on industrial production and inflation (see chart attached).

Canaccord Genuity

Historic levels of credit and liquidity, “coupled with the turn in the global economy, should cause any periods of consolidation to be resolved to the upside” even with a weak second-quarter earnings season set to get under way, Dwyer wrote.

Earnings Outlook: S&P 500 earnings set to plunge as the coronavirus batters all sectors — with Wall Street counting on a bounce that may not come

For now, he’s sticking to his call for a drawn-out period of consolidation given the scope of the surge in markets since the March 23 low. He’s called for adding risk on a pullback by the S&P 500 to 3,000. “With Q2 EPS reporting season and likely cautious corporate profit guidance kicking off this week with the major banks, we see no reason to change that game plan,” he wrote.

Related News  Here’s why the massive explosion in Beirut will deepen Lebanon’s financial nightmare

For more updates check below links and stay updated with News AKMI.
Life and Style || Lifetime Fitness || Automotive News || Tech News || Giant Bikes || Cool Cars || Food and Drinks


Show More

Related Articles

Back to top button

usa news wall today prime news newso time news post wall