File photo: On February 10, 2009, a street sign appears in front of the New York Stock Exchange on Wall Street in New York. REUTERS / Eric Thayer / File Photo
Invesco called the sharp decline of Nasdaq this week a “healthy period of consolidation”, while fund manager Lord Abbett said the US stock valuation was likely based on an analysis of the companies’ earnings.
On September 4, Goldman Sachs on Wednesday reiterated its year-end price target of 3,600 on the S&P 500, up nearly 6% from the index, while UBS Global Wealth Management recommended ease of markets to customers rather than being on the sideline. .
His optimism highlights how the Federal Reserve has pledged to maintain interest rates for COVID-19 in a vaccine with record lows and a rate of interest, gaining a market edge this year, although many US presidents Large-scale bets on choice and technology are avoided — related stocks may accelerate the market in the remaining months of 2020.
“We think the situation we are going through is a healthy improvement,” said Troy Gesicki, co-chief investment officer of Skybridge, an alternative investment company. “We can definitely fall more. But if you are a technology investor then you have to understand that the valuation was very high. ”
A day after the Nasdaq plunged into the zone of correction, Wednesday posted its best day since April, generally defined as a 10% or more drop from the recent peak. Other major indices also reversed after a sharp decline on Wednesday.
Invesco’s leading global market strategist Christina Hooper said in a recent note, “I think this root is not so much an improvement, but a digestive one.”
Analysts at Bhagwan Abate said in a recent note that second-quarter earnings on the S&P 500 were 23.1%, higher than the five-year average of 4.7%.
“The momentum of earnings, and the magnitude of the analyst’s earnings revision, is in other markets, suggesting that higher valuations on U.S. equities are merged,” the report said.
Still, some believe more volatility is in store. A recent survey of investors from UBS Global Wealth Management saw politics as their top concern, with 65% having held the US presidential election 3 weeks earlier.
Leading investor Stanley Druckenmiller – a skeptic of this year’s rally – heard a recessionary sound again on Wednesday, warning here on CNBC that the stock market is in a frenzy fueled by the Federal Reserve.
Uncertainty over heavy option purchases by SoftBank Group Corp (9984.T) Also hangs in the markets, posing another risk.
Gesky of Skybridge said the Nasdaq could fall 20% or the S&P 500 by 15% from its respective heights if equity declined, and there were other supportive signs for the market such as could see an opportunity to increase equity risk. As the Fed has expanded its balance sheet further.
Willie Delwich, an investment strategist at Baird, said that any sales that spread beyond the big tech-related stocks that have led the markets to higher levels could be an indication that the pullback could be carried forward.
In the coming days, Delwiche is looking for signs of increased investor caution – such as buying put options, outflows from equity funds and sharply declining views in surveys – which indicate that any over-exertion has declined.
Another indicator is how investors respond to key technical support levels, said Keith Lerner, chief market strategist for Trist / Suntream Advisory. For example, Nasdaq closed below the 50-day moving average for the first time since April on Tuesday, but returned above it on Wednesday.
“If you see these markets just slicing through support levels, that’s a sign that sellers have the upper hand,” Lerner said.
Reporting by Lewis Crascope; Additional reporting by Megan Davis; Editing by Ira Ibosbavili and Leslie Adler