Earnings Forecast for 3rd Quarter looks weak - Is this the End of the Bull Market?
What should you do in a changing market? Hold your Positions – don’t stress sell — wait. You will be rewarded
There’s another stock sell-off underway so where are equity prices headed this week and beyond over the second half of the year? Morgan Stanley’s Mike Wilson and former Goldman Sachs alum, Jim Cramer weigh in. Basically they both agree you should be on defense, then buy the dip.
““In many ways, this year’s investment landscape feels very similar to 2018. Global money supply growth is decelerating and asset markets (stocks) are experiencing a rolling correction with the most speculative assets down as much as 50% from their highs.” ”
Reason Stocks are trending Downward
The speculative stocks are down, and the market is moving towards higher quality ones. This is the market's way of getting out of the way. Which is exactly what you should do, hold your positions — don’t stress sell and wait. You will be rewarded with opportunities to add high quality stocks to your portfolio at lower prices that will head back up to a higher price level.
Source: Google Finance The major index and DOW detail for July 19th morning
The Cramer Perspective
“ Once FANG goes down get ready to buy. That is the signal to watch for. “ says Jim Cramer. “ They are the last ones to rollover and head down, once you see that it is time to look for good stocks on sale.”
Cramer also highlighted that the market is headed down this week 3-5%. But once that move happens, it is time to buy — especially FANG (Facebook, Apple, Netflix and Google) along with others like Nividia (NVDA) and Microsoft. (MSFT) Until the COVID-19 Delta Variant news cycle clears this week he recommends avoiding any re-open stocks like cruise lines, hotels and airlines.
Mike Wilson View
According to Morgan Stanley’s Mike Wilson there are four specific reasons for the for the trending downward equities movement.
The $3 trillion in fiscal stimulus that went to consumers and businesses. As a result, GDP, revenues, and earnings growth far exceeded expectations in the first half of the year. It seems likely growth will decelerate sharply and disappoint what are now very high expectations, especially in areas like consumer discretionary and technology.
The White House and Congress have proposed sweeping tax increases both at the corporate and consumer level. Capital gains tax increases are also being discussed which may have an even bigger impact on the overall market than income taxes.
The Delta variant of COVID-19 is limiting the pace of reopening in many parts of the world and while the U.S. and other developed economies will likely remain fully open, the global economy could take a hit to growth and that will weigh on many companies and markets.
Many supply chains are short of capacity. This includes labor which makes-up the single largest cost for many businesses. A lot of companies will feel the pinch of these higher costs and will have to reduce margin guidance.
Each week, Mike Wilson offers his perspective on the forces shaping the markets and how to separate signals from the noise. Read his thoughts here
About Mike Wilson
Mike Wilson is Chief U.S. Equity Strategist and Chief Investment Officer for Morgan Stanley. (MS) As CIO and Chair of the Global Investment Committee, Mike offers a unique perspective on markets to both institutional and wealth management clients, leveraging best-in-class research.
About Jim Cramer
Jim Cramer is an anchor on Squawk on the Street a daily show covering the financial markets, host of Mad Money, a daily show that helps small retail investors. He usually has unmatched, fiery opinions about the events of the day impacting Wall Street. Once a hedge fund manager (and co-founder), Jim brings an insider’s insights to explain the markets. His compounded rate of return was 24 percent after all fees for 14 years at Cramer Berkowitz. Prior to that Jim was at Goldman Sachs.
All investment strategies discussed are for informational purposes only and can involve risk and loss. Nothing contained in this website should be construed as investment advice.
