Various foreign houses such as Bank of America, Deutsche Bank, Goldman Sachs and UBS etc. are advocating caution in the markets ahead. Some of the commonly cited reasons are valuations; still weak corporate results; U.S. election etc.
To be balanced, Morgan Stanley in its 12 Aug 2016 write-up said they continue to be bullish on equities.
As you are aware, I operate my portfolio on a short term basis. Based on my views in my previous week market write-up dated 19 Aug 2016 (click HERE), I have reduced my equity allocation from 82% on 19 Aug 2016 to around 43% invested on 26 Aug 2016. Although I am cautious on the market in the next couple of weeks, I believe there are still opportunities in the market. I will take the time to research and accumulate into some stocks (with possible near term catalysts) in the next few weeks. (My clients have, will, & are informed on new stocks which I have entered and any significant portfolio change.)
Furthermore, it is likely that the markets are likely to be volatile in the next two weeks, in view of the packed economic calendar in the next two weeks (see below).
*Economic data (28 Aug – 9 Sep 2016)
28 Aug, Sun: (JPY) BOJ Gov Kuroda Speaks;
30 Aug, Tues: (USD) CB Consumer Confidence;
31 Aug, Wed: (USD) ADP Non-Farm Employment Change / Chicago PMI / Pending Home Sales m/m;
1 Sep, Thurs: (CNY) Manufacturing & Non – manufacturing PMI / Caixin Manufacturing PMI; (USD) Unemployment Claims / ISM Manufacturing PMI;
2 Sep, Fri: (USD) Non-Farm Employment Change / Unemployment Rate / Factory Orders
5 Sep, Mon: (CNY) Caixin Services PMI; (USD) ISM Non-Manufacturing PMI;
8 Sep, Thurs: (CNY) Trade Balance; (EUR) ECB Press Conference; (USD) Unemployment Claims;
9 Sep, Fri: (CNY) CPI / PPI
*Please refer to Forex Factory (click HERE) for more detailed information on the economic calendar. Also, please note all economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data which I feel has more impact to the market.
P.S: Do note that as I am a full time remisier, I can change my equity allocation fast to capitalize on the markets’ movements.
- UBS: Technical Indicators Portend Danger for S&P 500 Bulls (Bloomberg 24 Aug 16) http://www.bloomberg.com/news/articles/2016-08-24/ubs-technical-indicators-portend-danger-for-s-p-500-bulls
- Ten Reasons Why Bank of America Thinks U.S. Stocks Have an ‘Elevated Risk of Correction (Bloomberg 23 Aug 16) http://www.bloomberg.com/news/articles/2016-08-23/ten-reasons-why-bank-of-america-thinks-u-s-stocks-have-an-elevated-risk-of-correction
- 5 Reasons to Be Bullish on Equities (Morgan Stanley 12 Aug 16) http://www.morganstanley.com/ideas/bull-market-2016
- Deutsche Bank’s stock market outlook could be really good news for Donald Trump (Business Insider 25 Jul 16) http://www.businessinsider.com/deutsche-bank-stock-market-outlook-2016-7?IR=T&r=US&IR=T
- Goldman Expects the S&P 500 to Fall as Much as 10 Percent Before Ending the Year at 2,100 (Bloomberg 6 Jul 16) http://www.bloomberg.com/news/articles/2016-07-06/goldman-expects-the-s-p-500-to-fall-as-much-as-10-percent-before-ending-the-year-at-2-100
By Ernest Ng