The Week Ahead: Can Investors Plan For A Black Swan Event? |
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June 12, 2016 |
June 2016 Bond Updates
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The stock market spent most of last week trying to decide what the weak June jobs report meant for the stock market and the economy. The strong action of the S&P 500 early in the week and the ability to close at 2119 last Wednesday did not appear to convince many market skeptics to change their tune.
There was little in the way of economic data to move the market last week but the sharp decline in global yields had many scratching their heads. A recent article by noted technical analyst Louise Yamada "Professionals Confused Over Stock Market" highlighted the quandary for investors. She proposed "three scenarios likely to emerge: a 40 percent chance of a trading range forming, a 40 percent chance for a breakout to new highs, and a 20 percent chance for a resumption of the bear market."
Another force that I feel is driving the markets is the fear of some money managers who have been fighting the market rally this quarter. Those who have been underinvested may have to face unhappy investors once the quarter draws to a close. This could trigger another flood of buying before the end of the month.
The news that George Soros was worried about a large stock market decline did increase the level of bearish commentary, As I mentioned in early May " The Bubble No One Is Discussing" many other hedge fund managers had expressed bearish views at the Sohn Conference but I also pointed out that many hedged funds have not performed that well lately.
In fact a MoneyWatch article last week detailed what the market did in the past when news of a bearish outlook from George Soros hit the tape. Friday's comments from bond trader Bill Gross that "negative yields will lead to ‘supernova’-like market implosion" added fuel to the fire. As I advised last week " Investors - Look Before You Leap" that it is important to view any current market comments in the context of the analysts long-term record. Can investors plan for a Black Swan event?
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View more at: http://www.forbes.com/sites/tomaspray/2016/06/11/the-week-ahead-can-investors-plan-for-a-black-swan-event/
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