Last year, we finally threw up our hands and adapted our approach to require explicit deterioration in market internals before adopting
a negative market outlook, regardless of the level of valuations, regardless of the severity of overextended extremes, and with no exceptions.
In the face of these near - zero interest rates, one had to wait for market internals to deteriorate explicitly (indicating a shift toward risk - aversion among investors) before adopting a hard -
negative market outlook.
One had to wait for market internals to deteriorate explicitly before adopting a hard -
negative market outlook (see Being Wrong in an Interesting Way for the full narrative).
Criticize me for the awkward transition that followed, for relying too heavily on the historical implications of «overvalued, overbought, overbullish» syndromes, and for not realizing - until it was too late to help us in this particular cycle - that the recklessness of QE required us to wait until market internals explicitly deteriorated before adopting a hard -
negative market outlook.
One had to wait until market internals deteriorated explicitly before adopting a hard -
negative market outlook (which is the adaptation we imposed on our discipline in mid-2014).
So we made the only concession that remained: we elevated the priority of market internals above «overvalued, overbought, overbullish» syndromes in all circumstances, basically saying «It's fine to become cautious or neutral in the face of extreme conditions, but never adopt a hard -
negative market outlook unless market internals have deteriorated explicitly.»
Regardless of other market conditions, our adapted discipline requires explicit deterioration in market internals before adopting
a negative market outlook.
The main difference between this half - cycle and prior cycles was zero - interest rate policy, so in 2014, we imposed the requirement that, in an environment of zero interest rates, market internals have to deteriorate explicitly before adopting
a negative market outlook.
Our response to «overvalued, overbought, overbullish» syndromes was the source our difficulty in the half - cycle since 2009, because these syndromes encouraged us to maintain an overly
negative market outlook in the face of unrelenting speculation.
Prior market peaks across history had a key regularity: the emergence of extreme «overvalued, overbought, overbullish» syndromes was regularly accompanied or immediately followed by deterioration in market internals, so those syndromes alone were enough to warrant a hard -
negative market outlook.
Not exact matches
Investors who were underweight on the Canadian
market because of
negative outlooks on the Canadian dollar, oil and other commodities are returning, says Lesley Marks, senior vice-president and chief investment officer, Fundamental Canadian Equities, at BMO Asset Management.
Mary Miller, assistant Treasury secretary for financial
markets, said: «We believe S&P's
negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation.»
In mid-2014, we imposed the requirement that a hard - defensive
outlook requires a
negative shift in
market internals or credit spreads (see A Better Lesson Than «This Time is Different»).
We imposed overlays in mid-2014 that essentially rule out a hard -
negative outlook until that deterioration in
market internals or credit spreads becomes evident (as it has at present).
The central lesson was not that overvalued, overbought, overbullish extremes are irrelevant, but that in the face of zero - interest rates, one had to wait for
market internals to deteriorate explicitly before adopting a hard -
negative outlook.
A neutral
outlook is fine when conditions are sufficiently unfavorable, but establishing a
negative outlook requires deterioration and dispersion in
market internals.
In this cycle, it has been essential to wait for explicit deterioration in
market internals before establishing a
negative outlook.
Put simply, extreme
market conditions can hold us to a rather neutral
outlook (as we continue to maintain at present), but we no longer adopt a hard -
negative outlook if our measures of
market internals are constructive, regardless of how overextended the
market might become.
Yet except when the
market is strenuously overbought in a
negative Climate, or deeply oversold in a positive one, we rarely have any forecast at all about the
market outlook even a few days or weeks out.
As I've regularly noted in recent months, our immediate
outlook is essentially flat neutral for practical purposes, though we're partial to a layer of tail - risk hedges, such as out - of - the - money index put options, given that a
market decline on the order of even 5 % would almost certainly be sufficient to send our measures of
market internals into a
negative condition.
Suffice it to say that the most probable
outlook here is a continued
negative Market Climate accompanied by continued downside pressure.
However, given the recent deterioration in the growth
outlook in Europe and several Emerging
Market countries, our view is that Canada's larger share of exports will likely have a relatively larger «
negative» impact on Canadian growth, and by inference cause the BoC to be more cautious raising policy rates than the Fed.
Overall, our current
market outlook remains strongly
negative, but we would be inclined to adopt a more neutral
outlook if our measures of
market internals were to improve.
Unlike the 2011 - 2014 period, we're not inclined to maintain a hard -
negative outlook in response to overvalued, overbought, overbullish conditions if those mitigating factors are present, so our downside concerns will be deferred if
market internals improve sufficiently, particularly if the Fed was to cut rates at these levels.
«During the past decade, some commentators have taken a
negative outlook of the housing
market.
Investment team will typically sell a stock when: (1) Earnings
outlook deteriorates (2) Valuation is too high or expands (3) Significant
negative earnings surprise occurs (4) Stock quantitative score degrades (5) Other more attractive opportunities exist (6)
Market capitalization grows beyond range
I have a feeling that the lower oil prices we are seeing are due to the somewhat
negative economic
outlook (look at what the stock
market has / hasn't done over the last month or so).
Panic over Brexit initially wiped US$ 2 trillion from the world's
markets, with Moody's, the credit rating agency, pushing its
outlook for the UK banking system from stable to
negative.
They can also serve as a fixed income substitute when the
outlook is flat to
negative for the fixed income
market.
And into this decidedly
negative outlook for the broader
market, Spotify (SPOT) will makes its public debut on Tuesday as the streaming music service will begin trading after a direct listing on the New York Stock Exchange.
The fictional story is about Barney, a 19 - year real estate veteran stuck in a down
market, who has been feeding off the
negative outlook portrayed by the media.
Alberta had the most
negative outlook, where many consumers considered their local housing
markets over-heated.