Nasdaq is down and everyone is fleeing from FANG companies

US indices traded mixed yesterday, which is definitely a cause for concern. Technological Nasdaq Composite and Nasdaq 100 continued with their decline after new record highs reached, while Dow Jones rose.
The Nasdaq 100 Index declined for the first time in five days, with investors dumping and selling shares in the FANG group and targeting the stocks of the banking companies.
Interest rates on 10-year US bonds continue to keep below the psychological limit of 3%, but according to market observers the expected almost 100% rise in interest rates in June begins to weigh above the market and indices.
The Stoxx Europe 600 Index returned its earlier earnings yesterday after disappointing factory orders in Germany. The euro appreciated as a result of rising expectations for the end of monetary stimulus in the euro area.

The world's biggest hedge fund: the 2019th will be hard for the economy

When the founder and head of the world's largest hedge fund, Ray Dalio, speaks, the market is silent and listening. And what Dalio says should bother all market players.
According to the head of Bridgewater Associates, next year will be difficult for stock markets and the economy. He is bearish for almost every asset class, Dalio commented in a recent letter to the clients of the fund he manages.
2019 seems to be a dangerous period for the economy, Dalio says.
Earlier in the month, the hedge fund manager said he was at the forefront of the stock market and this is a problem.
The company, which currently manages assets worth about $150 billion, believes the US bond yield curve should remain flat, in a range where oil reached $62 a barrel and the dollar fell 3.5 percent against the rest of the major currencies.
2019 seems to be a dangerous period for the economy when the financial stimulus is over, and the Fed's interest rate cycle will find its peak, Dalio said in the letter to the hedge fund investors. Given the fact that financial markets are ahead of what is happening in the real economy, the danger to investors is already present.

J. Gundlach: If you want to know where the market is going, watch the bitcoin

The popular investor Jeffrey Gundlach has a message to investors: if they want to know where the stocks and indices are going, look at the bitcoin.
Strangely, but the bitcoin seems to be a child of social and market moods, said Gundlach in an interview with CNBC's financial magazine. According to him, if the shares are headed for a new stroke, this will be preceded by a decrease in the cost of the bitcoin.
Earlier this week, we witnessed extremely volatile stock market volatility, which momentarily took the indices into a correction phase. These sales, however, were preceded by a depreciation of the bitcoin.
We had a vertical rise in the bitcoin, which started at 4,500 and led the cryptocurrency to levels of about $20,000. The bitcoin found its peak in December and then collapsed. This collapse, to a certain extent, predicted the forthcoming volatility of the stock markets. If the shares are expected to suffer a new serious drop, it would be preceded by a depreciation of the bitcoin, according to Gundlach.
Even strange, Gundlach defines this dependence as quite convenient to use to predict market movements. In fact, the sentiment on the bitcoin and other speculative assets can be used by investors to predict future market movements, according to the legendary investor.

D. Gartman: The decline in US indices is not over

The collapse of US indices since the beginning of the week mobilizes an army of analysts and experts who are struggling to give an advices to investors.
Their opinions are quite opposite, some of them recommend investors to sell because we can see a further decline in the market, while the other part advises investors not to panic and not to close their positions.
The Dow blue chip index lost 1 841 points in two sessions, or nearly 7% of its value.
Some investors sell because they fear higher interest rates will affect the profits of US companies.
Others are dropping stocks because they expect further weakness in stock markets, or because they just have algorithms that sell when the majority sells, and so the decline is on the rise.
What are the predictions?
"The last few days are just the beginning of what may be a more serious bearish market," according to investor-veteran Dennis Gartman.
"We are now in the nine years of the bullish market, so will we see an adjustment of 12, 15, or 17% over the next few months?" - the expert continued.
Of course, investors should keep in mind that Gartman is traditionally a counter-investor. He has been warning of a correction for months, in an environment of growth and an increase in indexes to new and new records.
Of course there are experts who are in the opposite opinion. For example, according to Jeremy Siegel, one of the most prominent bulls in the market in recent years, which is also a warning of a potential correction, a 500-point drop in Dow could provide a good starting point for investors to buy stocks.

R. Schiller: The situation is very similar to that of 1928

US indices are historically the highest. The growth rate, however, exceeds the growth of companies' profits, sending leading financial ratios like SARP at alarmingly high levels. This alerts the creator of the ratio - Nobel laureate Robert Schiller, from Davos.
He shared his worries about the market before Yahoo! Finance in Davos.
"In a sense, the market is now very similar to the one in 1920 - I would say 1928," Schiller said.
Then, the US indexes were rising seriously until they failed remarkably in 1929.
Calvin Coolidge was the president. And pro-business oriented," Schiller noted. "Everything looked good. Anti-regulation. Same story. This is part of the story," added the Professor of Economics.
Today, the United States has again a pro-business president, in the face of Donald Trump, who has been pushing for deregulation, similar to what happened in 1928. And in the same year, there are a lot of people who warn about the overpriced market.
"Then there were a lot of people who warned that the market was overstated. And people were beginning to wonder when there would be a correction? And, ultimately, a correction happened," Schiller recalls.
Schiller, of course, did not suggest that the market would collapse next year. According to Schiller, however, part of the reasons people buy shares is that "it makes them feel better for one or another reason."
"Young people today have to plan the next 50, 70 years. So what would they do now? This gives emotional decoration to all their decisions. It seems more and more acceptable to invest in stocks, even if they look expensive. Especially technological ones," concluded Schiller.

Credit Suisse: It's time to buy technology companies

News related to US tax reform has led to a serious downsizing of technology companies. And according to Jonathan Golub, an analyst at Credit Suisse, the time for purchases may have occurred.
Information becomes more and more about tax cuts, and investors now have more clarity. This led the US indices to new records, with investors shifting from technology to industrial and financial companies.
Last week we saw growth in consumer, financial and industrial companies and a decline in technology ones.
Technological companies generally outperformed the market this year, and will probably continue to do so next year, says Goleb.
Golub also pointed out that technology companies are traded at a slightly higher ratio than other companies. The cost-benefit ratio for technology companies is 19.8, while the S&P 500's is currently 18.2.

That's what may stop the US indices growth

US indexes continue with their records. The S&P 500 index last week saw its longest winning weekly series in four years, after eight consecutive weeks of growth.
A key market test, however, may become a reality when a group of stocks will present its results next week.
Namely, we need to look at the results of the trading sector in relation to the Black Friday. This may be the first sign of market-based cracking.
Stocks of retailers are already 9% down from the beginning of the year, driven by massive industrial pressures and weaker-than-expected results for companies in the sector.
Less-than-expected sales during the "Black Friday" may lead to purchase of put options on the part of investors to protect their portfolios from potential corrections that may happen very soon.
At the moment in the US markets, the situation looks like a party that will never end. But as we all know, every thing has its end.

JPM: There are no cheap assets at the moment

Richard Madigan, Chief Investment Officer of the Private Banking Unit of the Investment Bank J.P. Morgan has bad news for investors. And it is - no asset seems cheap at the moment.
Madagan, which manages assets of $290 billion of private customers, and a total of more than $1 trillion in general, believes that the main challenge for investors today is the diversification of expensive markets and how to manage the higher customer expectations.
Yesterday, the stock saw a certain return after the record highs, which is seen as the first symptom of risk exposures among investors, and according to some experts, may be a precursor to a more serious adjustment.
The strategy among investors to buy on any index drop was the most profitable in the past three to five years, but the question is when will it stop working properly?
Some experts, such as GS, have made comments last week that the US economy and markets may be close to their peak. A similar thesis was taken up by other market observers.
Still, the foundation for the economy and companies remains strong, concludes Madigan. So, the biggest challenge for the manager right now is still the proper management of investor expectations. And the latter are quite high.

GS: S&P 500 at 2 400 points by the end of the year

The US economy is growing at a healthy pace, which has already brought the US indexes to new record highs, commented GS chief financial analyst David Kostin. He acknowledged that a synchronized rise in economic activity around the world was a major reason for the appreciation of the stock.
Now, however, Kostin warns investors to be careful. He pointed to the ISM Manufacturing Index, which is at a 13-month high of 60.8 points in September. Indicator value is above 50 points, signaling growth.
In other words, according to Kostin, the current ISM index values ​​could signal a peak in the economy.
And as we know, expectations are being traded in the markets. When expectations begin to slow down, markets are also following.
Kostin predicts the blue chip index S&P 500 to drop to 2 400 points by the end of the year. Despite these expectations, he likes growth-oriented stocks.

Buffett: Dow at levels of 1,000,000 would not have been impossible

It's hard to argue with the genius investor Warren Buffett. When Buffett speaks and makes predictions, everyone is silent and listening. Unfortunately, for some of the predictions of the "Oracle of the Omaha," will sue our heirs.
Buffett recently said he believes it is not impossible for the Dow Jones blue chip index to reach 1,000,000 points after 100 years. By comparison, the indicator is currently at 22,000 points.
But how many of us will be alive to see if this will happen?
More importantly, however, Buffett's idea is how we should look at investing - long-term. Buffett has repeatedly promoted the long-term investment. In his opinion, the time for which a position in the portfolio is to be held is eternity. Buffett also advised investors to focus on the game, rather than just looking at the scoreboard.
Other Buffett's emblematic advice is to buy long-term equity index shares based on broad indices, which he believes are the best form of investment by individual investors.
And while Buffett's estimate of an index value of 1,000,000 points may sound pompous or unrealistic, it is far from being unachievable. In fact, to reach 1,000,000 points in 100 years, an annual return of only 4.7% is needed, which is far below the average for the past 50 years.
All, that has to happen, is that the indexes continue to grow at the pace of recent decades.
Buffett points out that the Dow blue chip index was only 81 points a century ago. It was created in the 1890's, by the 30 largest American companies.

Laszlo Birinyi: I do not see an end to the current bullish market

The investment legend, Laszlo Birinyi, who has correctly predicted the bullish market over the last eight years, at any moment, does not see what will prevent stocks from continuing to rise.
He believes that the bearish investors ignore the large amount of free funds that go to the market and will likely continue to support the growth of the indices.
Birini rightly predicted mid-year that the broad US S&P 500 will reach 2 500 points. We can only recall that the index ended only 5 points from the level at the end of last week.
Instead of looking at the high financial estimates of the companies, cited by many experts, as potential reasons for a stock price correction, Birinyi directs its attention to the massive market-driven cash flow. According to him, this will be the factor that will continue to support the markets.

What should investors do in a record-breaking environment for indexes? (2)

The situation looks pretty much in the last phase of the bullish cycles, when everyone says the market can grow to infinity, and buyers of the last "plan" become individual investors.
Think about it, would you shorten the S&P 500 index right now? Probably not ... And why? Because you shortened it most likely to 2,200 points, then again to 2,300, then to 2,400 and now to 2,500 you give up.
What, however, has changed to opt out? Generally speaking, you are tired and you have decided that there is no point in shortening the index anymore. And it is very possible, even if you start considering to buy it. For example, if it returns by 5%...
It may be good, and it may be a bad idea! Time will tell. History shows, however, that there are no endless cycles of growth without any corrections.

What should investors do in a record-breaking environment for indexes? (1)

US indices are at record highs. Is this the cause of joy or concern? Rather for the second one.
Investors are interested in the future profitability of their investments, not the historical ones.
In a hurricane world, missile launches from North Korea and political uncertainty in Washington, the markets seem calm ... Even too calm. It seems as if nothing can get them out of their tracks.
Any decrease of 1 or 2% is rapidly recovering and is followed by new records. And so... The last time the indices drop by 2% and then fall with new 2% and new 2%.
Of course, when will the last time be is the biggest uncertainty in the equation.
However, in an environment where more and more experts are beginning to argue that there is still nothing terrible about US investors, they should definitely be afraid.

The Trump Rally shows signs to an end

The Trump rally, or the rise in US indices after Donald Trump's election victory in November, shows signs of an end.
What's more, analysts are predicting it can end in a very bad way. Particularly close to September - the worst historical month for US indices.
The results of US companies for the second quarter are already history, and although good, they can hardly be a factor to feed the rise in US indices, commented market observers.
Investors are likely to become more and more tense given the fact that the current rise in indices was the second longest in history.

The US companies with the highest growth in their results for 13 year

US companies are delivering better reports on their earnings and revenue than expected. They do this at the highest pace since 13 years.
Does this, however, lead to an increase in indices? Not exactly ... Although it is generally believed that the results of companies are the source of index growth.
Company profits rose by 9% yoy, exceeding the average growth expectations of 3%. Sales grew by 5% yoy. 55% of companies with sales on international markets have exceeded expectations in terms of profits and sales, compared with 30% for companies represented only in the United States.
In fact, there is the first case since the 2000s when investors saw no "prize" for better results, according to Bank of America Merrill Lynch.
This is a "potentially dangerous" anomaly we have not seen since 17 years, according to analysts from Bank of America Merrill Lynch.
This lack of reaction may be another sign of the late stage of the upward cycle we are in, according to Savita Subramanian, a bank analyst.
This does not mean that the situation is too negative at the moment. It seems, however, that this growth in the companies' results was apparently already in the levels.

Will the ECB keep zero interest rates for at least another year?

Europe struggles successfully for the leadership of growth and will gradually shift the US as the engine of the world economy in the second half of the year.
The difference will not be significant, but it shows the advantage of zero interest rates and the cheap euro. The slowdown in US growth does not just come from the process of normalizing of interest rates.
Their change is still insignificant, but the economy is entering the late stage of growth, which will be characterized by a slowdown in investment activity and industry. Consumption remains the most serious factor behind GDP growth, backed by low unemployment and low inflation.
Negative trends in industry and construction do not stop the Federal Reserve in raising interest rates because the slowdown in these sectors is not strong enough. Does this mean that raising interest rates is intended to stop the stock market turning into a bubble? More likely, because the deflationary processes have not passed and the economy does not overheat. In this case, the question arises when the US stock market will become aware of the risks of expensive stocks and of rising interest rates.
According to some analysts, the risks to growth in Europe are much less than the barriers to the US economy. Inflation worries remain in the background, with the European Central Bank holding zero interest rates for at least another year. Political risks are weakening, but tensions between Brussels and London will have economic consequences for both countries, which will gradually increase in 2018.