“Perma-bears” overanalyze how bad Brexit may be

Two articles from ABglobal


Beware of “Perma-Bears” in Volatile Markets


Since the Great Recession of 2008–2009, a few macro scares have rattled the global capital markets:
the Greek default crises; the US “fiscal cliff”; the Ukraine–Russia conflicts; the collapse in oil prices; China’s slowdown and currency devaluation; and now, Brexit.

“despite the many corrections and spikes in volatility during this cycle (from March, 2009), the S&P 500 Index hasn’t collapsed. In fact, it climbed 206%, or an annual average of about 16%, over that period. ”
– Volatility have created attractive opportunities to buy stocks! It holds true over the past seven years, perhaps even more than .

– At least it shows slow global growth mean nothing with abandoning equities

For roughly the past 12 months, the net market movement has been flat despite increased volatility.
– Past tide probably won’t help an investor’s returns going forward?

“There’s a mad dash to safety assets, so the rates on Treasuries continue to fall”
“Interest rates are likely to stay lower for longer.”  – ??
      – double positive for stocks:
1. helps support equity valuations
2. providing investment-grade issuers with the ability to borrow cheaply and increase shareholder value.

“maintaining higher-than-average long exposure—and tilting into the weakness that’s slammed the markets to buy specific stocks with strong long-term fundamentals.”

Concerns: oil prices, the US dollar and credit spreads



Headwinds to US Earnings Growth Abate



The US stock market has gone nowhere for the past 15 months, with plenty of volatility along the way.
– Investors have been reluctant to push the market higher without earnings growth.??

Falling oil prices and the strong dollar are losing force 
 – will reveal growth in earnings, particularly for the energy and tech sectors
– more than 75% plunge in oil prices (2014/6 – 2016/2) made the operating cash flow of the 21 largest oil-focused E&P companies fell 50% in 2015
– US technology firms generate nearly 60% of their sales internationally. “Gartner Research estimates that the strong US dollar reduced global IT spending by $217 billion dollars in 2015—more than the most recent financial crisis did.”

(“Oil prices have recovered from recent lows and the US dollar has stabilized” is anything but a strong argument!!!)





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