“Perma-bears” overanalyze how bad Brexit may be

Two articles from ABglobal

 

Beware of “Perma-Bears” in Volatile Markets

https://blog.abglobal.com/post/en/2016/06/beware-of-permabears-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.

But,
“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

However,
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?

Whatever,
“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.

Recommend,
“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

 

https://blog.abglobal.com/post/bernstein/2016/07/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.??

But,
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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