Here’s what five experts are watching now.
“Look at this market. I mean once again, remember we had a big update yesterday … There are a lot of people who have to be converted to bulls pretty soon.”
Rick Rieder, global CIO of fixed income at BlackRock, laid out the catalysts for the market’s bullishness.
“The markets are reacting to a couple of things. One, we are improving, whether it’s this vaccine, whether it’s vaccines we’re seeing domestically or internationally out of China, Japan, etc. The development is impressive. And the other thing the market is reacting to is this extraordinary liquidity and the fact there’s nothing else to do when the Fed is keeping rates down.”
Amy Wu Silverman, head of derivatives strategy at RBC Capital, described what the options market expects.
“It was interesting because Wells Fargo was implying a [dividend] cut but not nearly the severity that we saw yesterday. So you know the options market came into this underpricing dividends, and it kind of makes me flag what else it could be underpricing going forward.”
Sam Stovall, chief investment strategist at CFRA, said earnings are clearing a low bar.
“I think Wall Street is basically saying, ‘We’re going to get a vaccine sometime in 2021,’ and possibly right now the expectation is for sooner in the year rather than later. And when we’re focusing on second-quarter earnings right now and realizing that a good majority of the stocks in the S&P 500 are not offering guidance, analysts are actually having to work for their pay. But when the bar was set as low as it was, down 45% year on year for earnings in the second quarter, I tend to think that it’s a little bit challenging not to exceed what those dire estimates have been. And so far, that’s exactly what we’ve gotten.”
Gina Sanchez, CEO of Chantico Global, said expectations heading into earnings season may have been too pessimistic.
“Well, I think the lack of guidance certainly helped get a lot of analysts overly pessimistic and set up, as Sam [Stovall] said, a very, very low bar for this quarter. I think that guidance is necessary but we’re unlikely to get that. And I’m not sure that companies are willing to come out and say, ‘By the way, we’re probably beating because we have stimulus effects that are actually padding the Q2 numbers, and Q3 and Q4 are probably not going to be as good as you expect.’ I think the market multiple right now tells you everything about the hope that’s baked into this market and the idea that by 2021 Q1, we are back into positive territory.”
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