A correction could hit the Dow Jones
“I have to say ‘or sooner’ these days because every time I put out a bullish target, the bulls stampede all over me, and they get there a lot sooner because earnings have been so strong,” Ed Yarden said.
According to FactSet, more than 80% of S&P 500 companies exceeded their second-quarter earnings estimates, making it one of the most successful earnings seasons in recent years.
Timing market opportunities is a tricky business, Yardeni added, adding that he avoids attempting to time them.
“The problem with trying to time a correction is that you have to get out right before it happens and then figure out how to get back in at the bottom,” he explained. “Some people can get both, but it’s a tough call for the most part… I don’t try to time corrections, but when they occur, I hope people take advantage of the opportunity to purchase more.”
According to Ed Yardeni, September and October are good months to buy.
Yardeni also stated that he will continue to buy, but emphasized that it is “certainly not early in the market.”
“The market has doubled since March 23 of last year, so it is unlikely to double again anytime soon, and I could consolidate for a while rather than have a correction,” he said.
Yardeni also believes the Fed will keep interest rates low, and that because investors have been well prepared for tapering, he does not expect a taper tantrum, referring to the panic that erupted when the Fed began slowing the pace of its asset purchases in 2013. The big question, he says, is when the central bank will begin operations.
“Will they finally pull the trigger and complete the project before the end of the year? Yardeni believes they will. “Fed officials recognize that they must begin tapering now in order to complete it by the middle of next year in the event that they are wrong about inflation, [that] inflation is more of a problem, and they must raise interest rates.”
Despite the ongoing Covid-19 pandemic, the global economy has recovered to the point where the “extraordinary measures and policies” currently employed by central banks are no longer required, according to Roche.
The world’s housing prices have been supported by loose monetary policies, while stock markets, particularly in the United States, have continued to rise.
Removing those policies is necessary, but it will be difficult for investors, admitted Roche, president and global strategist of Independent Strategy.
“What you have to do now is accept the global economic adjustments, particularly… for bubble assets like housing and, I would argue, equity markets, you have to be prepared to accept a great deal of pain,” he said.
“There is no painless way out of this,” the strategist added.
Goldman Sachs is “more bullish” on technology, and these are its top picks for the fall.
Bernstein selects stocks in China and India that have the potential to outperform the market in the next 12 months.
Credit Suisse has identified six stocks that will benefit from the shift to 5G smartphones, one of which has a 40% upside.
The European Central Bank slowed the pace of its bond purchases on Friday, a move that ECB President Christine Lagarde said did not constitute “tapering.”
According to Roche, the Fed should have begun to reduce its asset purchases “a long time ago.” He warned that keeping monetary policy loose for an extended period of time is unsustainable, echoing comments he made in June that rising inflation could force central banks to raise interest rates more aggressively than expected.
The veteran strategist is not alone in believing that the Federal Reserve of the United States is moving too slowly.
Former US Treasury Secretary Larry Summers wrote in a Washington Post opinion piece last month that the Fed’s asset purchases, known as quantitative easing, have “gone on for far too long.”
How GameStop could change the rules of the market
During its second-quarter earnings call on Wednesday, GameStop did not provide an outlook for the coming quarters or take questions. The company said its losses per share decreased year over year, but shares fell more than 8% in early trading Thursday.
“That earnings call was a disgrace,” Chukumba said.” “It was a betrayal of their shareholders. To be honest, it astounded me.”
This year, GameStop joined the meme-stock craze, with retail investors organizing on Reddit forums to coordinate trades and push the stock higher.
Individual traders created a massive short squeeze in GameStop in late January, sending shares up 400 percent at one point, inflicting pain on short sellers betting against the stock.
The stock of the video game retailer is now down more than 60% from its 52-week high, but it will still be up 880 percent in 2021. On Wednesday, shares closed at $198.80, valuing the company at more than $14 billion.
Chukumba described GameStop’s current valuation as “nonsensical.”
“Let us call it what it is: the emperor is naked….” There is no strength, and there is no way to turn this business around,” said Loop Capital internet analyst.
According to Chukumba, GameStop’s profit margins will shrink as more consumers have direct access to gaming software on the internet without having to go through retailers.
“Sell the stock first, then ask questions,” Chukumba advised. “I know it sounds exciting — to the moon, diamond hands, and all that nonsense — but that is not how stocks work.”