Latest news with #investor sentiment
Yahoo
a day ago
- Business
- Yahoo
Stocks are at records. Investors should keep an eye on 5 things that could break the rally.
The steep rally in stocks faces big risks through the rest of the year, HSBC said. In a note, the bank highlighted five warning signs for investors to watch out for. Strategists said one risk factor, investor sentiment, was already flashing a "strong sell signal." The stock market is on a record-breaking rally, but investors are approaching some big hurdles they'll have to clear through the rest of this year if they want the gains to keep coming. Strategists at HSBC Global said on Monday that they see a handful of key risks facing stock prices through the second half of 2025. The risk factors could jeopardize the market's post-Liberation Day rally, the strategists wrote, adding that "there's an expiration date to our bullish stance — the question is where we could be wrong and therefore what we will have to look out for in terms of downside risks." Here are five things the bank says investors should monitor. 1. The market returns to the "Danger Zone" The "Danger Zone" is when US Treasury yields rise past a certain threshold that's painful for stocks. Higher yields globally also jeopardize the carry trade in markets, which is where investors borrow cheaper currency and covert it to dollars to invest in US assets. Turmoil related to the carry trade has most recently been seen amid rising yields in Japan, which sparked an unwind of the yen carry trade and a subsequent sell-off in global markets. The Danger Zone could be reached in two ways, strategists said: Fewer rate cuts. The economy's resilience could cause investors to push out their expectations for Fed rate cuts, driving up yields on the short end. Traders have already pushed out their rate expectations from the start of the year, and are now pricing in around 4-5 rate cuts through the end of 2026, according to the CME FedWatch tool. Inflation from tariffs. Consumer have begun to tick slightly higher in the lastest CPI readings. The June consumer price index report showed that prices for durables grew 0.7% year-over-year in June, the second-straight month of growth after more than two years of annualized declines. The headline number also drifted higher, hitting 2.7%, from 2.4% in May. Hotter inflation gives the Fed less room to cut interest rates, which would also drive yields higher. "This would put us right back into the Danger Zone in UST yields," strategists wrote of a more hawkish rate cut path. "Apart from the USD, we think the only places to hide out would be asset classes such as short-dated credit, value vs growth in equities or gold." 2. Investor sentiment sours HSBC's gauge for short-term investor sentiment and position is now sending a "strong sell signal," with 20%-30% of inputs within the gauge telling investors to sell, strategists said. "We don't think this is the time to pull the plug on risk assets just yet," the bank wrote, pointing to possible positive earnings surprises for companies reporting second-quarter results. "But clearly sentiment and positions are no longer as supportive a factor as it has been in the last three months." 3. The job market weakens A softer labor market is one of the biggest downside risks to economic growth in the second half, strategists said. The job market remains on strong footing overall. The US added 147,000 payrolls in June, more than economists expected, while the unemployment rate unexpectedly ticked lower to 4.1%, remaining near historic lows. But jobless claims could rise higher through late-July, the bank predicted, pointing to factors like the school holiday, several auto factories being shut down, the hurricane season, and "typical seasonal patterns" in the job market. They added that firms could also become more concerned about the impact of tariffs and slow down hiring in the second half. "A marked softening of the labour market could spark expectations for more aggressive rate cuts from the Fed over concerns to its mandate of maximum employment. From a market perspective, a classic risk-off backdrop would dominate, strategists wrote. 4. Markets sour on AI Much of the rally in US stocks this year has been driven by mega-cap tech and semiconductor stocks, which are seen to be the biggest beneficiaries of the AI boom. The Roundhill Magnificent Seven ETF, for instance, has soared 41% from its post-Liberation Day low on April 8. But investors have been growing more concerned with whether companies will be able to keep up the heavy AI spend, HSBC said. Strategists pointed to comments from Fed Vice Chair Michael Barr earlier this year, who suggested that the hype over artificial intelligence could be "overblown." It's also possible that tariffs on semiconductors could be renewed this year, which would hurt the AI trade, they added. "This adds to the growing sense that the tech-led rally may start to lose steam, which is a risk to our positive H2 view." 5. Trump keeps meddling with the Fed Trump has approached the idea of firing Fed Chair Powell a few times this year. If the president follows through — or if Powell were to unexpectedly resign from his post — that could spark another Liberation Day-style sell-off in the market, the strategists said. The market could also see a negative, but more mild reaction if Trump were to announce a shadow Fed Chair, a new Fed Chair named months in advance to suggest where monetary policy might be headed after Powell's term ends next year, strategists speculated. "We would view any unexpected changes at the Fed as initially US asset negative across the board, much in the fashion of how markets reacted in April," the bank wrote. "Markets would likely view this as a challenge to the institutional framework of the United States, likely prompting USD weakness, steeper US Treasury curves, and an initial drawdown in US equities." Markets were jolted last week after several reports claimed that Trump was getting ready to oust Powell from the Fed soon. Trump appeared to refute the reports, saying it was "highly unlikely" he would fire Powell when speaking at the White House last week. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
2 days ago
- Business
- Bloomberg
RBC's Calvasina Sees Investors Looking Past Policy to 2026
Lori Calvasina, head of US equity strategy at RBC, discusses the investor sentiment behind her firm's latest raise of the year-end target for the S&P 500. (Source: Bloomberg)
Bloomberg
4 days ago
- Business
- Bloomberg
CIBC Overtakes Scotiabank in Market Value After Stock's 47% Run
Canadian Imperial Bank of Commerce has inched past Bank of Nova Scotia in market capitalization to become Canada's fourth-most valuable bank, as investor sentiment shifts in favor of lenders with more exposure to the domestic market. CIBC has been the top-performing major Canadian bank over the past year, with its shares soaring 47%, giving it a market value of C$94.6 billion ($68.9 billion) as of Friday's close. It hadn't outranked Scotiabank since the early 2000s, until this month.
Yahoo
4 days ago
- Business
- Yahoo
Rangebound patterns tighten rupee's correlation with Indian stocks
By Jaspreet Kalra MUMBAI(Reuters) - The Indian rupee and local equities have been increasingly moving in sync over the past month as muted portfolio flows alongside lingering uncertainty over U.S. tariffs continue to cloud investor sentiment. The rupee's 30-day correlation with the benchmark Nifty 50 index has tightened to 0.66, the highest level since mid-May, pointing to the currency's increased sensitivity to moves in local stocks. On the day, the Nifty 50 was down about 0.6%, while the rupee dipped to last quote at 86.2025 per U.S. dollar as of 10:50 a.m. IST, down 0.1%. Local equities diverged from regional peers, led by losses in financial stocks. Asian currencies, meanwhile, were trading mixed and the dollar index was little changed at 98.5. Amidst the largely rangebound moves, the rupee's 1-month implied volatility has eased to a near one-month low of 4.2%, while the stock volatility gauge, India VIX, has retreated to 11.6 from around 14 a month earlier. Foreign portfolio flows, a key driver for both the rupee and local stocks, have also been muted, contributing to rangebound price action, a trader at a state-run bank pointed out. Both the local equity and FX markets are "lacking a clear direction right now," said Apurva Swarup, vice president at Shinhan Bank India, referring to the rangebound moves. News on the U.S.-India trade deal would be key to watch, as it could push stocks and the rupee to move out of their prevailing ranges, Swarup added. The United States is very close to a trade deal with India, U.S. President Donald Trump said earlier this week. Country-specific reciprocal tariff rates on exports to the U.S. are slated to go into effect starting August 1. On the day, dollar bids from foreign and local private banks weighed on the rupee, with traders also pointing to heightened demand to buy dollars at the daily reference rate. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
5 days ago
- Business
- Reuters
Rangebound patterns tighten rupee's correlation with Indian stocks
MUMBAI, July 18(Reuters) - The Indian rupee and local equities have been increasingly moving in sync over the past month as muted portfolio flows alongside lingering uncertainty over U.S. tariffs continue to cloud investor sentiment. The rupee's 30-day correlation with the benchmark Nifty 50 index has tightened to 0.66, the highest level since mid-May, pointing to the currency's increased sensitivity to moves in local stocks. On the day, the Nifty 50 (.NSEI), opens new tab was down about 0.6%, while the rupee dipped to last quote at 86.2025 per U.S. dollar as of 10:50 a.m. IST, down 0.1%. Local equities diverged from regional peers, led by losses in financial stocks. Asian currencies, meanwhile, were trading mixed and the dollar index was little changed at 98.5. Amidst the largely rangebound moves, the rupee's 1-month implied volatility has eased to a near one-month low of 4.2%, while the stock volatility gauge, India VIX (.NIFVIX), opens new tab, has retreated to 11.6 from around 14 a month earlier. Foreign portfolio flows, a key driver for both the rupee and local stocks, have also been muted, contributing to rangebound price action, a trader at a state-run bank pointed out. Both the local equity and FX markets are "lacking a clear direction right now," said Apurva Swarup, vice president at Shinhan Bank India, referring to the rangebound moves. News on the U.S.-India trade deal would be key to watch, as it could push stocks and the rupee to move out of their prevailing ranges, Swarup added. The United States is very close to a trade deal with India, U.S. President Donald Trump said earlier this week. Country-specific reciprocal tariff rates on exports to the U.S. are slated to go into effect starting August 1. On the day, dollar bids from foreign and local private banks weighed on the rupee, with traders also pointing to heightened demand to buy dollars at the daily reference rate.
