The slow grind up of major US indexes continued today as investors push stocks higher on strong earnings.
Never Short A Dull Market.
With over 80% of US companies reporting earning beats, US equity investors are seeing no reason to sell this summer. Even in the face of a balance sheet unwind from the Fed, traders believe there is more growth to come in stocks. While chatter of a “top” are heard more and more, exposure to US equities remains high.
Shorts continue to get run over…I guess the old saying “never short a dull market” is holding true at the moment. We did see a spike in the VIX today, but that’s hardly anything to celebrate as it almost hit an eight-handle earlier this week. Some question if the VIX is the best measure of fear anymore, but why would investors fear anything right now? Just pull up a daily chart of the S&P500 and you’ll see why.
Nothing can shake this market at the moment, which is worrying to anyone who’s been around for a while. There’s a regime change happening, Central Banks are tightening. The almost daily US political issues, looming debt-ceiling, low implied volatility, crowded trades, passive investing phenomenon and geopolitical risks are all being overlooked. The bull market that won’t give up continues to reward those that are long.
European Equities Are Mixed.
European equities are in an interesting place at the moment. After a very strong first half of the year, where we saw the DAX reach record highs and many individual countries showing significant growth, not all is rosey anymore. Deutsche disappointed this morning, and other market stallwards have been mixed. Looking forwards, a stronger Euro and the possibility of higher rates (which are a way off yet) could put the brakes on European companies who rely strongly on overseas sales. While I wouldn’t go as far as saying Europe is heading lower, there are a few headwinds.
In saying that, there such strong demand for equities out there at the moment that I wouldn’t be surprised to see them continue higher. Emerging markets still look strong, and unless we see a significant risk-off event I’d be surprised to see sentiment change in the short term.