TGIF. It had been a painful week for stocks–until today that is, as big gains in GameStop (GME), Cognizant Technology Solutions (CTSH) and Newmont Mining (NEM) have helped push the S&P 500 higher.
Why the brighter outlook? Wells Capital Management’s Jim Paulsen offers two reasons: confidence and emerging markets.
For starters, he believes that confidence will trump rising interest rates. He writes:
Interest rates are starting to rise in this recovery but so is confidence. Despite concerns this year about higher interest rates, the speed of the Fed’s exit strategy, disappointing weather-impacted economic reports and some old school Cold War rumbles, consumer confidence rose to its highest level in more than six years in March! If history is any guide, so long as confidence continues improving, the stock market may surprise many by its persistence despite higher yields and Fed tapering. So far, the primary reason yields are rising and the Fed is considering monetary policy normalization is because “confidence” surrounding the economic recovery is improving.
Indeed, in judging when the stock market may pause, rather than watching the Fed or interest rates, history suggest investors may be better served by staying focused on confidence.
And what about those emerging markets? Well, this week they’ve been rising–a lot. The iShares MSCI Emerging Markets ETF (EEM) has gained 5% this week as of 1:56 p.m. today, while the SPDR S&P 500 ETF (SPY) is down 0.3%. How extreme has the turn in emerging markets been? Consider this chart:
The upshot: “If [emerging markets have turned,” Paulsen says, the overall stock market “is likely to get a boost.”
The S&P 500 has gained 0.3% to 1,855.38, as GameStop has risen 6.9% to $39.90 after falling 4% yesterday following disappointing earnings, while Cognizant Technology Solutions has advanced 5.2% to $50.07 after it was upgraded to Overweight at Morgan Stanley. Newmont Mining is up 4.7% as gold miners rally.
No comments:
Post a Comment