The stock market loves to climb a wall of anxiety.
We have certainly seen it during the past two months. Despite the anxiety of US debt escalating and the effects of customs tariffs on inflation and economy, S&P 500 gathered 20 %. Technological stocks have done better. Nasdaq, the home of most technology leaders, increased by 27 %.
The gathering, since President Trump temporarily stopped most of the mutual definitions announced on April 2, is the so -called “Liberation Day”, for a period of 90 days, was impressive.
However, there is a good reason for anxiety, especially since the S&P 500 is challenging at all times, and it can be said that its evaluation has become crowded again.
The risks that stocks can lose some of their luster after they caught the attention of many veterans in Wall Street, including the long hedge fund manager Doug Cas.
Cass has been traveling in the markets since the 1970s, including as a research manager for Omega Lyon Copperman’s advisers, and his experience during good and bad times helped him properly sell to sell earlier this year and below the market in April.
This week, Cass has updated his expectations in the stock market, including an amazing long list of red flags for the reason for investors.
Doug Cass expects the stocks to restore some of her recent gains. Thestreet
The best settings for returning the returns is the market that is increasingly increasingly working to reset the price ratios to profits to levels near the minimum of its historical averages.
In February, when the stocks were getting the highest levels ever before the tariff fed by the tariff, the P/E of S&P 22 was dismantled, and most of the measurements were flashing.
The sale during early April erased a lot of this comfort, as the P/E of S & P 500 to 19 and less than five years from 19.9-not their prices, but it is low enough to help the stocks from severe sale readings. As a reminder, the CNN’s Fear & Greed was in “severe fear”, and most of the measures were high in the days after the tariff was announced on April 2.
Now that the stock market has returned near its highest level, feelings have turned into optimism again, with the CNN scale flash. Since profits expectations did not increase financially, the P/E S & P 500 North 21 – barely cheap.
S&P 500 forward to profits is 21.6 on June 15, according to FactSet.image Source & Colon; Thestreet
“The complications of the evaluation have expanded in a relief process from mid -April until now, and the S&P 500 is now circulating with profits to the front 21x and 35 % higher than the average, and it wrote Bank of America on June 14.
Doug Cas has successfully tracked the market until the seventies of the last century, interest rates of two numbers in the eighties, the savings and lending crisis, the internet and statue boom, the great recession, the pandemic, and the bear market for the year 2022.
He saw a lot throughout his career, which lasted almost 50 years, making the stock market warning now worth paying attention to it.
Cass On wrote Thestreet Pro. “There is a small space for disappointment.
More economic analysis:
Anxiety may be that stocks may prices in most good news are likely to be a continuous commercial negotiation that may have an advantage, given that China’s Chinese commercial news this week left the tariff at the current levels near 55 %. Since the effect of definitions flows through supply chains, inflation may start to rise within months, which dares family spending and business.
Unfortunately, this is not the only danger to a cup’s mind. The money manager has provided a long list of threats that could hinder the shares.
It is a long list, so you may want to fill your drink. He writes:
Political and political polarization, political and competition is likely to be translated into a lower political centralization and anxiety reduced by deficit, creating structural uncertainty, limited financial discipline, influence around the world … and for the potential for Disanchor markets.
Cracked in the basis of the market is multiple and deeper, but is ignored (as the changes in the market structure led to the price of price (fear of loss) are preferred over the value and a proper sense).
With the S&P 500 in about 6000, the negative risks stutter the ups of the shares-by about 5-1 (negative).
Ratrictions (price profit ratio 22-Time) and expectations (consensus) for economic profit growth and all companies are amazed.
He is rejected, the CEO of JPMorgan, Jimmy Damon, and others comments on contentment with contentment with consent to contentment that the corporate credit market is “ridiculous.”
Find soft data (see weak ISM last week and climb in unemployment claims) to move to (weaken) the difficult data led by the slow housing market is likely to provide evidence in the near -term exposure to the middle class and vulnerability.
Under the economic growth in the trend (housing will lead us to some extent), along with sticky enlargement in the future (“inflation”)-is uncomfortable for the federal reserve that must make increasingly more difficult decisions.
Corporate profits growth (rise +13 % in 1Q2025) will decrease significantly in the second half of this year.
The stock risk is divided low for two decades-usually consistent with a slide in the stock.
The S&P profit revenue is a semi-record decrease of 1.27 %-the spread between the profit revenue and the US treasury yield for 10 years was wide. With a lot of possible negative results, my basic forecast is for seven meager months to the balance of 2025.
It is clear that Kass is tense that any one or a mixture of opposite wind can cause stocks to restore some gains.
What should investors do? Over time, the stock market rises to the right, so it is often better than long -term horizons to stick to their plan, with realization that there will be bumps and bruises along the way.
However, investors who have the shorter horizon may want to curb some risks, answer some profits, and increase the “dry powder” to take advantage of any weakness if it proves a cup warning.
