Bullish investors have emerged from their late 2018 hibernation. Cash is piling back into the riskiest corners of the market.
“The market oversold tremendously in December,” said David Kelly, chief global strategist at JPMorgan Funds. “The things that fell the most were the ones likely to the rise the most.”
Green light from the Fed
“Fear of a credit event” in December “caused Fed capitulation,” Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, wrote to clients on Friday. “It worked.”
“We’ve seen quite a dramatic shift in the Fed’s outlook for monetary policy in just the past two months,” said Kelly.
But some think Wall Street’s euphoria over Fed policy is misplaced.
“People have to ask themselves: Why is the Fed pausing?” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It’s not because they met their objectives. It’s because the data and markets have scared them.”
If the Fed’s fears come to fruition, then a severe slowdown could be in the offing. That would be bad for stocks. If the Fed is being too cautious, then it may have to aggressively raise interest rates to catch up to inflation.
“Either scenario, I wonder how much more upside there is to equities,” said Boockvar.
“People aren’t paying enough attention to the possibility that this expansion could continue for quite a few more years,” he said.
2. The fate of Sears: This week could determine whether Sears survives. A US Bankruptcy Court judge will hold a hearing starting Monday about Sears’ plan to sell its assets to its chairman, Eddie Lampert, who wants to keethe 133-year-old company in business.
The hearing will probably unfold over the week. Sears hopes to have a decision that approves the sale by Friday.
4. Google isn’t slowing down: In the final three months of 2018, Google’s CEO was grilled by Congress about data privacy, its employees around the world walked out over sexual harassment scandals, and it disclosed a security bug impacting the largely forgotten social network, Google Plus.
5. General Motors reports earnings: General Motors will report financial results Wednesday. It’s the company’s first quarterly report since it announced plans to cut 8,000 salaried staff and close five plants in North America.
Analysts are forecasting lower earnings for the quarter and the year. But the cutbacks aren’t a response to financial distress. Instead, GM says it wants to trim costs and free up funds so it can invest in electric and self-driving vehicles. Analysts will be looking for more details about its investment plans when results are released.
6. Coming this week:
CNN Business’ Seth Fiegerman and Chris Isidore contributed to this report.
Source : CNN