indexes in this article
• Volatility index still has room for improvement – stock markets could go further down
• Numerous analysts warn against buying shares prematurely
• Market bulls now see negative factors as sufficiently priced in
Many investors long for the end of the months of sadness on the international capital markets. But many analysts see such a hope as misplaced in view of a variety of stress factors.
Experts: US volatility index not yet negative enough
Market experts often refer to the CBOE Volatility Index (VIX) to determine when US stock markets have bottomed. This volatility index hit a 52-week high at 39 in early March 2022, after Russia’s shock attack on Ukraine. Last week, according to Forbes, this indicator stood at 35 – too low to mark the end of the stock market downturn, according to some analysts. Among those skeptics is Robert Schein, chief investment officer of Blanke Schein Wealth Management. According to Schein, the current VIX signals that the market has not yet bottomed and is likely to fall further. Even after last week’s “ugly” stock market declines, the VIX is still trading off its March highs – a sign that “investors believe there could be an even bigger sell-off in the coming months,” yahoo quoted as saying finance” bill. “If investors really believed the bottom was in, we would probably see an even higher VIX,” he added, pointing to the Federal Reserve’s looming interest rate hikes as a potential catalyst for future sell-offs. Nicholas Colas of “DataTrek Research” also believes that a VIX value of over 36 is necessary for a trend reversal to be achieved.
Other analysts, on the other hand, consider the already very high volatility to be a counter-indicator, i.e. a basically bullish signal. Market strategist Ryan Detrick from LPL also emphasizes that the extreme fear of investors is already reflected in both the VIX and in share prices.
Morgan Stanley analysts: US stocks are still too expensive
Morgan Stanley analyst Michael Wilson, who is generally regarded as bearish, still sees the US stock market as overvalued. The bull market between 2009 and 2021 distorted the price-earnings ratios upwards, the exaggerations of the market in recent years are far from being reduced by the sharp downturn on the stock market since January 2022. The significant rate hikes by the US Federal Reserve would inevitably slow down economic growth. Wilson therefore expects the S&P 500 to be even lower. As “Forbes” reports, Wilson expects a total slump of 30 percent. Only after such a sell-off will the US stock market barometer turn upwards again. For the spring of 2023 he expects a level of 3,900 points – i.e. at a slightly lower level than currently.
“We remain of the view that the US stock market is not priced in for this slowdown in growth from current levels,” Wilson wrote in a recent statement. “We assume that the volatility of the stocks will remain high over the next 12 months,” quoted “yahoo finance” the market expert. For this reason, Wilson recommends a defensive portfolio stance with an overweight position in healthcare, utility and real estate stocks.
Graham Secker, also from Morgan Stanley, agrees with his colleague. Although the stock valuations are increasingly reasonable, the risks outweigh the risks. “Let’s make it easy for ourselves – the macroeconomic background is very difficult for stocks,” emphasizes Secker in his analysis. For the European exchanges, the greatest risk would be a reduction in Russian gas imports. “Although investor sentiment is low and equity valuations are reasonable, the challenging fundamental outlook is likely to drive equities lower in the coming months.” Seckers therefore advises defensive value stocks and investments in the leading British index FTSE 100, since Great Britain hardly imports any Russian raw materials and is therefore relatively unaffected by the Ukraine conflict.
Berenberg: Buying the dip is “tempting” – but could be regretted
The analysts from the investment house Berenberg share the concerns about a rapid recovery of the US stock exchanges. It is certainly “tempting” to buy the dip – but the enormous macroeconomic burdens make the valuation level still appear very high. The S&P 500 could therefore test the 200-week moving average level of around 3,600 points. Here the market could turn up again, because only when the dot-com bubble burst in 2000-2003 and during the financial crisis of 2008 was this average broken down, as “yahoo finance” found out.
Bullish dissenting voices
Not all analysts agree with the pessimistic basic tenor. For example, Peter Oppenheimer, an analyst at Goldman Sachs, sees increasing opportunities for additional purchases. The enormous sell-off in recent weeks has made the price level of some promising titles more attractive. In addition, headwinds from inflation and interest rate hikes are already priced into current prices.
However, the analysts agree on one point: the further development of the global capital market will mainly depend on the future inflation data and the related US central bank decisions. As a result, the stock markets are likely to be a little quieter in the coming weeks: the publication of US consumer prices for May and the next Fed interest rate decision are not due until mid-June.
Editorial office finanzen.net
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