December 13, 2015
Weekly Market Outlook
By Keith Schneider
Equity markets did a disappearing act this week trying but not quite topping the trick of China’s self-proclaimed disciple of Warren Buffet, Guo Guangchang billionaire head of Fosun, now a multi-national conglomerate. Mr.Guo fell off the radar Thursday like many other leading CEO’s amid a broad corruption scandal engulfing China.
Fosun holdings include Club Med and Cirque de Solei and was just this week approved to buy and run a European bank by the ECB. So much for due diligence of central bankers and does not give one a warm and fuzzy feeling that those in charge of running the global financial asylum have had their own sanity check.
The scorecard currently after this week’s action has improved for the bears after the August swoon, and the subsequent vicious rally that took only the Nasdaq 100 to new highs on a very narrow rally. The S&P 500 never made it that far and has dropped about 5% from its October highs, now down about 2% for 2015. Friday’s breakaway downside gap has put the SPY into a bear phase, along with the IWM and DIA.
It’s had plenty recently of help considering the meltdown in the energy prices and collapse of junk debt related to the oil patch. Things are so dour that two large hedge funds that specialize in high yield junk have suspended redemptions. This leaves the question will this spread to equity based funds in a scramble for liquidity?
Icahn thinks so but recent calls of Apple being cheap and NFLX being overdone was off way off the mark. Even the biggest gurus get it wrong, proving that even they are mortal.
Let’s not forget that the Fed is on track to give us our first rate increase this week in 10 years and although it’s not a secret and should already be factored into current market levels, the markets have shown nearsighted behavior and could get unwound.
On the brighter side nations signed a climate accord agreement (hopefully making it easier to find corruption in Beijing) and with market internals weak, along with strong seasonals make this market are ripe for bounce ... Maybe. For a lot more about this volatile backdrop check out this week’s video.
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