11 Reasons To Be Concerned About The Stock Market
The S&P 500 bounced back in early Monday trading, and it seems not even the weakest jobs report since 2010 can derail the U.S. stock market. Citi analyst Tobias Levkovich is among those who believe the S&P 500 is likely headed higher long term, but he urges traders not to kid themselves when it comes to downside risk.
“Selectivity will remain key in 2016 as it was in 2015 with a preference for large caps, value and higher quality.”
Citi sees 11 risks to the S&P 500 currently:
- 1. Valuation is perceived as lofty.
- 2. Credit conditions, especially in high yield, have worsened.
- 3. An alleged “industrial recession” is underway according to ISM, durable goods orders, etc.
- 4. The energy “tax cut” benefits do not seem to have come through.
- 5. Employment data is a lagging indicator.
- 6. Commodity prices and Transportation stocks are signaling a downturn.
- 7. Revenue trends have been lackluster, raising growth questions.
- 8. Margins have slipped already and could get worse from here.
- 9. The Fed and the stronger greenback could weigh on stocks.
- 10. China (and other emerging markets) remains a question mark.
- 11. Corporate spending has been focused on buybacks and not capex.
Despite all the risks, Citi remains optimistic overall.
“We remain generally constructive long term while advising investors to buy on weakness,” Levkovich explained.
So far this year, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 3.6 percent.
Disclosure: The author holds no position in the stocks mentioned.
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