BlackRock: 'What's Driving US Stocks? Irony'
After a week of unpredictability in the U.S. stock market, the market has calmed down for the moment. An official blog post by Russ Koesterich, of BlackRock, discussed what could be driving equities.
Any upside, he explained, "was more a function of slow growth rather than a booming economy." Apart from the labor market, local economic data are below expectations.
The Bloomberg ECO U.S. Surprise Index, which measures whether the data beats or misses estimates, is at its lowest level since 2009.
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For Jack Ablin, chief investment officer of BMO Private Bank in Chicago, observing surprise indexes helps gauge "when a particular national economy may be turning and looks for good value in equities," according to Bloomberg.
Meanwhile, Koesterich says that instead of partaking in selling, "investors are taking solace in the fact that low inflation and the moderating economic growth may lead the [Fed] to increase interest rates at a slower, gentler pace." The Fed's "recognition of the recent economic softness was interpreted as a dovish stance," he added.
The proof was simple: Treasuries rose after the statement was released.
The BlackRock specialist ended his discussed with a warning: "While U.S. stocks have managed to advance so far this year, the volatility of daily returns is already 25% higher than it was last year. Expect a continued bumpy ride in the months ahead."
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