Is The Market Priming For A Sharp Rally In Q4? Why Cantor Fitzgerald's Eric Johnston Has Reversed His Bearish Call

Zinger Key Points
  • The Fed will likely pivot by the December FOMC meeting: Cantor Fitzgerald analyst says.
  • Citing the recent movement in capitulation indices, the analyst says a strong rally could be in the offing.
Is The Market Priming For A Sharp Rally In Q4? Why Cantor Fitzgerald's Eric Johnston Has Reversed His Bearish Call

After a dismal September when major U.S. averages shed 4% or more, the equity market fought back with vengeance in the first trading session of October. At least one analyst is confident that things could look up in the final quarter of a disappointing year.

What Happened: Cantor Fitzgerald is now very bullish and the conviction is very high, Eric Johnston, Head of Equity and Cross Asset at the firm, said in an interview with CNBC on Monday.

The analyst noted that the firm looks at the market very unemotionally and that it checks with views every day based on the information available at that time.

“And what we are seeing right now is the following: inflation real-time is falling sharply,” Johnston said, adding every single data point of inflation is falling month-over-month. It has continued with rents and home prices falling as well, he noted.

See Also: Cathie Wood Says Fed Is 'Making A Mistake:' Expect To See Policy Pivot In 3-6 Months

The Cantor analyst said he thinks the Fed’s last hike is going to be on Dec. 14.

“We're a mere two months away from this Fed hike cycle being over,” Johnston said.

The capitulation indicators have all shown up in the last 10 days, with the VIX, the CBOE Volatility Index, hitting 34, the VIX curve inverting and the relative strength index going well below 30, he added.

“A number of others that all suggest we are going to have a sharp rally,” the analyst said.

Benzinga’s Take: Historically, the year-end has been good for markets, thanks to a combination of factors, including window dressing by institutions, tax considerations and investing year-end bonuses, which sparks what is called the “Santa Claus” rally.

Given the beaten-down nature of the stocks, traders are presented with another reason to hoard stocks, especially if macroeconomic fundamentals hold up. Fed pivot, if it materializes as predicted, could be in itself a motivation to increase exposure toward equities.

Price Action: The SPDR S&P 500 ETF Trust SPY rallied 2.64% to $366.61, according to Benzinga Pro data.

 

 

Posted In: Cantor FitzgeraldEric JohnstonInflationMarket RallySanta Claus RallyLong IdeasNewsGlobalFederal ReserveMarketsMediaTrading Ideas