Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

2320

Equity markets “experienced rally last week”

RELATED TOPICS​

Equity markets experienced a long-awaited rally last week on the heels of a series of announcements from Citigroup, Bank of America and JPMorgan that they have been profitable in the fi

Equity markets experienced a long-awaited rally last week on the heels of a series of announcements from Citigroup, Bank of America and JPMorgan that they have been profitable in the first two months of the year, according to Bob Doll, vice chairman and global chief investment officer of BlackRock.

Doll says investor sentiment also improved on news that the uptick rule designed to limit short selling might be restored and that some mark-to-market accounting requirements might be liberalized.

For the week, the Dow Jones Industrial Average soared 9.0 per cent to 7,224, while the S&P 500 Index and the Nasdaq Composite each jumped 10.7 per cent to close at 757 and 1,431, respectively.

Adding to the improved environment last week was some good economic news that came in the form of retail sales figures. January’s data was revised to show that sales actually rose, and February’s numbers were down only slightly.

It appears possible that overall first-quarter retail sales growth will net out to around zero, a much better scenario than was widely anticipated only a few weeks ago, says Doll.

Importantly, this leveling off has occurred even before the recently passed stimulus package has started to have an effect. That said, the overall economic environment remains troubled, and as Federal Reserve Chairman Ben Bernanke said last week, ‘Until we stabilize the financial system, a sustainable economic recovery will remain out of reach. In particular, the continued viability of systemically important financial institutions is vital to this effort.’

Doll still expects overall first-quarter gross domestic product growth to be weak as a result of inventory liquidation.

Much attention has been paid to the range of government action that has been taking place. While much has been done, Doll believes policymakers still need to do more. In particular, he does not believe current monetary policy is stimulative enough to offset the credit market freeze.

‘The Fed has slackened in its quantitative stimulus measures and has recently allowed its balance sheet to shrink, a move we believe is a mistake. More widely, US policymakers as a whole appear to have a diffused focus on the economy. We believe more aggressive action is needed in terms of removing toxic assets from bank balance sheets.

‘In addition, the current discussion of higher income tax rates for high net worth individuals, increased taxation on capital gains and dividends, and other potential tax changes have the markets concerned and should be delayed. We also believe that an at-least temporary suspension of mark-to-market accounting requirements would be a positive and that the uptick rule should be reinstated.’

Doll adds that last week’s positive move in the stock market appeared overdue, and it remains to be seen whether this represents the beginning of a turnaround or merely a bounce from oversold conditions.

‘Some evidence suggests that market conditions are improving. The rally was broad-based and volume was heavy, which are strong technical factors. Additionally, lower-quality stocks have been outperforming, which usually happens when markets rebound. Nevertheless, it remains entirely possible that we are still in the midst of a bottoming process. In our view, the market needs to see clearer evidence that the banking sector has stabilized and that the economy has bottomed before a sustained rally can occur.’

Latest News

Global index revenues increased 9.3 per cent in 2023, totalling a record USD5.8 billion, according..
Octopus Investments (Octopus) has announced it has launched a Natural Capital Strategy...
Research firm focused on Alternative UCITS funds, Kepler Absolute Hedge, has published its Market Intelligence..

Related Articles

Trends
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100 million deals announced this month alone...
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100..
Different flavours
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers...
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led,..
UK map
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be worth billions of pounds in the coming years...
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be..
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a possible buyout of EY’s Italian consulting branch...
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by