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S&P 500: Much bad news now priced in - NBF

According to analysts at National Bank Financial, the recent slide of the S&P 500 leaves much bad news now priced in.

Key Quotes

“To stabilize markets from this point onward we need: a resilient economy, good earnings, a steeper yield curve, a weaker U.S. dollar, and more visibility of a U.S.- China trade armistice. After a wave of downside economic surprises in recent weeks, the all-important U.S. employment report came in much stronger than expected for December — a gain of more than 300,000 payroll jobs. Though jobs growth is sure to slow in coming months, there is little to indicate that corporations are about to reduce headcounts (a sure sign of recession).”

“We argued last month that the future of financial markets had become less dependent on White House trade rhetoric (though calmer talk on that front would certainly help). We also needed the Fed to act. On January 4, Mr. Powell acknowledged that muted inflation provides more flexibility to set policy in the year ahead. With these comments the yield curve stopped flattening and the U.S. dollar softened. Since the S&P 500’s most recent low December 24, the greenback has lost ground against 27 of 31 major currencies. U.S. dollar weakness would go far to stabilize global financial markets.”

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