My Comments: Anyone who suggests they know what is likely to happen to the markets in the coming days is probably just hoping they will be right. And that includes me.
A high percentage of significant market downturns have happened in August and September. This article suggests there is an event planned for the end of August that might be the trigger that starts the next one. Obviously we are now in September but the danger level is still high.
My suggestion is to either be in cash, or in a program designed to make money when the markets tump.
Bob Bryan – August 16, 2016
The market has one last run left.
Stocks could get a huge boost as investors worry about missing gains, according to Michael Hartnett, the chief investment strategist at Bank of America Merrill Lynch.
According to a note from Hartnett titled “The Final Melt Up,” the shift of investors from defensive stocks (such as industrials and telecoms) to more cyclical companies (retail, tech, and consumer goods) shows that investors’ appetite for risk is growing.
This will create demand for stocks and drive the market upward.
“Likelihood of melt up in risk assets into Jackson Hole growing … likely followed by jump in yields,” he wrote.
The chart below illustrates the rotation that Hartnett is noticing:
Essentially, a melt up by definition is a sudden leap in the market caused by investors rushing in because they fear missing out. It’s not a sign of improved fundamentals.
In other words, these companies and markets may not have higher earnings or be stronger investment opportunities.
Hartnett doesn’t go into the details of the end of the melt up, but the speech by Federal Reserve Chair Janet Yellen at the Jackson Hole conference at the end of the month appears to be the catalyst that will stop the stampede.