The headlines were all over the place; depending on whom you believe, the market sold off on Friday regarding concerns over the so-called Brexit, global growth worries, or overbought conditions. I suspect that you could also check the box marked ‘all the above.’
Fundamentals and Valuations
According to the FactSet Data, only 112 companies dared to issue guidance with second quarter results probably because 81 or 72% offered up negative guidance. Surprisingly, utilities joined telecom services with zero upside guidance while 88% of the consumer discretionary issued warnings.
There’s the action in U.S. Treasuries, which saw yields on the ten-year test to 1.63% that matched the February 11th bottom. However, stocks, oil, and just about every asset class is still significantly higher than their own Feb bottoms.
Safe Haven No More
Over the past 52-weeks, foreign investors have sold $128 billion in U.S. stocks; however, that number is a drop in the bucket compared to the billions of U.S. debt being dumped by foreigners. Much of that selling is coming as a result of the central banks under immense pressure to shore up their own economies, but there is more to it. To some extent, I am not sure how much we should worry; yields would be on the cusp of record lows if there wasn’t some demand, even though it’s largely phantom money printed by the Fed.
In many respects, the world has been living on borrowed time, partly because leaders can’t afford to reset economies with short- term hits. Therefore, it’s spending and borrowing and from time to time, ignoring obligations.
With that being said, I think there is still enough time to right the ship in America; if foreigners are selling American assets, it’s because they are in a lot more trouble than us.