Bryn Mawr Trust’s Jeffrey Mills worries a disconnect between the stock market and economy is growing too big. “Stocks are discounting an environment that is not necessarily reflective of not only economic fundamentals, but earnings fundamentals,” Bryn Mawr’s Jeffrey… More and more loads continue to enter the spot market, fueled by produce harvests along with businesses reopening in many parts of the country.
The market rally off the March 23 low may be losing steam.
According to Bryn Mawr Trust’s Jeffrey Mills, there’s not enough juice left to drive another surge despite the Federal Reserve’s aggressive actions to keep the financial markets functioning.
“The liquidity injection that the Fed is introducing to the market is actually being tapered off,” the firm’s chief investment officer told CNBC’s “Trading Nation” on Friday.
Without another burst of Fed stimulus, Mills is concerned the recent rally is on borrowed time.
“The stock market has already discounted a significant degree of the economic recovery. So, incrementally improving data here might not do much to lift prices,” he said. “The risk reward isn’t great here.”
Mills, a CNBC contributor, highlights S&P 500 performance and earnings per share estimates as evidence of a growing disconnect between the market and economy.
Over the past few months, they’ve been moving in opposite directions. Typically, the track together.
Mills warns it’s an ominous signal for the market.
“Stocks are discounting an environment that is not necessarily reflective of not only economic fundamentals, but earnings fundamentals,” said Mills, who has $16 billion in assets under management.
He worries runaway valuations could be the rally’s undoing.
“Assuming that we maintain current levels around 3,100, that’s 26 times trailing p/e [price to earnings] multiples at the end of the year,” he noted. “For context, that’s the highest multiple that we’ve seen since the tech bubble.”
In mid-April, he cut his exposure to stocks. Mills remains slightly underweight, but he has been tilting his exposure to more economically sensitive stocks.
“If the market does continue to move higher, even if fundamentals don’t support that, what we’ve seen is those beaten down, lower valuation small and mid-cap and value stocks do well. So, that should be a tailwind for our positioning,” he said. “If things get dicey again, at least we have that underweight hedge to protect us on downside.”
Mills believes the biggest mistake an investor can make is being too optimistic or too pessimistic in this environment.
“You have information that’s all over the map. Sentiment data isn’t really clear. One day you get a positive virus headline. The next day you get a negative one,” Mills said. “Positioning needs to be somewhat nuanced.”
Author: Stephanie Landsman
The risk-reward in the stock market isn’t looking good, warns fund manger overseeing $16 billion in assets
“The liquidity injection that the Fed is introducing to the market is actually being tapered off,” Mills went on to say. “Stocks are discounting an environment that is not necessarily reflective of not only economic fundamentals, but earnings fundamentals.”
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Mills said that using trailing price-to-earnings as a measure, valuations haven’t been this high since the tech bubble. In this climate, Mills went to underweight in stocks mid-April.
“You have information that’s all over the map. Sentiment data isn’t really clear. One day you get a positive virus headline. The next day you get a negative one,” Mills said, explaining that investors need not get too bearish or too bullish. “Positioning needs to be somewhat nuanced.”
Watch the interview:
Last month, Mills spoke of the benefits of having cash on the sidelines in this climate.
“When people ask me, ‘How should I be invested? I need this money in one or even two years’ time.′ I tell them they probably shouldn’t even be in the stock market at all,” Mills told CNBC, adding that the advice applies now more than ever.
Author: Shawn Langlois
Increased demand boosts truckload markets, but momentum has slowed
Percent Change: +0.4%
Fuel Price: $2.4 /gallon
June 8 – 14 – More and more loads continue to enter the spot market, fueled by produce harvests along with businesses reopening in many parts of the country. The pace of that recovery slowed last week, while the number of new COVID-19 hotspots has grown.
NEW! Forecast freight prices with the one-of-a-kind RATECAST tool from DAT iQ. Learn More >
For the latest freight forecasts in response to COVID-19, visit DAT.com/COVID-19.
For more info on lane rates, read the Rate Trend of the Week on the DAT blog.
Trendlines shows a weekly snapshot of the month-to-date for national average rates from DAT RateView. National average spot market rates for the past four months, including fuel surcharges, are shown in the three graphs, above.
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Trendlines last updated: 6/21/2020 12:00:00 AM
Next update: 6/22/2020 12:00:00 AM
Author: DAT Solutions