A Possible Short-Term Bottom for Stocks, However Credit Continues to Loom

By James Dondero | October 2, 2015

  • Stocks finally had a good week, as both the S&P 500 and NASDAQ held their August 24th lows. Even more important is that both exchanges saw few new 52-wk lows in the (testing) process, which suggests the market has likely put a short term bottom “in place.”
  • That being said, widening credit spreads remain not only a headwind – but our primary concern. Last week again saw high yield bonds move lower while US Treasuries moved higher, and until this ‘risk-off’ tone changes it will be hard for stocks to mount a sustainable advance.
  • “Lower for longer” on interest rates could clearly help commodities stabilize. That being said, while the US Dollar has been moving sideways the past several months we believe it remains in a long-term bull market, which investors should clearly take into account in their planning.
  • Finally, looking overseas developed markets continue to present stronger charts than those in the emerging markets. This is not only important to country allocation decisions, but also because trends in the emerging markets have been leading those in the developed.

 

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