Join        Login             Stock Quote

5 Reasons To Remain Cautious On U.S. Equities

 January 23, 2013 03:35 PM

US equity markets are touching multi-year highs as investors increasingly allocate to the risk-on trade. But there are a few signals that may indicate some need for caution - at least in the short-term:

1. As discussed earlier (see post), consumer sentiment remains quite weak, which could easily create headwinds for corporate earnings.

2. Energy prices have been on the rise, with WTI crude oil at the highest level since September.

3. Regional manufacturing data isn't showing much improvement. The Richmond Fed index came in significantly below expectations.

Richmond Fed Manufacturing Activity Index

[Related -Savings Glut and Financial Imbalances]

What's particularly troubling about this index is that the component tracking manufacturing output prices declined while input prices rose. Not great for margins.

Richmond Fed Manufacturing Activity Index

[Related -A Dividend Aristocrat Is Now On Sale]

4. At the national level, activity remains subdued. The Chicago Fed National Activity Index came in below expectations. It means that economic growth is still fairly weak.

Source: Econoday

5. From a technical perspective, the world all of a sudden turned bullish. According to Merrill Lynch, investor "cash allocations fell to the lowest level since February 2011" and "allocation to bonds fell to lowest level since May 2011". We may not yet be at a level professionals would view as a contrarian signal, but this should certainly signal a need for caution.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageSavings Glut and Financial Imbalances

Martin Wolf in today's Financial Times discusses the reasons for low interest rates and suggests some read on...

article imageA Dividend Aristocrat Is Now On Sale

The bear market investors have been dreading is already here for many individual stocks. While the S&P 500 read on...

article imageTwo Picks to Play Defense in a Slowing Economy

Is the economy slowing? Last Thursday the Institute for Supply Management (ISM) reported that its read on...

article imageUS Jobless Claims Fall, Moving Closer To Multi-Decade Low… Again

US jobless claims continue to cast a positive glow on the outlook for the labor market. Today’s weekly read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.