Tags: Adams | US | stocks | correction

Raymond James' Adams Sees Danger Signs for US Stocks

By    |   Friday, 22 May 2015 10:00 AM

While the six-year bull market for stocks, which saw the S&P 500 index hit yet another record high Wednesday, rolls on, many experts see trouble brewing.

"We have been expecting the market break out to new highs, but the rally has been a lot less exciting than we hoped for," Andrew Adams, chief market technician at Raymond James, told MarketWatch.

"What this tells us is that it's a traders' market — people are making very short-term bets and are staying away from big long positions, because valuations are high."

The S&P 500 carried a price-earnings ratio of 21.47 last Friday, up from 18.04 a year earlier, according to Birinyi Associates.

The breadth of the market's recent rise has been unimpressive, Adams notes. For example, only about 50 percent of NYSE stocks hit new peaks Monday. And trading volume is thin, slumping to its second lowest reading of the year that day.

"We are long overdue for a 10 percent to 15 percent correction, but until we get a meaningful pullback, a lot of value investors are going to stay on the sidelines. In the meantime, traders have been buying every dip and also selling every top, resulting in higher lows and lower highs," he added.

Lance Roberts, a portfolio manager at STA Wealth, is bullish on stocks for the short term. But he told MarketWatch that he's worried about the long term due to lofty valuations, weak earnings and economic sluggishness.

The S&P 500 is headed for an earnings gain of only 0.1 percent for the first quarter, analysts estimate, according to FactSet. And the economy grew only 0.2 percent in the first quarter.

Thomas Lee, founder of Fundstrat Global Advisors, is a lot more optimistic.

Indeed, he predicts the S&P 500 index will rise to 2,325 by year-end.

"In some ways, that's a catch-up because Europe has done great this year, Japan has done great," Lee told CNBC.

And what's going to push stocks higher? "The U.S. consumer is still one of the most important engines for growth," he said.

"They're showing signs of employment life, not necessarily spending life yet. But once that turns, especially we're seeing that in housing, I think the focus comes back to the U.S., and there's a nice earnings story."

The unemployment rate fell to an almost-seven-year low of 5.4 percent in April, and housing starts surged to a seven-year high. But retail sales were unchanged last month.

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While the six-year bull market for stocks, which saw the S&P 500 index hit yet another record high Wednesday, rolls on, many experts see trouble brewing.
Adams, US, stocks, correction
406
2015-00-22
Friday, 22 May 2015 10:00 AM
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