Expert Says S&P Will Surge in Next Two Weeks!

by PATRICIA HolmesBusiness

The blue-chip S&P 500 Index will surge 5 percent to reach a new record level in the next two weeks, investing expert Tom DeMark stated recently. He estimated that the benchmark index will rise to a level of 1,480 before global market participants become tired of the benchmark and begin selling it, according to Bloomberg.

Accurate Forecaster

Having studied the inflection points for the movements of asset prices and provided consulting to hedge funds such as George Soros’s Soros Fund Management LLC, DeMark provided an accurate prediction when he stated that the S&P would stop depreciating at 1,076 and the group of stocks started moving upward again once it reached 1,074.77 on Oct. 4, the news source reports.

‘Unfinished Business’

Demark wrote in an emailed statement that the index’s rally will fade out before it falls between 12 and 17 percent, the media outlet reports. He said that “there is still some unfinished business upside that will totally surprise and shock most market followers,” and that the recent “rally is a solo move in a sense that the overall market trend has been down since September 14.”

The S&P 500 has spiked as much as 15 percent after falling to its recent low on June 1, as markets were bolstered by news that central banks around the world will stimulate the economy through monetary easing, according to the news source. After reaching 1,474.51, its highest value of 2012, the index has since fallen 3.9 percent as markets have been roiled by worries that corporate earnings will not be in line with the expectations of analysts.

No Indicator for End of Rally

DeMark said that the S&P 500 has not exhibited behavior that would indicate that its rally is over, the media outlet reports. He said that other indices such as the Nasdaq have already reached their top value since September and have subsequently declined.

He said that the current inability of the index to complete a ‘top countdown’ is similar to its behavior in August and September of 2011, when the group of stocks did not indicate that it had reached a valley, according to the news source.

Bloomberg reported on October 22 that the blue-chip S&P 500 Index had surged 14 percent year-to-date, and as a result had displayed better performance than any other major asset class. 

Corporate Bond Sales Surge in 2012

by PATRICIA HolmesBusiness

The sales of corporate bonds have surged in 2012, approaching the record amount issued in 2009.

Near-Record Bond Issues 

Data compiled by Bloomberg reveals that earlier in October, global conglomerate General Electric Co. sold $7 billion worth of these financial instruments derived from corporate debt. Business application provider Oracle Corp. issued $5 billion worth of these corporate bonds.

These major issuances brought October’s total bond sales to $347 billion, which represented a new record for this month, according to the news source. The monthly sales figures left the 2012 corporate bond sales total within $116 billion of the record $3.4 trillion issued during the first 10 months of 2009.

Emerging Market Bonds 

Data provided by Benzinga reveals that the market for emerging market (EM) corporate debt has been growing this year, as the sovereign debt of these economies is experiencing strong demand and dwindling supply.

Investment firm Pacific Investment Management Company, LLC (PIMCO) recently wrote that “the supply of U.S. dollar-denominated EM sovereign debt is decreasing and yields are near historical lows,” according to the news source. As a result of this, the investment firm is encouraging market participants to explore the corporate debt offered by companies in these regions.

In a recent PIMCO note, Ignacio Sosa and Anton Dombrovsky stated that “the dollar-denominated EM corporate market has been growing steadily, and many corporates can offer higher yields and lower durations than sovereigns.”

Surging Bond Markets 

Exchange traded fund provider WisdomTree recently said that the market for corporate bonds in these developing economies has increased roughly 100 percent in size since 2008, the media outlet reports. In a note written earlier in the year, WisdomTree wrote that “since 2003, EM U.S. dollar-denominated corporate bond issuance has outpaced sovereign issuance in a trend we believe will make EM corporate debt an increasingly larger allocation to emerging market fixed income.”

Bonds and Monetary Easing 

In the week of the financial crisis, governments have injected record amounts of money into the economy and keeping interest rates at very low levels, according to Bloomberg. Many market participants have also sought bonds amid strong risk aversion. These factors have helped push the yields on sovereign debt to 0 percent or even lower, which has motivated investors to put their funds into corporate debt.

“There’s a lot of money out there looking for a home,” Elisabeth Afseth, an analyst at London-based Investec Bank Plc., who suggests investors refrain from putting money into debt issued by euro zone nations including Spain, Italy and Portugal, told the news source. “Government bonds give you almost nothing, so you’re left with corporate bonds, which give you a little bit more than nothing.” 

Great News! Financial Bonds Create Record Returns!

by PATRICIA HolmesUncategorized

Financial bonds are currently on track to generate their highest annual returns ever, and this robust appreciation has motivated market participants ranging from Pacific Investment Management Co. (Pimco) to DoubleLine Capital LP to predict that the four-year rally will soon come to an end.

Sharp Appreciation 

Index data provided by Bank of America Merrill Lynch indicates that debt-based financial instruments issued by major financial services firms JPMorgan Chase & Co. to HSBC Holdings Plc. are currently on track to reach an annual return of 15.4 percent, according to Bloomberg.

If these bonds perform this effectively, they will surpass the robust return of 15.2 percent that bonds generated in 2009, the media outlet reports. The aforementioned financial bonds are currently outperforming industrial notes by 4.3 percent in 2012, which is the largest spread between the two groups of assets on record.

Global Economic Threats 

Although these bonds are generating substantial returns this year, speculation has been mounting that yields have been reduced to a point where investors might be prohibited from buying the debt-based instrument, considering the risks that are currently present in the global economy, according to the news source.

Any deterioration in the euro zone fiscal crisis could aggravate the existing interconnected nature of the global banking system. Pimco is currently in the process of selling some of its financial bonds, after speculating 15 months ago that these debt-based instruments could appreciate further.

The International Monetary Fund recently lowered its economic growth predictions for emerging markets, predicting that they will expand at an average rate of 5.8 percent during the five-year period through 2016. This figure is almost 2 percent lower than the rate of growth they had during the five years before the 2009 global economic downturn.

Bond Market Future

“It’s difficult to see the catalyst for further tightening in bank spreads,” Bonnie Baha, head of global developed credit at Los Angeles-based DoubleLine, which has more than $45 billion under management, told the news source. “They’ve had a terrific run this year.”

While the bonds issued by major financial services firms have experienced robust appreciation so far in 2012, Pimco founder Bill gross has predicted that the economy will produce many years of low bond returns, estimating that the debt-based instruments will return an average of between 2 and 3 percent annually.