Does the recent selloff in U.S. stocks and even larger selloffs in international equities, including emerging markets, suggest that the current bull market is near a tipping point, about to reverse itself?
Nicholas Colas, co-founder of DataTrek Research, writes that last week’s global selloff “is worrying,” but not definitive.
Indeed on Monday stocks ended the session mixed, with the Dow up slightly and the S&P 500 and Nasdaq posting slight losses.
Colas is looking at these capital markets for signs of what might come next for stocks:
1.The U.S. dollar. “Further dollar strength is our #1 worry, as it would cut into 2019 earnings estimates for large-cap, multinational US companies,” writes Colas, noting that higher yields haven’t yet lifted the dollar to new highs.
The dollar index (DXY) ended Monday at 95.77, below the index’s 2018 high of 96.73, posted on Aug. 14 when 10-year Treasury yields were at 2.9%, below today’s 3.23%.