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Oil is in bear market territory, and one strategist says the crude crush is far from over. » Read More
The fate of the market lies in the hands of the next president of the United States, says one JPMorgan strategist.
"If Hillary Clinton wins, which is what polls are pointing to, the market will probably react favorably," Nadia Lovell said Thursday on CNBC's "Futures Now." "But if Trump were to win, I think that would be a surprise to the market and the market continues not to like uncertainty."
In other words, the market could fall after a Donald Trump victory due to such an event being the more unexpected outcome, whereas a Clinton win is currently seen as the more likely event based on poll numbers. Recent polls show that Clinton continues to have a narrow lead over Trump ahead of Sunday's second presidential debate.
"We saw the same thing happen in Brexit where [there was] a momentary pullback in markets, and then markets rebounded off of that after uncertainty," added Lovell. "So we look for markets to be somewhat range bound through the election and then if we do see a Hillary Clinton win, we would expect a pop on the market."
Leading up to the election, Lovell believes that health care is a sector for investors to look into, as many health-care companies offer attractive yields. While health care has dropped more than 5 percent since hitting a year-to-date high in August, Lovell does see an opportunity to buy the pullback.
"The space is trading at a 10 percent dividend discount to the overall S&P, that's well below its historical premium of 13 percent," said Lovell. "A lot of that pullback has to do with the election noise around the sector, particularly around drug pricing."
In the long-term, Lovell expects the S&P 500 to rise 6 to 7 percent in a year's time.
Gold's shining rally has taken a beating, but prominent gold booster Peter Schiff believes that the precious metal's time isn't over, thanks to his expectation of Federal Reserve hesitation.
Gold was pacing for its worst day since December 2013 on Tuesday, plummeting almost 3 percent as the U.S. dollar gained due to increasing expectations that the Fed is set to raise rates in December.
Rising rates tend to be bad for gold because they make nonyielding gold look worse in comparison. Rising rates also tend to increase the value of the dollar, which also hurts gold because each more-valuable dollar can buy more gold.
Schiff sees gold's rough Tuesday as a result of investors selling the metal in anticipation of a rate hike. But Schiff believes investors have it all wrong. The Fed's main condition for interest rate hikes is that economic data, particularly employment and inflation data, have shown an improving economy.
"I'm certain that all this talk about a recovery is wrong," Schiff said Tuesday on CNBC's "Futures Now." "The recovery is an illusion, it's just another gigantic bubble."
Schiff believes that economic data has "actually gotten a lot worse since [the Fed] didn't raise rates in September." Add on the uncertainty surrounding November's presidential election, and Schiff is doubtful that the Fed will even risk raising interest rates this year.
"Everybody wants to go to heaven, but nobody wants to die, and that is the problem," said Schiff. "We're never going to have a real recovery until we kill this phony recovery, but for political reasons, that's not going to happen."
Schiff, who has runs a gold selling business, has long been a critic of the Fed's policies, and is perennially bullish on gold. He has long been predicting collapses in the U.S. economy and the stock market that have not materialized.
The fed funds futures market currently pins the chance of the Fed raising rates by December at 63 percent, according to CME Group's FedWatch tool.
More market highs are on the way, according to a Wells Fargo strategist, who added there are a multitude of reasons why investors should still buy stocks.
Scott Wren, senior equity strategist at Wells Fargo Investment Institute, sees the market rallying all the way through 2017. Just how high could markets go?
Wren believes the S&P 500 Index could touch 2,290, and possibly even a little higher by the middle of next year.
"You're talking an excess of 8 percent, and that's why we still like stocks," he said last week on CNBC's "Futures Now."
This is even in light of the uncertainty surrounding November's presidential election.
While investors may be wary of market chaos following the election, Wren actually believes that the anxiety is misplaced based on what he's seen in the past during election time.
"Whatever the result is, the market's going to trade off of that for [two to four] weeks maybe," he said. "But then the market's going to get back to [focusing on] earnings and the economy over the next 6 to 12 months."
He added: "Whoever is president is going to have virtually nothing to do with that, so I think this election effect is going to be very short-lived."
In fact, Wren predicts that the only thing that may stop a market rally in its tracks is a series of rate hikes by the Federal Reserve over the next year.
While Wren sees the Fed raising rates twice between now and the end of 2017, he does believe that the market can weather the event as it has already priced in a December rate hike. But more than two over the next year could give the market an unpleasant surprise.
The S&P 500 traded slightly higher on Friday, paring losses from Thursday when the financial sector brought U.S. markets down fairly significantly.
The commodities' strategist who called the rally in crude this week says more gains are to come, as Saudi Arabia appears ready to play ball and scale back production—a move likely to boost oil prices.
"This speaks to the economic realities of lower oil prices that are really biting Saudi Arabia," said top RBC commodities analyst Helima Croft on CNBC's "Futures Now" this week. The world's largest oil producer, along with other major oil producers, has struggled economically with crude languishing below $50 per barrel.
"Saudi Arabia really had to give considerable ground to accommodate the Iranian demands to get the deal done," Croft told CNBC. "This is more than just a freeze. It's actually cutting from current levels."
A deal of this nature represents the first reduction since 2008. Once announced, the deal sent crude prices soaring over 5 percent on Wednesday before closing the week above $48. Now Croft, who has been calling for $50 oil for since the 2016 lows, explained that her firm remains bullish through the end of 2016, with the notion that a floor is now in place.
"It can continue to be choppy based on weekly stats, rig count numbers and broader macro trends," she added. "But we think we are done with sub-$40, barring a major macro meltdown panic, and firms the case for 50's by year end and trending into the 60's next year."
Croft told CNBC that her firm expects the pact to hold with a belief that the Saudis are willing to bear the lion's share of the reductions needed to get down to 32.5 million barrels of oil produced each day globally by OPEC members.
The agreement, slated to go into effect in November, would require Saudi energy minister Khalid al-Falih to oversee major production cuts in order to help reduce nearly 1 million barrels from the market on a daily basis.
Investors should brace themselves for a scary October for stocks, according to top technician Stephen Suttmeier.
"The worst three-month period of the year happens to be August through October," said Suttmeier. He noted that this weakness occurs in both a traditional market as well as during presidential election cycles. "What we are seeing right now is nothing unusual."
However, it's what he is seeing in one obscure indicator that has him anticipating a "deeper drawdown" in stocks.
"The risk is that a deeply overbought or tactically complacent VXV/VIX ratio, along with a lack of fear in the put/call ratios, limits upside and suggests some unfinished business to the downside in stocks," said Suttmeier.
He explained that the VXV/VIX ratio measures expectations of volatility three months out versus the expectations of volatility in the near term. Readings above 1.2 are overbought and readings below 1.0 are oversold.
"Tactical fear or oversold VXV/VIX readings below 1.0 have done a good job of calling market lows. The VXV/VIX closed at 1.306 on Friday," he added.
Rather than hit the panic button when the S&P 500 starts to slip back toward the 2,050-2,100 level, Suttmeier said investors should use the opportunity to buy the dip — as in the bigger picture he expects the large-cap index to eventually rise to 2,300.
"The good news is that we are getting closer to the time of the year when the seasonal mantra shifts from 'sell in May and go away' to 'buy in October and stay,'" he said. Suttmeier noted that the S&P 500 tends to rise an average of 5 percent during the period of November to April.
The S&P is tracking for its fourth consecutive positive quarter — with its best performance since the third quarter of 2015.
Despite all the uncertainty and rancor surrounding November's U.S. presidential election, one thing is clear: Past trends indicate that the economy could be facing a recession — and could drag the market down with it.
So believes Sven Henrich of NorthmanTrader.com, who crunched the historical figures that suggest, regardless of who becomes the next president, the markets could be in trouble. According to Henrich's analysis, data show that since 1960, 70 percent of new presidents face an economic downturn very early in their first term.
"Historically, that's not good for markets, as they correct between 13 to 40 percent during a recession," Henrich said last week on CNBC's "Futures Now."
Henrich contended that much of the trend could have to do with consumers' uncertainty during transitions between presidents, but he also believes that the coming election differs from those of the past. This, in turn, doesn't bode well for markets, and may heighten the chance of an economic slump.
"In this particular cycle, we're seeing something that we've never seen before in any U.S. election, and that is neither candidate, whether it's Hillary Clinton or Donald Trump, have a majority support within the population," said Henrich. "So no matter who wins, in January Americans are faced with a president that the majority doesn't support."
The latest NBC/Wall Street Journal poll showed that the lead by Democratic presidential candidate Clinton over Republican nominee Trump was narrowing, this ahead of Monday's first presidential debate.
"I have no idea how this is reflected in consumer confidence, but it doesn't seem to suggest that consumers will be very confident with their new president," he added.
One of Wall Street's largest firms has a clear message for investors: Keep calm and carry on with your long-term investment strategy.
"What you've seen investors doing is starting to chase other asset classes in a search for yield so they've been piling into things that they perceive as safe havens," explained JPMorgan's Stephen Parker on CNBC's "Futures Now" this week.
The bank's head of thematic equity solutions highlighted the recent popularity of minimum volatility exchange traded funds (ETFs). These instruments offer nervous investors the opportunity to invest in so-called safe haven stocks, such as utilities and consumer staples.
However, while these sectors currently offer attractive yields in a zero interest rate world, valuations are trading well above the market. For instance, consumer staples trade at 22 times forward earnings and utilities, which historically trade at a 20 percent discount to the market, are trading at a premium.
"When you think about safety, it is a reflection not just of the fundamentals, but also of the price you're paying," noted Parker. "We're telling clients to be cautious about chasing yields at this point."
If the Fed announces a September rate hike on Wednesday, investors better brace themselves for what could come next, says one market watcher.
"Every time the Fed has removed accommodation, whether it was the end of QE or last December's rate hike, the market had a tantrum," Peter Boockvar, chief market analyst at The Lindsey Group said Tuesday on CNBC's "Futures Now." "I'm not going to think that this is going to be anything different."
Last time the Fed raised interest rates was in December 2015. The S&P 500 proceeded to drop more than 9 percent in the next month off of the rate hike.
While the markets have stayed in a tight range over the last several months in spite of big events like Brexit and poor earnings, Boockvar warns that may not be the case this time around.
"The equity market has not cared about the trajectory of earnings, which is going to be negative for six quarters in a row," he said. "It hasn't cared about the trajectory of the economy, which is running at a 1.5 percent pace."
"It's only cared about a suppression of interest rates," explained Boockvar. "So any reversal of that, whether it's from the short end or the longer end, I think we're going to have another tantrum."
Boockvar is also keeping an eye on the potential fallout from the Bank of Japan meeting, which he believes will actually have more sway on global bond yields than the Fed meeting.
The Fed will announce its decision on Wednesday at 2 p.m.
Gold prices, which have been on a tear for most of 2016, appear to have peaked, according to one top market watcher.
This year's 24-percent rally in gold "was completely justified. It was kind of a perfect storm for gold," said RBC Capital Markets Commodity Strategist Christopher Louney on CNBC's "Futures Now" recently. Fears stemming from the U.K.'s vote to exit Europe, Federal Reserve policy jitters and worries about the economy appear to have run their course, Louney said.
Gold, a precious metal often seen as a safe haven for investors, has been losing its luster even since those risks and situations began to fade. Since hitting its high for the year on July 6, gold has dropped four percent.
"The majority of this rally was driven by two fundamental factors and they were both investor demand. So in our view, it really has been a one-legged rally," said Louney.
The bulls have history on their side, according to Oppenheimer technical analyst Ari Wald.
Just as the markets saw their share of ups and downs this week, future expected market volatility, as measured by the VIX, has gone through the same. The VIX hit its highest level in almost three months on Tuesday and the index has surged more than 30 percent since last Wednesday.
While that would generally be taken as a sign of rising investor anxiety, for Oppenheimer technician Ari Wald, "this volatility is marking an opportunity to buy stocks." Wald looks back to the history books to point out something that he sees repeating again.
"Since 1990, we've found that when the VIX spikes 50 percent and the S&P is in an uptrend, [for] the next six months, the S&P averages 8 percent gain versus an only 4 percent gain during any six-month period," he said Thursday on CNBC's "Futures Now."
Wald's chart shows that such a trend actually happened this year. Volatility spiked near the end of 2015 while the S&P 500 was on the rise. Though stocks did fall in February of this year, the S&P ultimately rose more than 10 percent from January to the end of June.
On a long-term chart of the S&P 500 versus the VIX, Wald shows that the S&P 500 recently broke through resistance, a breakout that coincided with a spike in the VIX.
In other words, Wald believes that a short-term market rally is in the works, and investors may want to cash in.
Oppenheimer has a year-end target for the S&P 500 of 2,250, meaning that they believe the market could rise almost 5 percent.
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