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The Dow Jones Industrial Average may have fallen nearly one percent since coming within a fraction of 20,000 two weeks ago, but one top Wall Street strategist says it isn't an indication the rally inspired by President Donald Trump has ended.
PNC Asset Management's Bill Stone is telling investors to stay the course despite the Dow's third loss in four weeks.
He predicts stocks still have the ability to hit new highs this year, adding that markets are in an 'indigestion' phase for right now.
"A lot of it has to do with how strong things were. When you look at the really strong areas – financials, energy, small caps – they went on a tear post-election," Stone recently told CNBC's "Futures Now." "Over the past month now, they are down a bit."
With that he said, "I'd say that's still the place to look for opportunities."
While OPEC's key oil producers have been adhering to December's output cut deal, which also included non-OPEC producers, strategist Helima Croft says investors shouldn't expect a big breakout in crude prices this year.
The head of commodities strategy at RBC Capital Markets says the main problem for the commodity remains "bloated inventories."
"That's why we don't think we're going to break out into the $60s or $70s anytime soon," Croft said Tuesday on CNBC's "Futures Now." "We're going to grind higher, [but] it's really the inventory that needs to be worked off to move much higher in terms of prices in the near term."
A note released by RBC Capital Markets last week noted that oil prices could hit $60, but that this 15 percent increase from current levels will likely not happen until the end of the year. The long-term price target reflects Croft's belief that because of oil's inventory excess, the commodity will be moving "pretty sideways" unless a major news story occurs.
"That's why I think this OPEC compliance meeting this weekend is important," said Croft. "If there is some negative headline coming out of that, that's a catalyst to have a sell-off."
OPEC members surprised many by agreeing to cut production of crude in December. But concerns that the cartel's second-biggest oil producer, Iraq, will adhere to the deal have left other countries nervous as to the agreement's future, according to Croft.
Even if the accord is adhered to, U.S. production could cap oil's gains.
"As a result of the increase in prices, we are going to see a substantial amount of oil pouring into the market from the United States," the International Energy Agency's executive director, Fatih Birol, told CNBC.
Believe the Trump rally is losing its footing? You may want to explore investing in gold.
Ambrosino Brothers Senior Vice President Todd Colvin, a trader who has worked on the Chicago Mercantile Exchange trading floor for more than 20 years, pointed out some key patterns that currently support owning gold.
"We're looking at treasury yields creeping lower as well. So you've got everything kind of dynamically moving here," he said. "Gold is a good place to park some money until we start to see the dust settle."
Last week, the Dow Jones Industrial Average came within a whisker of 20,000, a key psychological level, for the first time on December 13. Despite the index's failure to hit that milestone, the index has actually soared eight percent since the November presidential election.
During that same period, gold prices have fallen more than six percent, a sign that the yellow metal might be poised to rebound. Bullion recently set an important bottom near $1130 per ounce, a level traders are now watching very closely.
"This market is way, way oversold on the fact that everything is solved and the [Federal Reserve] is going to raise rates and the economy is back on its feet. I'd like to see some proof in this first quarter data before I write that off," he said.
Yet it could still shape up to be a long season, as a new administration takes the helm at the White House. President-elect Donald Trump's inauguration is Friday, and the uncertainty surrounding which economic policies could be enacted is contributing to Colvin's case to own gold.
"I think gold right now is a kind of wait and see place to be," he said. "Certainly, the Fed is going to have an influence, the dollar is going to have an influence—but ultimately all that is very over-hyped and I think the market needs to take a step back, and gold is a good place to watch from," Colvin added.
Even though Colvin projects the precious metal should reach $1250 an ounce over the next 30 to 60 days, he is telling investors to be vigilant.
"Right now we need to see a $1200 [an ounce] sustainable trade in gold," he said. "If we can't hold it, $1175 is your downside 'get me out' because if we get back down there, I think it starts to turn a little negative."
The Trump rally is on its last legs, and according to one strategist, that means stocks could see a huge drop in the coming months.
Since the election, the S&P 500 Index has rallied more than 6 percent while the Nasdaq hit another record intraday high on Friday. Meanwhile, the Dow Jones Industrial Average continues to hover just under the 20,000 level, underscoring what some analysts believe is a market that's starting to look too frothy.
"The U.S. market, we feel, was already overvalued going into the election," Mark Eibel, director of client investment strategies at Russell Investments told CNBC's "Futures Now"last week.
"It got even more extended, and I think you're seeing this year almost a re-balancing into some of those other areas, whether it's bonds, whether it's emerging markets."
Emerging markets initially under-performed the S&P 500 following the election, but has rallied 5 percent to start the year versus under 2 percent for the U.S. index.
"A multi-asset platform, we think, really plays well in 2017, and that's what we've seen so far," added Eibel.
He did stress that it doesn't mean another run up in stocks is impossible, but with U.S. equities trading at a premium, gains will be more difficult when compared to other parts of the world. This is especially true, given that Eibel believes stocks are in "wait and see" mode ahead of Trump's inauguration.
While the strategist points out that generally, stocks do rally between every election and inauguration regardless of who wins, he does think that much needs to be seen from what Trump will do once he officially enters the White House.
This week, the president-elect sent biotech stocks tumbling on Wednesday following a press conference where he commented on drug pricing. His tweets on certain autos and defense stocks have also sent ripples across the markets.
President-elect Trump's policies will help the U.S. economy, but they won't be enough to save stocks long term, said widely followed perm bear Marc Faber.
"Mr. Trump is pro-business, so it's natural that the mood has improved among the small-businessman, corporations and investors," Faber said Thursday on CNBC's "Futures Now."
But even as Faber expects equities to keep rising, he noted that stocks are only climbing to a "higher diving board" and it will "not be very friendly" to investors if things start to turn.
"I think Mr. Trump will have a better economy, but that doesn't necessarily mean that asset prices will go up, because they are already grossly inflated," he said. Still, Faber's rhetoric was less alarming than in previous interviews, where he called for a collapse worse than in the late '80s.
"If someone wants to be in the market, and I always have part of my assets in equities, then I think other markets than the U.S. are more attractive," said Faber. He noted that in 2017, Argentina, Brazil and the emerging markets ETF are already outpacing the S&P 500. "Foreign markets will outperform the U.S., and if both go down then the U.S. will go down more," he added.
"The only space I like in the U.S. is essentially gold shares, silver and platinum. You have great gold mining companies in the U.S.," he explained. Gold prices are up 3 percent so far this year with the miners rising more than 8 percent in the same period. "I think that gold has performed fantastically well," he added.
Ultimately, Faber expects that the economy will stall out and deficits will rise, forcing Trump to go "begging the Fed to launch QE4," which will cause the dollar to weaken and "precious metals to go ballistic," he explained.
As investors await the Dow Jones 20,000 with baited breath, one widely followed chart watcher believes the current market rally is actually on its last legs.
On Friday, blue chip shares in the Dow Industrial Average flirted with the psychologically charged 20,000 level, which have largely been driven higher by anticipation over President-elect Donald Trump's business-friendly policies. Yet a few observers think the party is nearly over, and the punch bowl is about to run dry.
"Risk has been priced out of the market," said Sven Henrich of NorthmanTrader.com on CNBC's "Futures Now." Henrich, who is known online as the Northman Trader, said that despite the abundance of optimism on the part of investors, technical indicators could be pointing to some near-term pain.
According to the Northman's chartwork, every time the S&P 500 Index has hit new highs, it eventually retreats back towards its weekly 25-day moving average line, which would translate to a 4 percent pullback from current levels. The S&P 500 has rallied 6 percent since the election, and hit an intraday record high on Friday.
"I would expect that at some point there would be a buying opportunity for people who may want to invest in this market," said Henrich. "But if this line breaks, we may see significantly more downside that we've seen in previous corrections as well."
What's more, Henrich also believes that the S&P 500 has continued to trade in a "bearish wedge pattern" that began just after the end of the last recession. The wedge pattern Henrich speaks of consists of two trend lines: One that runs along the S&P's highs and a second that runs along its lows, that look to meet sometime in 2017. It is at that point that Henrich believes the rally will have run its course, and a downside will soon follow.
On a fundamental basis, the Northman Trader is troubled by "record debt levels" that the global governments have incurred.
"In 2016, the U.S. government ran a deficit of over $600 billion," explained Henrich." "If we now add tax cuts and stimulus spending, you're either going to have to cut a significant amount of programs somewhere, or you're going to end up with an even larger deficit."
A major Wall Street firm is encouraging investors to start looking for opportunities in Europe, even as uncertainty surrounding Brexit and upcoming elections in the region linger.
BlackRock, which formally upgraded its rating on European assets to neutral from underweight, believes this could be a 'contrarian' way for investors to profit this year.
"We think a lot of the risk is starting to be priced in. So, you're actually being paid a nice premium," said Terry Simpson, the firm's multi-asset investment strategist this week on CNBC's "Futures Now."
According to Simpson, BlackRock is "actually starting to inch back in... This is still a very undervalued market relative to the United States."
Simpson is telling clients to seriously consider investing in overseas developed markets. Instead of just relying on recent U.S. gains which have been chiefly driven by multiple expansion, he says investors should rotate back into Europe and put money to work in Japan.
"We look at the performance of Europe and Japan absolute relative to the U.S. over the last month to three months. That's actually been a really good trade," he said.
In just the early days of 2017, the FTSE 100 is up nearly a full percentage point, building on last year's double digit percentage returns.
If you thought stocks were soaring sky high, you might want to brace yourselves for another leg up and more record levels ahead.
Tuesday on CNBC's "Futures Now," Louise Yamada, managing director at Louise Yamada Technical Research Advisors, said that history shows that the last months of 2016 indicate that the markets will continue their rally in 2017.
"Even though the Dow, the S&P and Nasdaq didn't suffer 20 percent declines in [late 2015 and early 2016], the other markets [like the Russell 2000 and Nasdaq 400] were down 20 percent or more," she explained. "It's very much like the stealth bear market that we had in 1994 and 1995 where the small and mid-cap stocks got hammered and the large caps only pulled back 9 percent."
The assessment leads Yamada to believe that the markets had been in an "interim cyclical bear market" for two years, but that the recent stock rally is a "valid breakout into a new leg up." This even as Yamada believes large-cap indexes like the Dow could see a pullback before another rally of "either one-third to one-half," which she describes as a "general rule of thumb" in a note released on Dec. 30.
Yamada believes that the S&P 500 could hit 2,400 by the end of 2017, and the Dow could hit 22,000 by that time as well. This means that Yamada sees a rally of about 6 percent and 10 percent for the large-cap indexes, respectively.
The spectacular oil run of 2016 doesn't have much left in the tank, says one oil analyst who sees oil's supply troubles carrying into the New Year.
Crude saw its best year since 2009, surging almost 45 percent and driving energy to become the year's best-performing sector. The good news has investors and oil companies hoping for another big rally in 2017, especially in light of OPEC and non-OPEC agreements among countries to cut oil production, an attempt to solve global oversupply.
The OPEC meeting in late November caused oil to jump more than 12 percent in just one week, and the commodity rode the OPEC news momentum to hit new highs in December. Yet according to Tom Kloza, global head of energy analysis at the Oil Price Information Service, the same agreement that brought so much joy could also be oil's undoing.
"I do think we'll see [demand exceed supply] in 2017, but I think it's going to be front-end loaded," said Kloza to CNBC's "Futures Now" last week.
Kloza believes that oil could run back to its high of $62.83, which it saw in May 2015, but any higher is doubtful. This means that oil could still surge an impressive 23 percent or so, however that may be the limit to its run up in 2017.
"We'll see some compliance with the OPEC quotas and the non-OPEC agreement, but it will fade into the second quarter and it may not be there at all in the second half of 2017," he added.
In other words, the worst case scenario of OPEC and non-OPEC countries putting aside their production cut agreements could play out. But global non-compliance aside, Kloza also believes that domestic factors could also exacerbate oil's supply glut.
"As you see prices go up above $55 a barrel in the forward markets, you will unleash various beasts in West Texas, North Dakota and even Oklahoma called shale," said Kloza, referring to the vast shale fields powering the U.S. energy production boom.
"That will be the great determinant, or the factor, that keeps oil prices at bay," the analyst added.
When the Nasdaq was hitting all-time records during the dot-com bubble, Ned Riley alerted investors to brace for steep declines.
But now, the veteran stock market strategist says there's nothing to fear as technology stocks jump to new highs.
In fact, Riley believes tech will be the big winner next year, especially as revenue picks up from the overseas markets and delivers a tremendous boost to profits.
"I look at 2017 as an exciting year," said Riley, who runs research firm Riley Asset Management, Thursday on CNBC's "Futures Now." "Secular growth for this sector is particularly strong for the next three to five years."
Riley points out he doesn't detect the "irrational exuberance" that characterized the tech bubble in 1999 and 2000. He says financial prospects for companies are clearly improving, not fading.
"Earnings are starting to turn up again. It looks like we'll have a plus year in 2017. It may not replicate the same kind of recoveries we've seen from cyclical lows. But still I think something on the order of 5 to 8 percent seems reasonable for the S&P 500," said Riley.
The Nasdaq surpassed the 5,500 level for the first time ever on Tuesday, before losing some momentum to close at 5,487.44. But that was still a record close for the index, which is up more than 8 percent this year.
"As far as the market itself is concerned, the valuation may be on the high end, but people seem to ignore the fact that when you look at the price-earnings ratio to the inflation rate, which is running at about 2 percent, it doesn't seem that unreasonable relative to history," he said.
Riley, a frequent guest on CNBC during the late 1990s and early 2000s, was the chief investment strategist at State Street Global Research. The Nasdaq has soared nearly 400 percent since hitting the bubble low on Oct. 9, 2002.
He has been a bull on tech stocks for the past five years, says Apple is his top tech pick. It's a name he's owned long term.
"Apple still looks like the cheapest stock out there," said Riley. "I just think that they're [investors] pricing it wrong and they're not pricing it to the long-term growth rate."
"This has been a bull market that everyone has learned to hate," he said.
"If one looks at the asset allocation exposure that they have in the markets, that's the critical element. The public has been buying bonds to the tune of over a trillion dollars for the last four years. And that money is what I think is going to be the strong equity money which pushes this market up next year."
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