{"id":11248,"date":"2023-11-08T18:14:54","date_gmt":"2023-11-08T18:14:54","guid":{"rendered":"https:\/\/infundpros.com\/markets\/this-stock-market-rally-cant-be-trusted-heres-why\/"},"modified":"2023-11-08T18:14:55","modified_gmt":"2023-11-08T18:14:55","slug":"this-stock-market-rally-cant-be-trusted-heres-why","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=11248","title":{"rendered":"This Stock Market Rally Can’t Be Trusted. Here’s Why."},"content":{"rendered":"
\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

The stock market has been on a tear and investors are hoping for more gains. Rosenberg Research\u2019s David Rosenberg offers three reasons not to trust the rally. <\/p>\n

The
\n S&P 500
\n and
\n Dow Jones Industrial Average
\n have risen for seven straight days, while the
\n Nasdaq Composite
\n has gained for eight consecutive days. For the S&P 500 and Nasdaq, the streaks are the longest since November 2022. <\/p>\n

\n

But can stocks keep rising? Rosenberg has his doubts. In a report released Wednesday morning, he calls the market\u2019s rally \u201crather junky\u201d and offers three reasons why: earnings, short covering, and breadth.<\/p>\n

Third-quarter earnings have actually been pretty good, but guidance has not. Estimates of fourth-quarter earnings per share have dropped 4%, with eight out of 11 sectors experiencing downgrades. Of the 75 companies that have issued guidance, 64% have provided downbeat forecasts. <\/p>\n

And it\u2019s not like the rally has been driven by the companies with strong fundamentals. Instead, the biggest gainers have been the most-shorted stocks, Rosenberg says, as well as those with weak balance sheets, what he dubs \u201cnon-profitable tech.\u201d This is a sign that \u201cthis is a reflexive
increase driven by technicals and complacency, rather than any fundamental strength. Hence, there are more reasons to be cautious,\u201d Rosenberg says.<\/p>\n

Finally, Rosenberg notes that small-cap stocks aren\u2019t participating in the rally, The
\n Russell 2000
\n has dropped for two straight days. And while the monthly returns have been fine\u2014the index has risen 4.3%, just a touch below the S&P 500\u2019s 4.4%\u2013they\u2019re still down 1.6% for the year to the S&P 500\u2019s 14% and the Nasdaq\u2019s 30.3%. That 32 percentage-point gap between the Nasdaq and the Russell is \u201cthe largest in the last two and a half decades and was last seen in the lead-up to the Dot-Com bubble,\u201d Rosenberg writes.<\/p>\n

Rosenberg, of course, has a reputation for leaning bearish, so his argument should be looked at through that lens. Still, It\u2019s a reminder that just because a market has short-term momentum, doesn\u2019t mean it will keep going. <\/p>\n

Write to Ben Levisohn at ben.levisohn@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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