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Feb. 6, 2020, 9:48 a.m. EST

Here’s why the next 10% stock move is likely to be down, warns Miller Tabak’s top strategist

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By Barbara Kollmeyer, MarketWatch


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What goes up...

Thank China (again) for what looks like another bullish day on Wall Street after Beijing pledged to halve tariffs on $75 billion in U.S. imports, while political uncertainty has eased after the Senate acquitted U.S. President Donald Trump. That is as investors have decided the deadly coronavirus isn’t a reason to sit on the sidelines of markets.

But all that appetite for investing in equities, which tends to invite more risks than other asset classes, is worrying a few. “The odds that the next 10% move is to the downside versus the upside, I think, are much higher,” Miller Tabak + Co.’s lead strategist Matt Maley told MarketWatch in our call of the day .

Maley said the market has been “priced for perfection” for a while, making it harder to rally much higher from here.

And because most individual investors had a pretty stellar 2019, they don’t need to go chasing the stock market or the movements of bigger investors right now, he said.

“At the beginning of the year, if the market is rallying, [institutional investors] have to be in... they can’t fall behind their bogeys early in the year, because they spend the rest of the year playing catch-up and it’s too hard to do,” Maley explained, adding that those big players must buy stocks in a rising market regardless of their longer-term goals.

And regular investors shouldn’t invest on the theory the market will take off like it did in 2019. “Too many people talk about the extremes too often. ‘Oh my gosh, I’m going to miss another 30% rally like we got last year.’ Or ‘The stock market’s going to crash,’” he said.

Most years, the stock market ends up somewhere in between and “right now with the market as extended as it is, I just don’t think chasing it is a great idea,” said Maley.

The last word goes to Citigroup’s chief U.S. equity strategist, Tobias Levkovich, who said in a recent note that nearly “every client we talk to wants to buy the dip, and that is not comforting.” While the coronavirus’s spread outside of Hubei has slowed, “we are reticent to think that impact is behind us now,” he said.

The market

The Dow /zigman2/quotes/210598065/realtime DJIA +1.39%   , S&P /zigman2/quotes/210599714/realtime SPX +0.64%   and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.52%  are potentially looking at record sessions, as trading kicks off in the green, with European stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.04% also higher, despite dismal German manufacturing orders. Oil /zigman2/quotes/209723049/delayed CL00 -0.71%  is climbing and Asian markets surged , with Hong Kong /zigman2/quotes/210598030/delayed HK:HSI -0.67%  and Japan /zigman2/quotes/210597971/delayed JP:NIK -0.43%  stocks climbing over 2% each.

The chart

As Iowa Democrats continue to toil away at those presidential caucus results, this Goldman Sachs chart shows which candidates’ chances have improved — Pete Buttigieg — and gone the other way — former Vice President Joe Biden.

The buzz

Shares of Twitter /zigman2/quotes/203180645/composite TWTR +1.21% are surging after the microblogging service posted is first $1 billion revenue quarter, and beat forecasts for user growth. Makeup giant Estee Lauder, cigarette maker Philip Morris /zigman2/quotes/201611010/composite PM -0.18% /zigman2/quotes/201611010/composite PM -0.18% and Kentucky Fried Chicken operator Yum Brands /zigman2/quotes/209029767/composite YUM -0.89% also reported. After the close, ride-share group Uber /zigman2/quotes/211348248/composite UBER +1.59%  and videogames companies Activision /zigman2/quotes/200717283/composite ATVI -2.46%  and Take-Two Interactive /zigman2/quotes/204008930/composite TTWO -0.84%  will report.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,201.52
+373.05 +1.39%
Volume: 369.98M
Aug. 5, 2020 5:27p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,327.77
+21.26 +0.64%
Volume: 2.45B
Aug. 5, 2020 5:27p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,998.40
+57.23 +0.52%
Volume: 3.78M
Aug. 5, 2020 5:16p
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
365.29
+0.13 +0.04%
Volume: 0.00
Aug. 6, 2020 9:58a
loading...
/zigman2/quotes/209723049/delayed
US : U.S.: Nymex
$ 41.89
-0.30 -0.71%
Volume: 48,129
Aug. 6, 2020 4:03a
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/zigman2/quotes/210598030/delayed
HK : Hong Kong Exchange
24,935.15
-167.39 -0.67%
Volume: 1.47M
Aug. 6, 2020 3:58p
loading...
/zigman2/quotes/210597971/delayed
JP : Nikkei
22,418.15
-96.70 -0.43%
Volume: 0.00
Aug. 6, 2020 3:15p
loading...
/zigman2/quotes/203180645/composite
US : U.S.: NYSE
$ 36.79
+0.44 +1.21%
Volume: 10.05M
Aug. 5, 2020 4:04p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$28.52 billion
Rev. per Employee
$776,112
loading...
/zigman2/quotes/201611010/composite
US : U.S.: NYSE
$ 76.96
-0.14 -0.18%
Volume: 4.21M
Aug. 5, 2020 4:00p
P/E Ratio
16.49
Dividend Yield
6.08%
Market Cap
$120.07 billion
Rev. per Employee
$382,519
loading...
/zigman2/quotes/201611010/composite
US : U.S.: NYSE
$ 76.96
-0.14 -0.18%
Volume: 4.21M
Aug. 5, 2020 4:00p
P/E Ratio
16.49
Dividend Yield
6.08%
Market Cap
$120.07 billion
Rev. per Employee
$382,519
loading...
/zigman2/quotes/209029767/composite
US : U.S.: NYSE
$ 91.00
-0.82 -0.89%
Volume: 1.25M
Aug. 5, 2020 4:02p
P/E Ratio
27.29
Dividend Yield
2.07%
Market Cap
$27.64 billion
Rev. per Employee
$167,294
loading...
/zigman2/quotes/211348248/composite
US : U.S.: NYSE
$ 33.20
+0.52 +1.59%
Volume: 17.28M
Aug. 5, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$57.06 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/200717283/composite
US : U.S.: Nasdaq
$ 84.32
-2.13 -2.46%
Volume: 12.56M
Aug. 5, 2020 4:00p
P/E Ratio
35.98
Dividend Yield
0.49%
Market Cap
$66.61 billion
Rev. per Employee
$756,869
loading...
/zigman2/quotes/204008930/composite
US : U.S.: Nasdaq
$ 176.02
-1.50 -0.84%
Volume: 1.65M
Aug. 5, 2020 4:00p
P/E Ratio
45.08
Dividend Yield
N/A
Market Cap
$20.30 billion
Rev. per Employee
$574,279
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