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Strategists share views on halting the stock sell-off

Bloomberg News

Weeks have become months in measuring stock market pain.

Lines on charts didn’t work. A favorite boundary for bulls, the 200-day average in the S&P 500, is a distant memory. Earnings have come and gone — they made things worse. Midterms? Nope. Falling yields? Haven’t helped. The decline showed no sign of abating Monday as the Nasdaq 100 fell 3 percent to the lowest since April. The Dow Jones Industrial Average closed the day down 1.6 percent, while the S&P 500 fell 1.7 percent.

Following are the views of money managers and strategists on what could conceivably put a brake on the selling. It starts with views held by virtually everyone, that a softening in Federal Reserve rhetoric or in Donald Trump trade bluster would be the fastest route to relief. Then it gets into some other ideas.

Trade war

Ryan Nauman, market strategist at Informa Financial Intelligence:

“No. 1 could be trade. At the G20 summit, if we get some good news out of there and maybe some optimism building on the trade front, that could potentially give us a boost. In order for the markets to get to the next level and break through this range we’re in, the trade issue will have to be resolved. And once that is — if it is — then markets will break through with some optimism.”

Kristina Hooper, chief global market strategist at Invesco Ltd:

“This sell-off is largely driven by growing concerns over the trade situation and therefore it will take a positive development in trade to take pressure off markets. Now, that’s somewhat simplistic, since there is certainly concern over the slowdown that we are seeing globally but that slowdown is relatively modest. I believe it has been partially caused by concerns over trade and the economic policy uncertainty that comes with it. In my view, a positive trade development would likely be the easiest way to end this sell-off.”

Fed chairman Powell

Max Gokhman, head of asset allocation for Pacific Life Fund Advisors:

“Another person who could help is (Federal Reserve Chair Jerome) Powell in December, but that’s tricky because skipping a hike could indicate the economy is slowing down and result in further selling as investors get spooked even more. There’s room to be dove-ish without sounding alarmist by changing the balance sheet wind down though, but again it would be quite a tightrope to walk on.”

Tim Courtney, chief investment officer of Exencial Wealth Advisors:

“If the market gets more comfortable with the Fed not going bananas on raising rate — and I think they won’t — the Fed has got to talk a good game, they have to talk the talk and maintain their independence — but when push comes to shove, the market will be comforted by the Fed not being as aggressive as they’ve indicated they might be. As earnings come in and continue to be strong, if we see any progress at all towards U.S. and China working this trade situation out, the Fed’s reasonable stance or agreement on trade, that could be the catalyst to end the year strong.”

Earnings growth

Brad McMillan, chief investment officer for Commonwealth Financial Network:

“What’s driving this pullback is not the deterioration in fundamentals. What’s driving it is the change in confidence about future growth. Confidence has to come back. A lot of these companies may have hit the peak of the growth cycles, and investors are probably starting to realize that. It’s a healthy repricing, which will be more reality-based. If the confidence about profit growth returns, we may see prices going up again. Yes, it’s unpleasant, we haven’t seen anything like this for a while, but it’s not the end of the world, for now. The results are not that bad.”

Tech reversal

Andy Kapyrin, director of research at RegentAtlantic:

“Tech stocks have an easy time ignoring the macro news wherever they deliver strong growth. That’s why they’ve done so well from April to September: investors didn’t lump them together with other assets. Now investors are not only lumping them together with other assets, but they’re hitting them harder because the good news is gone. What will be crucial for many companies, especially Apple and Amazon is this holiday shopping season. That’s going to make or break their sales. If tech companies can conquer the growth outlook in the next two months, we may see the entire sector reverse.”