That’s as in “news interpreted negatively,” according to the strategy team at Goldman Sachs.
We get the sense that sentiment is so bad that many market watchers have all but given up on dispensing investment advice.
Here’s the latest snap commentary from Gerald Moser, Peter Oppenheimer, et al:
Equity markets continue to face a steady stream of bad corporate and macroeconomic news. What is worse, the market still sells off on such news, suggesting that it is not all in the price. We would wait until the market stops falling on bad news before we turn positive.
News flow keeps getting worse
News flow has gone from bad to worse in recent months. Earnings have been revised downward for more than 70% of DJStoxx600 companies over the last three months. Economic survey data continue to surprise to the downside and set new lows. In turn, growth forecasts have fallen with our own economists reducing global GDP forecasts to 1.8% from 3.7% three months ago.
It’s a NINY (news interpreted negatively) market
European companies facing earnings downgrades fell in 3Q. On a sector level, earnings expectations came down most on banks and basic resources — the two worst performing sectors. Macro data are also being interpreted negatively with markets falling even when our Surprise Index is positive or when the oil price falls. Most notably markets fell in the face of globally coordinated rate cuts and a surprise UK rate cut, two events which we would have otherwise expected to drive markets higher. Our NIPY/NINY index (news interpreted positively/news interpreted negatively) suggests that macro data releases are still getting a negative reaction.
We are cautious near term
On our estimates, the equity market is inexpensive on most metrics but near term, we do not believe that is sufficient reason to buy. In recent weeks, we have articulated risks to corporate cash flows (26-Sep), better opportunities in credit than in equities (14-Nov), risks to 2009 consensus EPS (10-Oct) and the fact that our leading indicators point to further equity market downside (7-Nov). We would want some evidence that bad news is ignored and the pace of deterioration in growth momentum slows before we turn positive.