Australia has called for the Trans-Pacific Partnership to go ahead without the U.S. following President Trump's withdrawal from the 12-nation trade agreement.
China's foreign ministry declined to say whether Beijing would consider any invitation to join the TPP, but a spokesperson instead cited rival trade pacts, saying that Regional Comprehensive Economic Partnership "should be concluded at an early date."
The IMF has raised its forecasts for the U.S. economy, reflecting an expected boost from the economic policies of President-elect Donald Trump.
The new outlook sees U.S. growth at 2.3% this year and 2.5% in 2018 (+0.1% and +0.4% from previous estimates), marking an improvement from lackluster American growth of around 1.6% in 2016.
Regarding its World Economic Outlook, the IMF kept its overall growth forecasts unchanged from October at 3.4% for 2017 and 3.6% for 2018, up from 3.1% growth in 2016, the weakest year since the financial crisis.
The world economy is expected to expand 2.7% this year, recovering from a post-crisis low in 2016, thanks to rising commodity prices and Donald Trump's stimulus plans, the World Bank said in its latest Global Economics Prospects report.
However, this growth could be hit by a significant slowdown in investment in emerging markets and political uncertainty in major economies, including the U.S.
"This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers," says Ray Dalio.
Our country, he says, is about to undergo a shift that may very well dwarf the Thatcher, Reagan, and Kohl socialist-to-capitalist revolutions of the late 70s and early 80s.
By just looking at the numbers from tax and spending policy changes, analysts will miss the larger impacts of ignited animal spirits and attraction of productive capital.
Dalio: "If this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge" - a sentiment the stock market averages apparently figured out the night of the election.
"The dam is breaking, you can feel it," Jeff Gundlach tells Reuters, referring to the recent string of modest S&P 500 declines. He sees another 5-10% downside for the index.
Meanwhile, DoubleLine's $61.6B Total Return Bond Fund (MUTF:DBLTX) (ETF cousin: TOTL) suffered its first month of net outflows since January 2014, with $33.2M pulled. The $7.7B Core Fixed Income Fund (MUTF:DBLFX) had net inflows of $166.5M in October, bringing YTD inflows to $2.1B.
Having been vocally bearish on bond prices for months, Gundlach isn't surprised at least some are heeding his warnings and pulling money out of fixed income offerings.
"The possibility of a severe fall in the stock market is now very high," says HSBC technician Murray Gunn, noting rising volatility since the end of the summer, and the broadness of the recent selloff.
Gunn is also worried about the rising Trader's Index - an indicator combining market breadth and the trading volume of advancing and declining stocks.
Ben Laidler, the bank's global equity strategist, says stocks are exposed to "a dangerous combination" of risk factors like high earnings expectations, economic policy uncertainty, and the upcoming election.
Historically, periods of sub-zero long-term real Treasury yields have corresponded to very low S&P 500 P/E ratios (under 12x), but this time is different, says Morgan Stanley's Adam Parker.
1) Current low bond yields aren't a viable alternative to stocks; 2) There is massive liquidity in the U.S. market; 3) The U.S. is the only major region with positive EPS growth as a base case; 4) Investors aren't positioned for major upside.
Parker and team lift their base case target on the S&P 500 to 2,300 from 2,200. The index currently sits at $2,180.
"Investors have shunned equity funds year-to-date, but are now stampeding into the asset class for fear of missing out," says BAML's Michael Hartnett, as $10.8B poured into equity funds during the week ending July 13 - the highest in nine months. U.S. funds saw inflows of $12.6B, while Europe saw a record outflow of $5.8B - its 23rd consecutive week of outflows.
Investors, for now, appear to have brushed off Brexit concerns, but "a maturing economic cycle with elevated valuations, decelerating buybacks, and growing political uncertainty provide the basis for potential market weakness in the second half," say David Kostin and team.
Their three-month S&P 500 price target range of 1,900-2,000 suggests a drawdown of as much as 10% from current levels. Citing above-trend U.S. growth, a cautious Fed, and an earnings recovery, however, the team sees the S&P returning to about 2,100 by year-end.
Best bets are health care, telecom services, and consumer discretionary, with energy, materials, and industrials riskier bets.