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Need to Know: Here’s why sticking to U.S. stocks right now is your best bet

The jury is out this morning on whether that attempted Turkish coup is going to really try to rattle the bull market’s cage.

So far, stock futures are holding steady, and there’s no rush to the yen or silver. The coup has been squashed, but Turkey has served to add one more black swan to an already crowded pond.

Citi says the recent political upheaval — the tragic Bastille Day attack, Brexit and the growing possibility of a Donald Trump U.S. presidency — “point to a marked increase in political risks in systemically-significant countries.”

Citi’s Tina Fordham and team say they had flagged a lot of these risks early in the year, but “we did not anticipate quite how many would transpire, let along within such a compressed timeframe.” Look for “FX shocks and a return to risk-off sentiment until the dust settles,” they add in their note.

But who needs added political risk, as Wall Street gets ready to delve deep into earnings season? U.S. equities will see a big test to the upbeat momentum that has pushed the S&P 500 5.8% higher so far this year, according to Hussein Saye, chief market strategist at FXTM. This week, IBM, J&J, AT&T, GE, Microsoft, Goldman Sachs and Morgan Stanley are all coming our way.

So, pushing aside the fact that earnings growth is expected to remain in recession for the second quarter, Saye believes the bigger concern is “the forward outlook that matters the most, as central bank’s policies can’t push stocks forever.”

Speaking of, the European Central Bank is front and center this week, with a policy meeting Thursday.

Be it ever so humble (presidential candidates aside), albeit violent, there is no place like home when it comes to U.S. stocks, says our call of the day. Our chart of the day takes a look at how Turkish stocks and the lira are doing. The answer? Not that great.

Key market gauges

Some bravado has drained from Dow US:YMM6  and S&P 500 ESU6, +0.13%  futures as New York’s open draws near, though both are nudging higher. That’s after those indexes climbed 1.5% and 2%, respectively last week. It’s been a mixed day in Asia ADOW, +0.37% with China absorbing growth data late last week, while the Nikkei is shut for a holiday. The dollar is up against the yen, but off against the pound GBPUSD, +0.4019%  Check out our chart of the day for the latest Turkish asset action.

Europe stocks SXXP, +0.02%  appear a little exhausted. Meanwhile, losses for WTI crude CLQ6, -1.78%  are starting to pick up, while gold GCQ6, +0.25%  is a bit higher. Silver SIQ6, -0.81%  is down more than 1%.

The call

U.S stocks are still worth the higher price they’re commanding, according to Yardeni Research’s Ed Yardeni and his team. They say the U.S. economy is performing better, is more diversified and resilient than most, and not overly exposed to the on-off EU/eurozone crisis. What’s more, as Turkey showed us this weekend, emerging markets still face a ton of challenges. Here are three more reasons:

1) Performance: “Since the start of the current bull market on March 9, 2009, the U.S. MSCI is up 204.4% to a record high, while the All Country World ex-U.S. MSCI is up 84.4% in local currencies and 82.4% in dollars.”

So far this year, the U.S. has gained 5.5%, while the rest of the world is down 2.5% in local currencies and up 0.1% in dollars.

2) Valuation: Yardeni points to forward price/earnings as one way of gauging how expensive Wall Street stocks are. During the first week of July, the forward P/E of the U.S. MSCI stock price index was 16.9, compared with 15.6 for the U.K., 12.8 for the eurozone, 12.7 for Japan and 11.8 for emerging markets. But the U.S. has had a higher valuation multiple than the rest of the world since data was available in 2001, and has only traded at a discount just once.

3) Revenues, margins, & earnings: “U.S forward revenues has been relatively flat since mid-2014, when commodity prices started to drop. Over that same period, revenues declined in overseas developed and emerging economies.”

The economy

The only data of mention is the July home builders’ index, coming in at 10 a.m. Eastern.

The chart

Ankara has overcome the military coup, but Turkish stocks XU100, -7.88% are still getting hammered, down about 5% this morning.

MarketWatch

Turkey stocks hit

Look for political tension to stay high during the year, says Lubomir Mitov, chief CEE economist at UniCredit Research. Given political stabilization was behind a recent rally for Turkish assets, “its unraveling will result in a significant downward correction amid heightened volatility,” Mitov adds in his note.

The Turkish lira USDTRY, -1.2054%  doing a little better against the dollar, even though it hasn’t fully recovered from the coup shock:

MarketWatch

A lift for the Turkish lira

Earnings

Hasbro HAS, -3.54% beat estimates on demand for Disney toys and shares are up. Bank of America BAC, +1.72%  on the earnings docket early this morning, while Yahoo YHOO, -0.16% IBM IBM, -0.54% and Netflix NFLX, -0.82%   are the highlights after the close.

Check out our earnings previews for Yahoo and Netflix

The buzz

Dragon on its way to @Space_Station, Falcon on its way home pic.twitter.com/EpfUKBmoWi

— SpaceX (@SpaceX) July 18, 2016

Out on LZ-1. We just completed the post-landing inspection and all systems look good. Ready to fly again. pic.twitter.com/1OfA8h7Vrf

— Elon Musk (@elonmusk) July 18, 2016

SpaceX, run by Tesla TSLA, -0.57%  boss Elon Musk, launched a rocket into space and then landed it back on earth — not on a drone ship, as before. An impressive feat, say some.

Outside of SpaceX tweets, Musk sent a couple of posts about Autopilot, in the wake of a fatal crash involving a Tesla car in Autopilot mode. Read: Tesla’s risk from self-driving cars

Tesla customers are v smart & don’t want media speaking on their behalf abt Autopilot. Recent poll: 0.0% want it disabled — not 0.1%, 0.0%.

— Elon Musk (@elonmusk) July 17, 2016

Tesla customers are v smart & don’t want media speaking on their behalf abt Autopilot. Recent poll: 0.0% want it disabled — not 0.1%, 0.0%.

— Elon Musk (@elonmusk) July 17, 2016

Japan’s SoftBank 9984, +0.23%  is buying U.K.-based chip designer ARM ARM, +0.00% ARM, +0.00%   in an all-cash deal valued at more than $32 billion.

U.S. Volkswagen VOW, -0.35% VOW, -0.51%  executives have promised restitution within a month for hundreds of American franchise dealers hurt by the auto maker’s diesel scandal. Meanwhile, J.P. Morgan said it believes the worst is over for Volkswagen in Europe, and early signs of stabilization are coming through.

Nintendo’s 7974, +9.80%   wildly popular PokemonGo had some major server issues over the weekend after releasing the game to much of Europe. Hacker OurMine has apparently been hitting servers with distributed denial of service (DDoS) attacks, and it won’t stop until Pokémon Go gets in touch.

The quote

“From an investor’s perspective, Turkey looks more and more like a political basket case” — Dani Rodrik, Harvard University Turkish economist, tells the FT.

The stat

6,000 — That’s the number of arrests made in Turkey linked to a failed coup that left nearly 300 people dead. The chief military assistant to Turkey’s President Recep Tayyip Erdogan, the former head of Turkey’s air force, and the Turkish commander of a joint U.S.-Turkish air base are among those who have been arrested.

Random reads

Baton Rouge police officer Montrell Jackson wrote a poignant Facebook message just days before he was killed.

Our favorite vapid feud is ON. Kim Khardashian took to Snapchat on Sunday to prove Taylor Swift had given hubby Kanye West’s “Famous” lyrics the OK ahead of time.

UC Berkeley student Nicolas Leslie among those who died in last week’s attack in Nice.

Venezuelans have been pouring into Columbia to buy food and medicine after borders were temporarily opened.

Action film “Bastille Day” has been yanked from theaters all over France.

Slate Magazine comes up with 141 reasons why Donald Trump shouldn’t be president.

Finally:

World’s most “comfortable” pig house in east China’s Zhejiang, with swimming pool, playground & light music pic.twitter.com/n6Ci6lFoQF

— China Xinhua News (@XHNews) July 18, 2016

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Need to Know: Here’s why sticking to U.S. stocks right now is your best bet Reviewed by on . The jury is out this morning on whether that attempted Turkish coup is going to really try to rattle the bull market’s cage. So far, stock futures are holding s The jury is out this morning on whether that attempted Turkish coup is going to really try to rattle the bull market’s cage. So far, stock futures are holding s Rating:
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