Post by Admin/YBB on Jan 9, 2021 7:10:32 GMT -6
[Italics within the brackets are my additions/elaborations]
Pg M1, Trader: Stock market needs a breather/correction after an up week to new record highs in an eventful week of political turmoil. Democrats have control of House, Senate and soon, the White House. Stocks look stretched at SP500 fwd P/E of 22.8; BoA/BAC Bull & Bear index was at 7.1 [extremely bullish]. FOMC Minutes indicated that the Fed would give plenty of warning before tapering the QE and/or rate hikes.
Ignore poor Q4 earnings season that starts on Friday but pay attention to future guidance. Earnings in 2021 should be much better than those in 2020 and may be even better than the record in 2019. Stock market has already anticipated that with strong rebounds in cyclicals [energy, industrials, etc]. Some Covid-19 at-home/WFH winners in 2020 may face difficult comparisons in 2021.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +1.61%, SP500 +1.83%, Nasdaq Comp +2.43%, Russell 2000 +5.91%. DJ Transports +2.95%; DJ Utilities -1.55%. US$ index (spot) +0.16%, oil/WTI futures +7.67%, gold futures -3.12%.
52-weeks [index changes only], DJIA +7.89%, SP500 +17.13%, Nasdaq Comp +43.83%. [Rotating spot R2000 +26.18%]
Pg M4, Europe: Post-Brexit, UK retail, leisure, transportation stocks are attractive. Domestic oriented stocks should also do better. The UK stocks are near 20-yr low.
Pg M4, Emerging Markets: Much of Bitcoin “mining”, a computation and energy intensive process, has been in China. The US “miners” include MARA, RIOT. Only 21 million Bitcoin are outstanding [but there are several other cryptocurrencies].
Pg M6, Commodities: Better driving season in 2021 will keep palladium [used in auto catalytic converters] rally going for 6th year [2020 was a volatile but up year]. The US may rejoin the Paris Accord. China’s tightening of auto emission regulations will create additional demand. Palladium has been in deficit mode for a decade.
Pg M5, Options: Banks would benefit from rising yields and calls on financial ETF XLF are recommended.
[SP500 VIX 21.56, SKEW 139.25] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M21, L58: A great week in Europe [UK +5.76%, Switzerland -0.87%] and a great week in Asia . The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -7% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.08%, 2-yr 0.14%, 5-yr 0.49%, 10-yr 1.13%, 30-yr 1.87% [Treasury data*]. Dollar rose, DXY 90.07, +0.2% [M23]. Gold [Handy & Harman spot, Thursday] fell to $1,863 -1.3% [M26]; the gold-miners rose. [^XAU was at 147.24, +2.12% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [L59].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2.
Pg 10: Cover Story “Here Comes Joe Biden’s Washington. Consider These Stocks and Funds for Your Portfolio” . The stock market wasn’t affected by a mob incited by the President to storm the US Capital. But the market is rallying in the hopes for better post-pandemic economy [GDP growth +4% to +6% in 2021] and extra fiscal stimulus. Investors would see mixed policies with higher taxes and regulations and more social programs. But with slim majority in the House and tie in the Senate, it would be a game of small hits, not big home runs. Inflation pressures may rise from stimulative monetary and fiscal policies. Cyclicals and riskier [not defensive] stocks would benefit; financials would benefit from rising yields. Early winners have been cyclicals [travel, leisure, consumer-discretionary, homebuilders, infrastructure; ETF PEJ], small-caps, clean-energy/tech [ETF ICLN], financials [ETF XLF]. Tougher times are ahead for bond-proxies [utilities XLU, real-estate XLRE] and, due to more regulations, for some energy, healthcare, financials. Outlook for expensive big techs is mixed.
Details from Funds Quarterly will be in Part 3 in the Mutual Funds forum.
Pg 5, Up and Down Wall Street: When historians look back the past week [remember that official publication date for Barron’s is Monday, 1/11/21], they will not remember new highs for the stock market, but that rioters stormed the Capital building in DC on Wednesday, 1/6/11 in a near-coup. But it was business as usual a few hours later. With Democrats in control of the Government, more fiscal stimulus is coming, The Fed has already been super easy. The liquidity is flowing through the markets, not the real economy. Margin debt is at a record and retail options volume has surged.
With the Senate control changing after GA Senate runoffs, bond yields have risen. There may be more fiscal stimulus [for individuals, businesses, state/local governments, infrastructure] sooner than later. Munis should benefit from state/local government aid and higher taxes. Corporate yields are under pressure due to heavy issuance ahead of higher taxes. Rising yields may also be negative for stocks.
EXTRA. In February 2020, BCA had a list of possible Black Swan events and Covid-19 wasn’t on it, but violence after GOP losses of Congress and White House was. The columnist thought the latter to be very unlikely but says that he was proven wrong. He now says that events of last Wednesday were an aberration, something never to be repeated, and hopes that he won’t be wrong again.
Pg 5, Streetwise: Where is Jack Ma of Alibaba? To recap: Alibaba has substantial stake in its fintech spinoff Ant [old Alipay]. Ant has developed a business model for consumer banking that doesn’t require much reserves. When Chinese banking regulators raised questions, Ma criticized them in October as having “pawnshop” mentality and also criticized the Chinese government leadership. This upset Chinese banks, Chinese banking regulators and, most importantly, Xi Jinping. Retributions were swift – Ant IPO in November was suspended, and new rules were approved for fintechs that would disrupt Ant’s previous highly profitable model to disrupt traditional Chinese financials. And Ma hasn’t been seen or heard from for weeks, very unusual for a media personality like Ma. Is he just laying low or in detention somewhere? In addition to risks Alibaba faces in China, shareholders of the US-listed BABA face additional risks – they don’t own Alibaba directly but own stake in an offshore entity that invests in Alibaba. BABA may be attractive on price, but it may be nothing without Ma. Remarkably, 53 of 54 analysts still have buy recommendations.
More later….
Pg M1, Trader: Stock market needs a breather/correction after an up week to new record highs in an eventful week of political turmoil. Democrats have control of House, Senate and soon, the White House. Stocks look stretched at SP500 fwd P/E of 22.8; BoA/BAC Bull & Bear index was at 7.1 [extremely bullish]. FOMC Minutes indicated that the Fed would give plenty of warning before tapering the QE and/or rate hikes.
Ignore poor Q4 earnings season that starts on Friday but pay attention to future guidance. Earnings in 2021 should be much better than those in 2020 and may be even better than the record in 2019. Stock market has already anticipated that with strong rebounds in cyclicals [energy, industrials, etc]. Some Covid-19 at-home/WFH winners in 2020 may face difficult comparisons in 2021.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +1.61%, SP500 +1.83%, Nasdaq Comp +2.43%, Russell 2000 +5.91%. DJ Transports +2.95%; DJ Utilities -1.55%. US$ index (spot) +0.16%, oil/WTI futures +7.67%, gold futures -3.12%.
52-weeks [index changes only], DJIA +7.89%, SP500 +17.13%, Nasdaq Comp +43.83%. [Rotating spot R2000 +26.18%]
Pg M4, Europe: Post-Brexit, UK retail, leisure, transportation stocks are attractive. Domestic oriented stocks should also do better. The UK stocks are near 20-yr low.
Pg M4, Emerging Markets: Much of Bitcoin “mining”, a computation and energy intensive process, has been in China. The US “miners” include MARA, RIOT. Only 21 million Bitcoin are outstanding [but there are several other cryptocurrencies].
Pg M6, Commodities: Better driving season in 2021 will keep palladium [used in auto catalytic converters] rally going for 6th year [2020 was a volatile but up year]. The US may rejoin the Paris Accord. China’s tightening of auto emission regulations will create additional demand. Palladium has been in deficit mode for a decade.
Pg M5, Options: Banks would benefit from rising yields and calls on financial ETF XLF are recommended.
[SP500 VIX 21.56, SKEW 139.25] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M21, L58: A great week in Europe [UK +5.76%, Switzerland -0.87%] and a great week in Asia . The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -7% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.08%, 2-yr 0.14%, 5-yr 0.49%, 10-yr 1.13%, 30-yr 1.87% [Treasury data*]. Dollar rose, DXY 90.07, +0.2% [M23]. Gold [Handy & Harman spot, Thursday] fell to $1,863 -1.3% [M26]; the gold-miners rose. [^XAU was at 147.24, +2.12% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [L59].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2.
Pg 10: Cover Story “Here Comes Joe Biden’s Washington. Consider These Stocks and Funds for Your Portfolio” . The stock market wasn’t affected by a mob incited by the President to storm the US Capital. But the market is rallying in the hopes for better post-pandemic economy [GDP growth +4% to +6% in 2021] and extra fiscal stimulus. Investors would see mixed policies with higher taxes and regulations and more social programs. But with slim majority in the House and tie in the Senate, it would be a game of small hits, not big home runs. Inflation pressures may rise from stimulative monetary and fiscal policies. Cyclicals and riskier [not defensive] stocks would benefit; financials would benefit from rising yields. Early winners have been cyclicals [travel, leisure, consumer-discretionary, homebuilders, infrastructure; ETF PEJ], small-caps, clean-energy/tech [ETF ICLN], financials [ETF XLF]. Tougher times are ahead for bond-proxies [utilities XLU, real-estate XLRE] and, due to more regulations, for some energy, healthcare, financials. Outlook for expensive big techs is mixed.
Details from Funds Quarterly will be in Part 3 in the Mutual Funds forum.
Pg 5, Up and Down Wall Street: When historians look back the past week [remember that official publication date for Barron’s is Monday, 1/11/21], they will not remember new highs for the stock market, but that rioters stormed the Capital building in DC on Wednesday, 1/6/11 in a near-coup. But it was business as usual a few hours later. With Democrats in control of the Government, more fiscal stimulus is coming, The Fed has already been super easy. The liquidity is flowing through the markets, not the real economy. Margin debt is at a record and retail options volume has surged.
With the Senate control changing after GA Senate runoffs, bond yields have risen. There may be more fiscal stimulus [for individuals, businesses, state/local governments, infrastructure] sooner than later. Munis should benefit from state/local government aid and higher taxes. Corporate yields are under pressure due to heavy issuance ahead of higher taxes. Rising yields may also be negative for stocks.
EXTRA. In February 2020, BCA had a list of possible Black Swan events and Covid-19 wasn’t on it, but violence after GOP losses of Congress and White House was. The columnist thought the latter to be very unlikely but says that he was proven wrong. He now says that events of last Wednesday were an aberration, something never to be repeated, and hopes that he won’t be wrong again.
Pg 5, Streetwise: Where is Jack Ma of Alibaba? To recap: Alibaba has substantial stake in its fintech spinoff Ant [old Alipay]. Ant has developed a business model for consumer banking that doesn’t require much reserves. When Chinese banking regulators raised questions, Ma criticized them in October as having “pawnshop” mentality and also criticized the Chinese government leadership. This upset Chinese banks, Chinese banking regulators and, most importantly, Xi Jinping. Retributions were swift – Ant IPO in November was suspended, and new rules were approved for fintechs that would disrupt Ant’s previous highly profitable model to disrupt traditional Chinese financials. And Ma hasn’t been seen or heard from for weeks, very unusual for a media personality like Ma. Is he just laying low or in detention somewhere? In addition to risks Alibaba faces in China, shareholders of the US-listed BABA face additional risks – they don’t own Alibaba directly but own stake in an offshore entity that invests in Alibaba. BABA may be attractive on price, but it may be nothing without Ma. Remarkably, 53 of 54 analysts still have buy recommendations.
More later….