Displaying items by tag: bull market

(San Francisco)

For a lot of people, BlackRock brings two things to mind: fixed income and ETFs. Therefore, the firm making a bold call about a handful of single name stocks comes as somewhat of a surprise. However, BlackRock is the largest asset manager in the world and is also a leader in equities. The call they are making today is that big tech companies are looking strong and likely to keep seeing price expansion. On the one hand, this is a very easy call to make given tech stocks have been soaring, but on the other, it is somewhat of an interesting and risky call because many fear FAANGs can really only go down in the short-term. BlackRock says that the cash flow producing abilities of tech companies (a factor proven to be vital in this downturn) will be critical to their continued success.

FINSUM: There might be some short-term tailwinds, but in our view, big tech companies are going to keep moving higher because this crisis has created a huge opportunity to grab market share as more of life moves online.

(New York)

JP Morgan’s head of research, famed analyst Joyce Chang, published some very interesting views this week. She argues that the pandemic has forever changed financial markets, and highlights what she says are four “paradigm shifts” that COVID has caused. The biggest of those from a market direction perspective is about the Fed. She contends that the huge and extraordinary measures central banks have undertaken in the last few months have fundamentally changed the role of central banks towards financial stability (something they were arguably already focusing on).

FINSUM: In our mind it has become very obvious over the last few years, and especially during the pandemic, that the Fed’s most important mandate is financial stability.

(Washington)

Investors are wondering how we are going to escape this exhaustingly choppy market. Markets are fighting higher generally, but it seems like 2 steps forward, 1.9 steps back. So how we will we break out of this mode? The answer might be another $1 tn+ stimulus package from the government. Some are skeptical this will happen because many believe Demcorats in the House don’t want another package because it might help Trump’s chances. That seems to be short-sighted analysis, as Democrats need another package to help avoid layoffs in key states they want to win, which could jeopardize their odds. Republicans want more stimulus to aid in their various reelection bids.

FINSUM: Both sides want a package. The big issue seems to be the continuation and size of expanded unemployment aid. Rumor is a deal might come before July 31st.

(New York)

Markets were up big today on news out of China. The day started with Chinese stocks surging on news from the government—Chinese state media told its people that they should load up on stocks. This sent hopes for a recovery soaring around the global and markets rose strongly. Beyond the state’s endorsement, the Chinese economy does seem to be dong well. “In recent weeks the data has looked very positive from China. Its economy is back in motion, and that should lift global equities a bit”, summarized Principal Global Investors chief strategist, Seema Shah.

FINSUM: The state media announcement seems a bit hollow, but since real economic data in China appears to be improving, the overall direction looks positive.

(New York)

The long sought V-shaped recovery has been like a white elephant for investors. It has been hoped for since March when the economy started to shrink, but in the last couple months, most let go of the hope as the depth of the downturn became clear. However, given recent economic data, there are growing odds that the economy might vault out of its recession like a rocket ship. Morgan Stanley says it won’t be long until investors completely buy into that narrative. MS thinks in the next six months investors will go from “doubting to believing” in the v-shaped recovery, and that by the end of the year risk assets will be in a “mid-stage bull market mind-set”.

FINSUM: This is highly speculative, but it is a clear un-muddled position. We suspect the recovery is going to be slower than v-shaped, so our expectations are not nearly so bullish.