This week’s action focused on the bond market, not the stock market, as Treasury yields rose in response to the progress of a new stimulus package as well as the global launch of COVID-19 vaccines.
S&P 500 SPX,
fell for three consecutive days, but by only 0.5% – suggesting that the stock market did not panic over the 10-year yield movements TMUBMUSD10Y Treasury,
at about 1.30%, and the 30-year yield TMUBMUSD30Y,
up to 2.10%.
Dhaval Joshi, European chief investment strategist for BCA Research, said for some time that low returns have meant stockpiling stocks and other assets, it made sense – a rational bubble, if you will. “Rational, because the bleeding assessments in the nose are justified by a fundamental factor. And not every fundamental factor, but the most fundamental factor of all – the yield of bonds “, he writes.
But not now. Multiples of the pre-earnings price increased even as yields increased. Earnings in the most growth-oriented sector, technology, have now been outpaced by bond yields plus a fixed amount, as shown in the chart.
There are three ways this can be solved. One is for stock prices to fall; another is for bond yields to fall; one-third is for none to move, but for earnings to increase, to improve stock valuations. (The third factor seems unlikely, for now, at the end of the earnings season.)
“Our current recommendation is to remain tactically neutral for the next few weeks, to see if risk-active assessments can return to rationality. This means keeping the existing investments on the market, but firing on the new cash implementations “, says Joshi. “If the valuation returns to rationality in any of the three ways listed above, then investors can safely implement new money in the market.”
What if not? Joshi says that if the market becomes irrational, the key will be to look at whether investors on longer horizons join the party. “As investors with longer and longer time horizons join the irrational bubble, there will be well-defined moments of increased fragility, where the risk of correction increases. This is what the irrational bubble burst in 2000 and any new irrational bubble will burst. ”
Buzz
Uber Technologies UBER,
fell into the premarket trade after the UK Supreme Court ruled that its drivers were workers and not self-employed, which would entitle them to a minimum wage and paid leave.
Facebook FB,
CEO Mark Zuckerberg was scheduled to speak with Australian Treasurer Josh Frydenberg after the company imposed a block on the exchange of news produced in Australia, a response to measures to make online companies pay publishers. Confronted with the same potential law, GOOG Alphabet,
Google has reached agreements with publishers, including News Corp., which owns MarketWatch, the publisher of this report.
IBM computing giant IBM,
is considering selling its lost IBM Watson Health unit, according to The Wall Street Journal.
Roku ROKU streaming device manufacturer,
reported a surprise profit on stronger-than-expected revenues. Dropbox DBX cloud service provider,
reported higher-than-expected earnings and earnings for the fourth quarter. Applied AMAT materials,
the microchip equipment maker exceeded fiscal estimates for profit in the first quarter and led to better estimates in the current quarter than analysts had estimated.
French carmaker Renault RNO,
fell in Paris and canceled its dividend after reporting a loss of 8 billion euros by 2020. Renault also said that the peak of the microchip deficit facing car manufacturers should be reached in the second quarter.
The flash version of Markit’s purchasing managers’ indexes will launch at 9:45, followed by existing home sales data.
The latest development by Senator Ted Cruz, who left Texas without electricity in Cancun, Mexico – for which he apologized – is the report that he left his poodle, Snowflake, at home in Houston.
markets
US ES00 futures,
NQ00,
advanced.
Oil CL.1,
fell below $ 60 a barrel, and the US dollar DXY,
slipped.
Random readings
Now that NASA’s Perseverance rover has landed safely on Mars, it will be tasked with collecting rock samples that could hold evidence of past life.
A 3D printer that produces vegetable steaks? This is the goal of this startup that has just raised $ 29 million.
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