A modest recovery appears to be underway after Monday’s downturn, as hopes are forever leaping for fresh stimulus from President-elect Joe Biden’s government. And why would the market stop what it has been doing for a long time? Bounce back again and again.
But are there problems in paradise? “The stock market’s ability to resolutely recover in the face of the tragic events at the Capitol on 1/6, the escalation of the virus, a poor employment report and rising returns confirm a new, more speculative, more volatile phase of the bull market has begun, ”Julian Emanuel, BTIG’s lead equity and derivatives strategist and Michael Chu, equity strategy partner, tell clients in a note.
“Such a phase lasted more than 6 months in 1999-2000, when the S&P 500 advanced another 25%, with multiple sales of 15% in between. The depth of such downturn in 2021 will largely depend on yields, ”they say. And if yields continue to rise, like on Monday, names with a high number of growers could run into trouble, they say.
They also provide our call of the day, and focus on one sector that they say investors may want to avoid in the future.
Last month, they warned that communications and media companies are at risk from higher rates, increased regulatory oversight and “a world tired from years of overconsumption of the media.”
Emanuel and Chu update those thoughts Tuesday: “President Trump’s departure will undoubtedly diminish media interest, as will the reopening of the economy and the eventual return of off-screen travel and leisure.” That and recent steps to restrict access to content providers and platforms by Alphabet GOOGL,
Apple AAPL,
Facebook FB,
and Twitter TWTR,
can only inspire politicians to seek greater surveillance of them.
Then there is also the issue of investors shifting to value and away from growth stocks, who would lean on the communications sector.
Here is their list of S&P 1500 communications services stocks that have outperformed their broader index since late 2019 but will move from ‘leaders to laggards as politicians pay more attention to the media while the rest of us pay less attention’ .
Among the stocks listed above are Facebook, Disney DIS,
Netflix NFLX,
the New York Times NYT,
and the publisher of MarketWatch, which produces this report, News Corp. NWSA,
NWS,
The last word goes to Howard Marks, Co-Founder and Co-Chairman of Oaktree Capital Management. He explains at length in his latest newsletter how investors may not be looking at that growth versus value stock strategy entirely.
“Some of today’s high valuations are probably more than justified by future outlooks, while others are laughable – just as certain companies with low valuations may face imminent demise, while others are only temporarily tarnished,” he says. Read more here.
The markets
US Equity Futures ES00,
YM00,
NQ00,
are modestly higher, but European stocks SXXP,
have declined as concerns about the COVID-19 infection grow. Asian stocks ended higher. The return of the 10-year treasury TMUBMUSD10Y,
continues to creep higher after the largest weekly increase since June last week.
Bitcoin BTCUSD,
volatility continues, with the cryptocurrency surging 8% after a fall between Sunday and Monday.
The buzz
Sentiment for small businesses in the US fell to a seven-month low in December. The results of the survey on vacancies and work turnover are also ahead.
German lender Deutsche Bank DB,
has reportedly cut off contacts with President Donald Trump and the Signature Bank SBNY in New York,
calls for his resignation, after it also said it would stop doing business with him after last week’s riots on Capitol Hill. Trump tried last week to blame those attacks on “Antifa people,” Axios reported, citing a tense phone call between him and House Minority Leader Kevin McCarthy, who replied that no, it was “MAGA. I know. I was. there.”
Shares of Zoom Video ZM,
have fallen after the communications technology company said it was selling $ 1.5 billion in stock.
Network management software group SolarWinds SWI,
says it has found the source of recent cyber attacks.
Some Democratic lawmakers say they tested positive for COVID-19 while hiding from colleagues who refused to wear face masks during last week’s Capitol Hill riots.
Retailer Walmart WMT,
starts his own financial technology company for customers and employees with a financier for investment platform Robinhood.
The graph
Here’s a look at how COVID-19 is progressing in the US, with deaths and cases a little off their peaks.
Randomly read
I spy. Angelina Jolie is more than an actress?