Another record-setter for stocks looks like a big order for Tuesday, with futures tending lower after stimulus hopes and rising oil prices pushed stocks up to start the week.
While momentum has slowed down a bit, this largely unstoppable market generally leaves few new highs in the way. So a break that is being renewed?
As for what could derail the stock market, our call of the day from global equity strategist Andrew Garthwaite and a team at Credit Suisse, proposes a shortlist of red and yellow flags.
“We have remained overweight equities thanks to a very supportive policy, high ERP [equity risk premium], the start of a bond-for-stock switch and massive excess liquidity, while tactical indicators are not yet sending a sell signal, ”the strategists said.
For example, they are not overly concerned about the “exuberance” of the market right now, saying that retail flows are moderate and there is little systemic risk or that signals from other indicators are being sold.
Regarding their concerns:
-
Disappointing growth in Europe – medium risk and rising. A slow rollout of the COVID-19 vaccine and leave plans and tax policies that look less generous than the first time are worrying. Unlike in the US, banks in Europe currently provide business lending and bankruptcies are suppressed by moratoria. “We see this as a European, not global, equality problem, with a European GDP [gross domestic product] about 16% of global GDP – although a tactically stronger USD could be a consequence, ”says the team.
-
Less moderate Federal Reserve – high risk in the second half of 2021. That’s amid the potential for stronger growth in the US amid easier fiscal policies, pent-up pandemic demand and economic reopenings. “If this happens at a time when inflation rises to 2.5%, wage growth is higher than expected and there are concerns about asset bubbles, the Fed could become less subdued,” Garthwaite and the team say. Also note the interest on 10-year government bonds TMUBMUSD10Y,
1.155%
above 1.7% or soaring TIPS (Treasury inflation-protected securities) returns, they say. -
Slowdown in China – low to medium risk. The recent policy tightening is nothing to worry about, but China’s current account could worsen even more as the global economy reopens. Keep an eye on housing market indicators, some of which point to a sharp slowdown. If that happens, “the excessive leverage would begin to unravel,” says Credit Suisse.
Elders: “We see the possibility that vaccines will not work against mutations as low risk, especially since modifications can be rolled out within 3-6 months. Other low-risk events include the fiscal stalemate in the US Senate and policy errors (with the exception of UK tax policy and the winding-up of French leave, which we consider to be higher risk), ”the team said.
Read: The stock market is echoing 2009-10 – and that means a downturn could be imminent, analysts warn
The markets
Equity Futures ES00,
YM00,
NQ00,
are modestly lower, with European stocks SXXP,
in red. Asian markets climbed after the Wall Street record session. Brent oil BRNJ21,
hits new highs above $ 61 a barrel.
Bitcoin BTCUSD,
kept climbing and tipped $ 48,000 at one point, after electric carmaker Tesla TSLA,
unveiled a $ 1.5 billion investment in the cryptocurrency and indicated that it will accept bitcoin as future payments.
The tweet
Meanwhile, Tesla has apparently not been as generous with employee retirement plans.
The buzz
Canadian cannabis company Canopy CGC,
reported a larger-than-expected loss, but sales exceeded estimates and stocks are rising. Materials and chemicals giant DuPont DD,
reported a predicted profit and revenue. Social media messaging service Twitter TWTR,
(see preview) and technology conglomerate Cisco CSCO,
reports after closing.
Democrats on Monday unveiled their plan to get more incentive money for families, raising the current $ 1,000 one-year child discount to $ 3,000 and slightly higher for families with smaller children.
The parents of a Robinhood trader who died of suicide when faced with a massive negative balance sued the online broker for wrongful death.
A small business confidence index shows that optimism is the lowest since the start of the pandemic last spring. There are also vacancies on the horizon.
The World Health Organization says that COVID-19 likely jumped from an animal to a human, and not from a Chinese lab.
The impeachment process of former President Donald Trump begins on Tuesday.
Random reads
Free ice and Russian COVID-19 vaccine shots? Another “The Simpsons” prediction is coming true.
A Redditor asks how everyone is doing with pandemic depression, burnout, and fatigue; he gets over 3,000 mostly miserable responses.
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