Displaying items by tag: volatility

(New York)

You know the saying “a rising tide lifts all boats”? It couldn’t be further from the truth as it concerns the current stock market. The S&P 500 is just about flat, yet if you take a close look, 337 of its component stocks are down. The index is only being held up by a 1% gain from Apple and minor gains from the other 4 stocks that comprise 20% of its entire value. The lack of breadth has been a consistent feature of the recovery over the last several months.

FINSUM: Investors are not expressing any degree of bullishness about the economy, which would be reflected in breadth. Frankly, all the recent gains seem to be simple momentum bets on a small handful of stocks, making the whole recovery feel hollow.

(New York)

For the last few weeks the market has had somewhat of a respite from the constant stream of vaccine-related market yo-yoing. However, it looks like it is going to start again as several COVID vaccines are reaching a critical stage of testing. Multiple vaccines, one from Pfizer, are entering phase 3 of their trials and some anecdotal evidence says Pfizer’s version is getting better. Johnson & Johnson has a vaccine in a similar position. Markets have shown significant volatility in the past when news about vaccine trials has been released.

FINSUM: The economic implications of a successful COVID vaccine are monumental, so expect significant volatility on material vaccine news, especially as these vaccine trials enter later stages.

(New York)

The market has been highly topsy turvy lately. With no real direction, stocks have been swinging back and forth based on economic and COVID news from day to day. With this kind of market looking likely for the near term, Goldman laid out some of its best picks for this kind of environment. Speaking about the market generally, the bank said “Consensus expects 9% upside to the typical stock over the next 12 months and volatility should remain elevated through the rest of the year, suggesting low risk-adjusted returns in the coming months.” Its stock picks included: Merck, Verizon, Philip Morris, General Motors, Comcast, Mondelez, and Coca-Cola.

FINSUM: A lot of old blue chips here whose earnings aren’t likely to be hurt too much by COVID.

(New York)

Markets have been rough for the last few weeks. Investors are doubting the pace of the recovery because of a big renewed rise in cases and the possibility of new lockdowns. And according to market analysts, signs are increasingly pointing to another meltdown. If you study various volatility indexes, starting with the VIX, it is becoming clearer that another big move lower is on the horizon. The VIX and other indexes have recently shot back higher after a steady fall after the huge March volatility and their momentum indicates investors may panic sell and create another big correction.

FINSUM: We do not give much respect to technical analysis on its own, but it is useful (in our opinion) as a tool to quantify what one is seeing in the real world. Right now, this makes sense given the rising worries about new cases and lockdowns.

(New York)

Evercore put out an interesting prediction today. The bank, which has a strong research team, says that the market is likely to be “violent” in the near term. They also added a twist—that it would be “violently flat”, meaning it would have sharps up and downs on but the whole remain around the same levels. Evercore highlights the upsides and risks this way, saying “A significant COVID second wave would continue to drive asset prices lower, but with vaccine development continuing, little correlation between economic re-openings and increased case growth and hospitalization data at the national level”. That said, longer term, they are quite bullish, arguing that there will be a “sharp rebound”.

FINSUM: The news flow is going to mean that stocks are very volatile for the foreseeable future. Increased case growth one day, and then a big jump in retail sales the next.