Displaying items by tag: S&P 500

(New York)

In what comes as a very important announcement right now, Goldman Sachs argues that the stock market has not bottomed, and that it will take three things happening for the nadir to arrive. In order for markets to reach a bottom and start to sustainably rise, Goldman says case numbers must start to fall, there must be evidence that Fed and Congressional efforts are sufficient to support the economy, and investor sentiment and market positioning must bottom out (which has not even close to happened yet, according to GS). Goldman expects the S&P 500 to finish the year at 3,000.

FINSUM: We agree with the first two points (about case numbers and stimulus), but the third argument about positioning seems circular to us, as it relies on the markets getting worse before getting better.

(New York)

Income investors have been frightened by the extent to which the current Coronavirus downturn is going to cause an economic downturn and thus a big cut to dividends. The only good news on this front recently has been that companies are suspending buybacks before dividends. In assessing the damage, Goldman Sachs says overall dividend payouts are going to be slashed by 25% this year. That figure includes a 38% fall for the next nine months added to the 9% rise in dividends in the first quarter.

FINSUM: This is big, but it would be far from catastrophic levels.

(New York)

One of the hardest things to do in a crisis is to sit back and let one’s mind relax enough to think creatively and see the big picture. This has been particularly hard to do in the fog of the coronavirus, which is not just a financial/economic crisis, but primarily a health emergency that has disrupted our everyday lives more than in any period since WWII. So what are some of the long-term economic, and thus market, consequences of this virus? We believe the main outcome of this huge lockdown is ultimately going to be more consolidation of power by large corporates. As Main Streets across the US are cleared out of small business that do not have the capital to survive, American consumers will be ever more incentivized to look online and to existing behemoths (who have the resources to weather this storm). As a very short-term example, think of the 100,000+ workers will will quickly migrate from Main Street retail/service sector jobs into employment for Amazon; the consolidation that is happening in employment will front-run consumer spending.

FINSUM: As sad as it may seem, we see this lockdown as a big tailwind for the S&P 500 over the next few years, as this is the kind of crisis that will wipeout small competition and concentrate revenue in an ever smaller group.

(New York)

Markets have been on an extraordinary run over the last three days. 20%+ for the Dow and a measly 18% for the S&P 500, technically ending the bull market. It was the best three-day run since 1931 (in itself a bleak reference). However, many on the street think this rally was too bullish too fast, as we are arguably not even to the worst of the health crisis, and certainly not in the worst part of the coming economic slowdown.

FINSUM: We are going to have at least two quarters of awful earnings and several months of terrible jobs data, so there is a long way to go. This seems like a stimulus-euphoria/dead-cat bounce rally.

(Washington)

President Trump is changing his view on coronavirus. When the virus first started sweeping the world, he maintained a cavalier attitude. He then pivoted to be very focused and concerned about protecting against the virus. Now he is moving back in the other direction, saying that at the end of the current 15-day lockdown, he is considering opening the economy back up, joining a chorus of business leaders who say that the “cure cannot be worse than the virus itself”.

FINSUM: This is a difficult and risky decision—lives or livelihoods? However, Trump proceeds, it seems unlikely New York, California, and Washington, will take his lead.