Displaying items by tag: bear market

Monday, 27 July 2020 14:48

Tech Poised to Bring Down S&P 500

(San Francisco)

No matter how good you may feel about stock indexes being back near all-time highs, one fact cannot be ignored: the market seems to be heavily overweight on the five largest tech stocks— Microsoft, Facebook, Google, Apple, and Amazon (the new acronym, named by Goldman is FAAMG). These stocks have been powering the market, but the whole situation feels like past peaks where their outperformance could not go on forever. Concentration in the S&P 500 is now at its highest in decades, with those five names accounting for 22% of the total capitalization, up from just 16% a year ago. According to Barron’s “Simple arithmetic limits the continued outperformance of the biggest names, the Goldman team observes, because many portfolio managers have 5% limits on holdings of any given stock. The strategists’ analysis shows that the average large-cap mutual fund already has a 5% position in Microsoft and about 4% positions in the other big four names.”.


FINSUM: It seems these stocks are reaching their institutional allocation limits, which mans retail needs to power them higher. The whole situation feels ripe for a correction.

Published in Eq: Tech
Tuesday, 14 July 2020 12:49

Why This Labor Market is Better Than Expected

(New York)

There has been a quite a bit of consternation over the current labor market, and with good reason. Over a million people have applied for unemployment assistance ever week for over 4 months. All told, over 30 million people have lost their jobs. However, there is an encouraging trend: unlike in past recessions, there is still plenty of hiring going on. New job postings have not plunged the way they did in the past. In previous recessions, including after the Crisis, a lot of unemployment had to do with a combination of attrition and a lack of hiring-much more so than outright layoffs. However, that does not appear to be happening now as job postings are still holding strong at their 2015 levels.


FINSUM: This is an encouraging sign for the economy and for individual job seekers. There is still a chance that demand hollows out—especially if we have another full scale lockdown—but for now things look positive.

Published in Eq: Total Market
Tuesday, 14 July 2020 12:47

The Outlook for Airlines is Still Uncertain

(New York)

Where do you stand on airlines? Your opinion is worth about as much as the whole market’s—nobody is quite sure what to make of the future of air travel right now. Airlines had seen rising passenger numbers, but that has been tapering off as COVID cases have been rising again. Delta announced dreadful earnings yesterday, with revenue down 88% and net losses worth $4.33 per share. Thy also announced they were cutting their flight additions for August in half because of the rise in cases. The earnings come alongside a bleak announcement from United, which said “it's increasingly likely that travel demand will not return to normal until there is a widely available treatment or vaccine."


FINSUM: Have airline stocks come back too far? It looks there is likely to be at last another ugly 18 months as we await a vaccine.

Published in Eq: Value
Friday, 10 July 2020 16:28

We May Be Headed for More Lockdowns

(New York)

Coronavirus cases across the country are surging. On Wednesday the US announced there were 62,000 new COVID cases, exceeding the record set the previous Friday by almost 5,000 cases. Some states, like California have actually started to reverse opening plans, not merely pause them as so many other states have. The huge surge in cases is leasing investors to fret that large-scale second lockdowns may be in the works. Anthony Fauci even openly said this yesterday, adding to fears.


FINSUM: Whether or not you think the case rise is just because of increased testing, the fact remains that as numbers soar, there is growing discourse about lockdowns. That is an undeniable risk to markets.

Published in Eq: Total Market

(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.

Published in Eq: Total Market
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