Displaying items by tag: bull market

(Washington)

Fed chief Powell made an interesting warning today. Powell said it will probably take a vaccine to get the economy into a full recovery. “For the economy to fully recover, people will have to be fully confident. And that may have to await the arrival of a vaccine … it may take a while . . . it could stretch through the end of next year, we really don’t know”, he said. Despite the hesitancy, the Fed has been very supportive in its statements of the support it will provide, saying the central bank could do a much more to help the recovery if needed.

FINSUM: This statement is really helping markets today, as combined with good news on a promising new treatment and the lack of a second wave forming (yet), things are looking up.

(New York)

Anybody who has paid even scant attention to the market over the last eight weeks has been shocked by what it has done. After dropping 35% from peak, the market has rallied back by almost as many percent over the course of the last 5 weeks. Now, Societe Generale says the comeback is just too fast and defies all previous bear market recoveries. Rebounds from bear market lows tend to be long slogs, with gyrations upward and downward as the market moves slowly higher. This recovery has been a lightning bolt as the market almost sprints higher. However, UBS argues that this recovery could be different, saying “This is a policy-induced downturn, and the speed and structure of the recovery could follow a different route from previous downturns”.

FINSUM: The thing that is really keeping this recovery afloat is the extraordinary monetary and fiscal stimulus that has been injected into the economy. That said, it is likely going to take a LONG time to get back to where we were on February 15th 2020, so a plateau or fall in markets does not seem unlikely.

(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)

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.

(Los Angeles)

Tesla’s stock has been rising almost as fast as Elon Musk’s rocket ship ambitions. Not only is the stock up almost 100% this year already (!), but shares rose by a shocking 20% on Monday alone. Why? The lack of a concrete reason is what makes the move alarming. There was some relatively minor news from a supplier about battery prices, but otherwise nothing. That is making many traders expect that a short squeeze has hold of the market, making gains artificial and moving the stock dangerously away from its moving averages.

FINSUM: Tesla shares seem to be showing a high degree of irrational exuberance right now. Any bad news could cause a huge drop.