Displaying items by tag: markets

Global turmoil is on the rise, but just as threatening to domestic returns is skyrocketing wages in the U.S. Sure there were great returns last year despite higher wages and inflation, but what stocks are primed to succeed in this current environment? The first is Arcutis Biotherapeutics which has an important drug in stage three clinical trials, which Goldman says could be very profitable. Next is Tricidia another pharma company that has a high buy rating and a potential upside of 126% according to analyst Madhu Kumar of Goldman. Coupang is the final pick which is a South Korean e-commerce retailer. They showed impressively robust revenues when the economy reopened and has great operating leverage according to Eric Cha of GS.

Finsum: These could be potentially good candidates in the tumultuous markets we are seeing currently. 

(Shanghai)

The US is considering some new rules that could cause a stock market calamity in China. The government is considering putting new restrictions on US capital flowing to the Chinese mainland. The move is considered the third and worst-case-scenario stage for Chinese markets in the current trade war. In particular, the big risk is that MSCI de-lists Chinese stocks from its broader indexes, meaning all that capital would need to be pulled out. That amount is currently around $50 to $60 bn.

FINSUM: This is not hugely massive, but it is certainly enough to hurt markets on a technical front, but perhaps even more from a perception angle.

(Copenhagen)

The inverted yield curve may be odd, and negative yields in Europe may be strange, but the weirdest current perversion of markets (or is it the “new normal”?) is in Denmark specifically. That oddity is the negative rate mortgage. Yes, homebuyers are getting paid to take out mortgages to buy a home. Jyske Bank, Denmark’s third largest lender, is offering a mortgage rate of -.50% before fees.

FINSUM: So this is already happening in Europe, but it may have limited effects given the continent’s demographic struggles. It is hard to imagine this happening in the US, but if it did, we bet it would cause a housing boom.

(New York)

October is usually associated with market panics and gives investors a general sense of anxiety. Many of the greatest market meltdowns occurred in October, including 1929, 1987, and 2008. However, this October seems likely to be different, says Barron’s. In fact, good Octobers are not infrequent. It may surprise investors to learn that October has the highest average return of any month in the last 20 years. But the reason this year might be good is that there is a midterm election in November, a factor that has historically made October a strong month for returns.

FINSUM: When you put together the numerous factors supporting markets with the midterm elections next month, it seems like this October will be a good one.

(New York)

Equity investors need to accept a new truth, says the Wall Street Journal—that earnings and fundamentals have given way to a new “boss” of the markets. Instead of stocks trading based on the performance of companies, they are now trading almost squarely on movements in rates. Recent equity performance could not have made the new reality more clear—companies saw outstanding earnings performance, yet stocks have simply muddled through. The reason why—yields have been moving higher on Treasury bonds.

FINSUM: The current obsession with yields reminds us of the 2014-2015 mode for stocks, when everyone was tied up on whether the Fed would start hiking or not.