(Washington)

New polling data has come out since Joe Biden, former vice president, announced his candidacy. In a development that may come as a surprise, poll numbers are showing him as the Democratic front runner, unseating Bernie Sanders. 39% of Democrats or Democrat-leaning voters say he is their top choice for the candidacy. That figure is up from 28% in March.

FINSUM: It looks like Biden’s reputation hasn’t been tarnished much by the negative press lately. That said, we still favor Bernie to get the nomination on the Democratic side.

(Washington)

Something very odd is going on in the minds of investors. Data on the economy continues to come out very strongly, with Q1 growth at 3.2%, and the market are nothing short of astonishing, up 25% since its December low. But at the same time, many investors and analysts think the Fed will cut rates. The reason why is disinflation, or the fact that the inflation number refuses to rise to the Fed’s target. Looking more broadly, you also have weakening in China and a slowdown in Europe, so there are macro headwinds that could wound the US. Analysts tend to fall in one camp or the other on hikes, with some, like Scott Minerd of Guggenheim, calling the idea “plainly wrong”.

FINSUM: It is very hard to predict what the Fed will do because their u-turn earlier this year caught everyone by surprise. Our bet is that if the current data holds steady, there won’t be any hikes.

(New York)

The yield curve has been injecting fear into markets all year. Investors understandably panicked when the spreads between short-term and long-term Treasuries bonds inverted a few weeks ago. However, investors have been looking at the yield curve with the wrong lens, argues Barron’s. If you actually pay attention to what has been happening recently, you will see a distinct picture of spreads rising, which is a very bullish indicator. Moving averages on the spreads have been growing, the first instance of such in a long time. A number of macro factors are supportive of wider spreads, including a now dovish Fed and strongly rising oil prices, which have injected more fear of inflation.

FINSUM: We think spreads are headed in the right direction. Taken as a whole, the market is starting to look like a good buying opportunity right now. It seems odd to say given stocks are at an all-time high, but if you look at the back drop, the situation looks pretty bullish.

(New York)

For the last eight weeks or so we have been running a “recession watch” theme in articles, but the data is lately looking so good that we are feeling silly. New GDP data was released today and it was nothing short of a blowout. The US expanded 3.2% in the first quarter despite a government shutdown and winter weather. The growth was almost a full percentage point ahead of expectations and well beyond the 2.2% growth of the fourth quarter.

FINSUM: These recession fears seem pretty well put to bed in our opinion. Back in Q4, the declines in a number of indicators seemed to show we may be headed for a recession, but the strong reversal in data suggests this was just an aberration. The market doesn’t seem convinced, though, as Treasuries rallied on this news!

(New York)

One the tail risks for markets right now is the sharp downturn that is supposed to happen to the stock buyback market. Huge levels of corporate buybacks have been supporting US equities for years, but that is forecast to drop dramatically. While that may wound US stocks, it poses a major opportunity for another area: Europe. European stocks don’t see much in the way of buybacks, which has left them much less loved than the US recently. However, the declines in US buybacks are likely to make Europe look much more attractive.

FINSUM: European valuations are significantly more attractive than in the US, which means that if the playing field gets levelled by decreased buybacks, there is probably a good opportunity here. That said, Europe has a lot of economic issues right now.