The Dow Rose 60 Points, but Investor Optimism Is Bigger Than That
First off, the reason the S&P 500 couldn’t gain any traction was because some of its biggest components— Microsoft (MSFT), Facebook (FB), Apple, and Google parent Alphabet (GOOGL)—spent much of the day in the red. The index is weighted by market capitalization, so these companies, including a trio valued at $1 trillion-plus, have tremendous pull on the index.
With the absence of any major or macro developments to move stocks ahead Monday, TD Ameritrade’s chief market strategist offered some explanation. “People are anticipating a good earnings season and the market is overall kind of ignoring the Washington drama,” J.J. Kinahan wrote in a blog post.
Goldman Sachs’ chief economist warns a pullback for stocks could be coming soon
PUBLISHED WED, JAN 13 20213:43 AM ESTUPDATED WED, JAN 13 20218:02 AM EST
KEY POINTS
Since the trough in late March, the S&P 500 and Dow Jones Industrial Average have both added nearly 70% and the Nasdaq has soared over 80%.
Goldman Sachs Chief Economist Jan Hatzius said market valuations might stop moving “relentlessly higher.”
Last week, Goldman upgraded its forecast for U.S. economic growth to 6.4%, from 5.6% for 2021.
Senate GOP torn over convicting Trump: 'There's no love lost'
(CNN)To many Senate Republicans, including Senate Majority Leader Mitch McConnell, there's no question in their minds: President Donald Trump committed impeachable offenses.
But getting McConnell and at least 16 other Republicans to convict Trump after he's left office is another question entirely.
"There is no love lost within the Senate Republican Conference for Trump," said one GOP source familiar with internal discussions. "Everybody is ready for this to end. But there is a really open question about how many people will vote to convict him after his term will have expired."
torn ─ tear（引き裂く）の過去分詞
no love lost ─ 仲が悪い、嫌悪している
convict ─ 有罪にする
European stocks set to open lower as recovery concerns offset U.S. stimulus hopes
Markets in Asia-Pacific started brightly on Friday, but tailed off by the afternoon as rising Covid-19 cases in China which have led to lockdowns in several cities, resurfaced concerns about an imminent global economic recovery.
Stocks fell Friday because much of the additional fiscal stimulus from the Blue Wave scenario has been priced in. The adage “buy the rumor, sell the news,” may have been at play.
President-elect Joe Biden Thursday evening officially unveiled a $1.9 trillion fiscal stimulus plan he hopes to pass through Congress, which will be controlled by Democrats in both chambers. The size of the plan is roughly in line with expectations. The $900 billion stimulus plan recently passed in Congress has already contributed to the increasingly pent-up consumer demand. More stimulus would only add to that demand, which could be unleashed when Covid-19 vaccines catalyze reopenings and small businesses—which have some access to cash—can rehire employees.
Plus, stocks have been in rally mode, with the S&P 500 up more than 3% in the past month. Calls for a pullback on the index have been growing louder. On Friday, Bank of America’s chief investment strategist Michael Hartnett wrote in a note, “Post-inauguration correction [is] likely on peak policy,” arguing that fiscal spending and monetary stimulus are priced into stocks. Tony Dwyer, chief market strategist at Canaccord Genuity, wrote in a note that he expects a roughly 8% drop in the S&P 500 in coming weeks.
Majority of investors say higher rates loom as biggest threat to stocks and risky assets, says BofA survey
More than half of fund managers polled by BofA Global Research in January say higher interest rates and less accommodative monetary policy marked the biggest danger that could derail the bull run in risk assets in the first half of this year.
“Combined with nascent speculation about the tapering of Fed asset purchases given the much more meaningful fiscal support that is forthcoming in the US, leaves investors acutely aware of the risk that higher rates pose to risk assets,” said Ralf Preusser, an interest-rate strategist at BofA Global Research.
Atlanta Fed President Raphael Bostic and some senior Fed officials alluded to the possibility of easing the central bank’s pace of asset purchases if the economy recovers faster than expected this year.
But recent guidance from Fed Chairman Jerome Powell and other members of the Fed Board of Governors suggested such talk was premature.
Janet Yellen, President-elect Joe Biden’s choice for Treasury secretary, testified Tuesday that the U.S. could afford a higher corporate tax rate if it coordinates with other economies around the globe.
“We look forward to actively working with other countries through the [Organization for Economic Cooperation and Development] negotiations on taxes on multinational corporations to try to stop what has been a destructive, global race to the bottom on corporate taxation,” she said in response to a question from Sen. Mike Crapo, R-Idaho.
President-elect Joe Biden and Vice President-elect Kamala Harris will be sworn in today in a scaled back ceremony at the US Capitol. Harris will make history as the first female, first Black and first South Asian US vice president.
DC and states across the country are under strict and heightened security over fears of possible new threats today.
be sworn in ─ （宣誓して）就任する
swearの他動詞宣誓させるを受け身にするのか
scaled back ─ 縮小された
Biden logs best stock-market rally from Election to Inauguration Day in history
In the 11 weeks between the Nov. 3 election and Wednesday’s close, the S&P 500 surged a dazzling 14.3%, according to FactSet data.
Looking back historically, the all-time champion for Election Day to Inauguration Day performance had been the one-term Republican President Herbert Hoover, with a 13.3% rally in the S&P 500 index SPX, +1.39% between his Nov. 6, 1928 election and his first day in office.
フーバー？(ﾟдﾟ;)
Jeremy Grantham says the market is in a bubble with ‘very seldom seen levels of investor euphoria’
PUBLISHED THU, JAN 21 20213:18 AM ESTUPDATED THU, JAN 21 20213:53 AM EST
KEY POINTS
Famed investor Jeremy Grantham on Thursday reiterated his warning that Wall Street is in a bubble as individual traders get “carried away.”
Grantham cautioned that there has “never been a great bull market that ended in this kind of bubble that did not decline by at least 50%.”
Grantham said he prefers emerging market assets over U.S. markets and also likes cash and American venture capital.
Robinhood day traders are squeezing the hedge funds — here’s why it may continue
As the saying goes, the market can remain irrational longer than you can remain solvent. And what is happening now is that the big players are being pushed around — David bullying Goliath, if you will — by the legions of day traders, using services including the Robinhood investing app to drive stocks higher.
That is the theory put forward by Michael Batnick, director of research at Ritholtz Wealth Management and author of the Irrelevant Investor blog. “These traders are moving from stock to stock. They squeeze all the juice until there’s nothing left and then move onto the next one,” says Batnick
He points to this chart from JPMorgan showing the most shorted companies in the Russell 300 RUA, +1.29% surging higher. “I can’t prove that the digital traders are the culprits, but I don’t think it takes a titanic sized leap of faith to make the connection,” he said.
Batnick included this viral video of a young couple sharing their investing strategy on TikTok. (If you don’t click on the link, the man says he buys stocks when they start going up and sells when they stop doing so. Momentum trading, in other words.)
What’s different this time? The networking effect. “This is a gigantic community now, and if we’ve learned anything over the last decade, it’s that we should be careful shorting networks. There are nonmonetary considerations at play here, like belonging. And fun. Did I mention they’re having fun?” says Batnick. “I don’t think these people can continue to make money forever, but this idea that it ends with them going away is not something I see coming.”
squeeze ─ 絞りとる、short squeeze 踏み上げ
as the saying goes ─ 俚諺に曰く
irrational ─ 不合理に
solvent ─ 支払い能力がある
bully ─ いじめる
put forward ─ 提案する
culprit ─ 犯人
take a leap of faith ─ 信じて崖などから飛ぶ
グランサム氏もスクイーズされてんでしょうか
ビジネス志向 〜 キャンベル氏は2013年にAsia Groupを創設、2007年にCNAS（新アメリカ安全保障センター）、そして2002年にStratAsiaなどのコンサルティング会社を設立している。これらはBrookingsやHeritage財団のようなシンクタンクというより、企業と個別契約を結び、安全保障や国際貿易・投資などのアドバイスあるいは便宜を図っている。
「インド太平洋調整官」に就任することで、Conflict of Interestが生じないか気になるところだ。
韓国びいき
同氏は、2014年に韓国修交勲章を受章した。他に韓国と近しい関係の例として先月2日に韓国国際交流財団（ＫＦ）が主催したフォーラムに招かれ、北朝鮮問題に言及、日韓関係においては「外部が果たせる潜在的な役割がある」と介入の可能性とも受け取られる発言を行っている。更に韓国配慮の姿勢は国際外交に置いても見られる。キャンベル氏は、G7に韓国、インドそしてオーストラリアを加えたD10（デモクラシー10）を推奨し、Quadにも韓国を加えることに言及している。
インド太平洋調整官に任命されたカート・キャンベル氏は、「How Can America Shore Up Asian Order 〜 A Strategy for Balance and Legitimacy」と題した外交論文を1月12日にForeign Affairs（オンライン）誌に掲載した。論文を何度も読み返した小生の感想は、消極的なアジア外交、中国とは対立をなるべく避け共存を模索、アジア諸国により自立した体制を促す内容で、語弊があるかもしれないが率直に言って中国への降伏宣言との印象を受けた。
Stock-market legend sees few weeks of ‘putting your last, desperate chips into the game’—then pop
‘We will have a few weeks of extra money and a few weeks of putting your last, desperate chips into the game, and then an even more spectacular bust…When you have reached this level of obvious super-enthusiasm, the bubble has always, without exception, broken in the next few months, not a few years.— Jeremy Gratham
That is the latest from Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., offering up a stark warning to speculators driving the stock market to new heights amid the greatest pandemic of the past century.
Stock-market bulls brace for major gut check as earnings, Fed and GDP loom
It may be the moment of truth for stock-market investors with the Fed and the busiest week of earnings ahead
A stark reality for the euphoric stock market? The coming week may present the closest thing to a reckoning for bullish investors so far in 2021.
It is the busiest week of the fourth-quarter earnings season, highlighted by hotly anticipated results from heavyweight companies like AT&T T, +0.35%, Apple Inc. AAPL, +1.61%, Facebook FB, +0.60% and Tesla TSLA, +0.20%.
In all, some 118 companies are scheduled to report quarterly results in the final trading week in January, including 13 components of the blue-chip Dow Jones Industrial Average DJIA, -0.57%, John Butters, senior analyst at FactSet research told MarketWatch.
And over 60% of that weekly onslaught will play out between Jan. 27 and Jan. 28.
brace for ─ に備える
gut check ─ 本気が試される、正念場
moment of truth ─ 真実の瞬間、審判の時
a reckoning ─ 請求書、報い
Stock-market bulls brace for major gut check as earnings, Fed and GDP loom
It may be the moment of truth for stock-market investors with the Fed and the busiest week of earnings ahead
A stark reality for the euphoric stock market? The coming week may present the closest thing to a reckoning for bullish investors so far in 2021.
It is the busiest week of the fourth-quarter earnings season, highlighted by hotly anticipated results from heavyweight companies like AT&T T, +0.35%, Apple Inc. AAPL, +1.61%, Facebook FB, +0.60% and Tesla TSLA, +0.20%.
In all, some 118 companies are scheduled to report quarterly results in the final trading week in January, including 13 components of the blue-chip Dow Jones Industrial Average DJIA, -0.57%, John Butters, senior analyst at FactSet research told MarketWatch.
And over 60% of that weekly onslaught will play out between Jan. 27 and Jan. 28.
brace for ─ に備える
gut check ─ 本気が試される、正念場
moment of truth ─ 真実の瞬間、審判の時
a reckoning ─ 請求書、報い
The frenzied period could shape up to be a pivotal one for a market that may be searching for its next spark as the newly minted administration of President Joe Biden administration’s unfolds its policy initiatives and plans to tackle the COVID-19 pandemic.
Thus far, optimism is sky high among equity investors, with sentiment data from Ned Davis Research at a reading of 74.4%, a level that it has only achieved 7.4% of the time since 1994.
Similarly, the bull-bear spread is at 19.3% versus a median of 4% as of Dec. 31, according to American Association of Individual Investors survey.
One doesn’t have to search long to find evidence of the treacherous path that short sellers are facing these days.
Case in point, GameStop‘s stock GME, +51.08% is on track for its best monthly rise in its history, up 245%, as retail-investing fanatics touted the stock and urged users on finance-oriented social platforms like Reddit to buy the shares to squeeze activist investor and noted short seller Andrew Left’s Citron Research.
The actions of fanatic investor groups have gone beyond name-calling and hacking attempts and included what Left described as “serious crimes such as harassment of minor children,” MarketWatch’s sister publication Barron’s wrote.
treacherous path ─ 危険な道
tout ─ しつこく売り込む
name-calling ─ （デブハゲなどと）悪口を言う事
The stock market is at or near the most-expensive levels ever by most measures. When will it matter?
PUBLISHED SAT, JAN 23 20218:29 AM EST
KEY POINTS
A battery of valuation tests from Goldman Sachs shows the market to be at or near the most-expensive levels in recent history on most measures.
Stock values look less extreme relative bond yields and corporate free cash flow.
There is a distinct “greed hive” that’s buzzing with options speculation, engineered short squeezes and heedless momentum buying of marginal, illiquid stocks.
However, when financial conditions remain very loose and the direction of expected earnings is up, there tends not to be a general reckoning due to high valuations
A surge in options trading is pushing around the stock market — and bringing back memories of the dot-com bubble
“What we have seen is a focus on short-term, out-of-the-money call options because they have these lottery-like payoffs,” said Garrett DeSimone, head of quantitative research at OptionMetrics, an options database and analytics provider for institutional investors and academic researchers.
payoff ─ 受取金
A call option is a financial instrument that gives the holder the right, but not the obligation, to buy the underlying security at a set price, known as the strike price, by a certain date. By buying far “out of the money” calls, which have a strike price well above the stock’s present level, investors are betting that a surge in the stock price will net them a healthy profit.
the right ─ 権利
the obligation ─ 義務
underlying security ─ 裏付け原資産の有価証券
the strike price ─ 権利行使価格
net ─ （網をかけて）捕まえる、（誰々に何々を）捕らえせしめる
That activity has been amplified, in some cases, as options investors gather on Reddit’s Wall Street Bets forum and elsewhere to brag about wins, commiserate about losses and, in particular, urge each other to pile into a particular stock and to hold the fort when suffering setbacks.
brag ─ 自慢する
commiserate ─ 慰める
setback ─ 反落
It’s that kind of concerted action that’s been cited as a primary driver of a 300% rally by shares of videogame-retailer GameStop Corp. GME, +18.12% since the end of last month. The GameStop rally underlined a phenomenon in which small investors have aggressively bought calls of companies that have been heavily shorted by hedge funds and other large investors, forcing them to exit and accelerating a rise in the price as they scramble to exit their bets that share prices would fall.
That’s a new wrinkle compared to the dot-com era or even the recent past.
wrinkle ─ シワ、新機軸
The ability of individual investors to muscle heavily shorted shares represents “a new facet of the market that didn’t exist five years ago and needs to be respected,” Mike Zigmont, head of trading and research at Harvest Volatility Management, in an interview.
Mania in stocks like GameStop, surging options activity suggest a market pullback is coming
PUBLISHED MON, JAN 25 20212:03 PM EST
KEY POINTS
The wild rocket higher in GameStop, then its quick fall is a sign of frothy trading that could precede a broader market pullback, strategists said.
Volatility hit a whole group of stocks, some of which had high short interest and were ‘squeezed’ higher as rising prices forced shorts to cover.
BTIG’s Julian Emanuel said while the frothy trading signals a short-term top, the bull market is far from over and by some measures the S&P 500 could reach 5,047 before it ends.
The Dow Slipped 23 Points Because a Broad Short Squeeze Brought the Pain
There may be a marketwide “short squeeze” in play, an event that occurs when bearish bets on stocks backfire, and end up pushing shares higher and higher as short sellers have to pay more for shares to replace stock they borrowed. Some investors have to liquidate long positions to cover their unraveling short positions. A short squeeze “allegedly resulted in some margin calls for some big long-short equity fund managers and that began to weigh on the broader market by midmorning.”
Champions of GameStop’s jaw-dropping stock surge portray it as a victory by long-suffering mom-and-pop investors over nefarious Wall Street institutions, but some veteran market observers see parallels with past trading catastrophes that ultimately left those same individuals holding the bag.
jaw-dropping ─ 開いた口が塞がらない
portray ─ 描く
nefarious ─ 極悪な
leave someone holding the bag ─ 誰か一人に責任を押し付ける
Tesla CEO Elon Musk calls Robinhood CEO ‘Vlad the Stock Impaler’ and grills him over the GameStop saga
He said that while he was asleep, at 3:30 a.m. Pacific time last Thursday, Robinhood’s operations team got a file from the National Securities Clearing Corp. (NSCC).
“We have to put up money to the NSCC based on some factors including things like the volatility of the trading activity into certain securities. And this is the equities business so it’s based on stock trading and not options trading or anything else,” he said.
“So they give us a file with the deposit, and the request was around $3 billion, which is, you know, about an order of magnitude more than what it typically is,” said Tenev.
Musk asked how that was calculated and commented that it seemed “weird” that you get a “$3 billion demand, you know, at 3:30 a.m. in the morning, just suddenly out of nowhere.”
“Robinhood up until that point has raised around $2 billion in total venture capital, up until now. So it’s a big number, like $3 billion is a large number, right?” responded Tenev, who added that Robinhood doesn’t have the full context concerning what was going on at the NSCC to make those calculations.
“I wouldn’t impute shadiness to it or anything like that, and actually you know the NSCC was reasonable … they worked with us to actually lower it. So it was unprecedented activity,” said Tenev. He said an eventual conversation with “higher-ups” at the NSCC led to that $3 billion number being dropped to $1.4 billion — still, he said, a “high number.”
He said marking the most volatile stocks “positioning closing only” was proposed, and the NSCC responded by saying the deposit was $700 million, which Robinhood paid. Tenev said that explains why some positions had to be marked “closing only,” even in the knowledge it wasn’t a great outcome for customers.
Vlad the Impaler ─ 串刺し公ヴラド（ヴラド・ツェペシュつまりドラキュラの事）、ロビンフッドのCEOウラジミール・テネフの名に引っ掛けた
deposit ─ 保証金
an order of magnitude more than ─ よりも一桁多い
impute ─ に帰着させる
shadiness ─ 影、いかがわしい暗部
eventual ─ 最終的な
The Dow Rose 476 Points on a Double Dose of Optimism
Stocks rose sharply Tuesday. More fiscal stimulus looks likelier, and the Covid-19 vaccine outlook just got a tad brighter.
The most important development on the day was progress on fiscal stimulus. President Joe Biden met with Republican lawmakers to discuss their proposed $618 billion stimulus plan, one that would include $1,000 direct payments to households. Some economists expect roughly $1 trillion of spending by March, and the talks indicate both that roughly that amount could be on the way and that this is a bipartisan—not Democratic-only—agenda.
Consumers and corporations have already built up excess reserves, which could be unleashed when vaccines enable reopenings, especially as small businesses will have the cash to rehire workers. But more stimulus may mean that even more pent-up demand and even higher earnings growth than currently expected.
Reddit user who helped inspire GameStop mania says he lost $13 million on Tuesday, but is still holding on
Keith Gill, AKA Reddit’s DeepF------Value, apparently lost more than $13 million on Tuesday alone from his GameStop bet as the shares dropped 60%.
Despite the losses, the investor is holding onto 50,000 shares of GameStop as well as 500 call options in the brick-and-mortar video game retailer.
Investors fear buoyant global markets vulnerable to China credit crunch
Short-term lending rates spiked in January, fanning fears Chinese policymakers would tighten policy
Investors warn the cheery mood in global stock and commodity markets could come to an unfortunate end if Chinese policymakers constrict lending to prevent the country’s economy and financial markets from overheating.
The S&P 500 is on track for surprise earnings growth, and Disney waits on deck
Big banks and tech companies have posted sizable profit beats, putting the S&P 500 on pace to break out of an earnings recession
S&P 500 index SPX companies are now projected to show positive earnings growth of 1.7% for the fourth quarter, with 58% of results already in. That would allow the index to snap out of an earnings recession, which exists when corporate profits post year-over-year declines for two or more quarters in a row.
At the end of last year, analysts expected December-quarter earnings to fall by 9.3%, which would have marked the fourth straight quarter of year-over-year declines. Overall projections began slowly improving as more results came in and they finally turned positive this week.
be on track ─ 軌道に乗っている
on deck ─ 甲板に出ている、出番待ち
post ─ 計上する
beats ─ 動詞では打ち負かす意、「獲得」が近いか
snap out of ─ （悪い状態から）脱する
in a row ─ 連続した
straight ─ 連続した
And trading in futures and options on CME Group CME, -1.34% exchanges will also be halted on Monday. In other words, there will be no settlements in trading in gold futures GCJ21, -0.29% or crude oil CL.1, -0.84%. However, traders will be able to deal in commodities on the Globex platform, with a pause starting after 1 p.m. Eastern.
So, here’s the skinny on so-called Presidents Day. Congress declared Washington’s Birthday a holiday in 1879, according to the Library of Congress. The republic’s first president was born on Feb. 22, 1732.
The Fed’s new focus on employment above inflation has important investing implications
The Federal Reserve is placing the employment end of its mandate above the inflation side.
That’s a reversal from previous policies where the central bank used interest rates to control price pressures.
Now the Fed says it will tolerate higher inflation in the interest of broad, inclusive employment gains.
So when does the pain of rising yields, which makes it harder to justify stretched equity valuations, start to make a difference? With the yield on the 10-year Treasury note TMUBMUSD10Y, 1.286% moving back above 1.2%, a challenge of the 1.5% area, which is the equivalent of the dividend yield on the S&P 500 SPX, -0.06%, could soon be in store, wrote Sean Darby, global head of strategy at Jefferies, in a Tuesday note.
Home Investing Stocks Mark Hulbert
Mark Hulbert
Opinion: What signals the top of a bull market in stocks? Not rising interest rates
Last Updated: Feb. 16, 2021 at 5:10 p.m. ET
First Published: Feb. 16, 2021 at 10:45 a.m. ET
By Mark Hulbert
Treasury yields have risen sharply so far this year
MARKETWATCH PHOTO ILLUSTRATION/ISTOCKPHOTO
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Referenced Symbols
TMUBMUSD10Y
1.288%
SPX
-0.06%
CHAPEL HILL, N.C. — Rising interest rates will not be what sabotage this bull market.
That’s crucial information, since interest rates have risen significantly over the last six months, and especially over the last couple of weeks. The 10-year Treasury yield TMUBMUSD10Y, 1.288% has more than doubled from where it stood last August, for example, from 0.52% to its current 1.20%. A big chunk of that increase—27 basis points—have come just since the beginning of the year.
I am revisiting this topic since many readers apparently weren’t convinced by my column earlier this month that there is no historical correlation between interest rates and stock-market returns. SPX, -0.06% As some of you pointed out, that column focused on summary patterns that emerge when analyzing all data back to the 1920s. That is different than focusing on interest-rate trends at bull-market tops in particular. That’s what I am focusing on in this column.
Since 1962, which is how far back my database for the 10-year Treasury yield extends, there have been 17 bear markets, according to the calendar maintained by Ned Davis Research. In 10 of those 17 cases, the 10-year Treasury yield when those bear market began was actually lower than where it had stood three months prior. In other words, in more than half of the bear markets the 10-year yield had fallen over the last three months of the preceding bull markets.
You shouldn’t conclude from this result that a bear market can’t happen unless interest rates are declining, however. Notice that in seven of these 17 bear markets, interest rates rose over the three months preceding the beginnings of those bear markets. The appropriate conclusion to draw is that interest-rate trends are an unreliable guide to when bull markets will come to an end
‘No peace’ for markets until 10-year Treasury yield hits 2%, strategist says
Referenced Symbols
TMUBMUSD10Y
1.628%
COMP
-0.59%
SPX
0.10%
DJIA
0.90%
DXY
0.22%
USDJPY
0.47%
A bond market selloff is calling the tune across financial markets, including for foreign exchange. Equilibrium is unlikely to return until the yield on the benchmark 10-year U.S. Treasury note hits 2%, argued one well-known analyst on Friday.
“There will be no peace until U.S. 10s reach 2%,” said Kit Juckes, global macro strategist at Société Générale, in a note.
Rising yields have triggered rotation away from growth-oriented stocks, including large-cap, tech-related shares, into more cyclically sensitive and often value-oriented stocks and sectors. The tech-heavy Nasdaq Composite COMP, -0.59% slipped into correction territory, defined as pullback of 10% from a recent peak, as yields continued to climb, while the S&P 500 SPX, 0.10% and Dow Jones Industrial Average DJIA, 0.90% have traded at records. All three benchmarks are positive on the week, with the Nasdaq bouncing on days when the climb in yields relented.
“The pattern seems clear enough: The equity market is seeing a sector rotation but not a correction; the bond market is seeking a new equilibrium in the light of a vastly improved economic outlook in both the U.S. and elsewhere; some policy makers are pushing back against the bond moves, with little success,” Juckes wrote.
Why a pullback for stocks might be fast approaching, according to Deutsche Bank
Published: April 7, 2021 at 3:15 p.m. ET
The organization that in the U.S. says whether the economy is in a recession or not seems to be asleep on the job.
be asleep on the job ── 仕事中に居眠りする
The National Bureau of Economic Research defines a recession as the period between a peak of economic activity and its subsequent trough, or lowest point. There is no debate that the NBER was correct in calling the last cycle’s peak in February 2020, but the bottom was, if you look at jobless claims, late April, and no later than May if you look at employment or personal income.
For markets, there is significance to when the economy is in expansion or recession. According to research from Deutsche Bank, growth, as measured by the Institute for Supply Management’s manufacturing index, typically peaks 10 to 11 months after a recession ends. That would be right now, if you go by the NBER’s definition of recession and not its stubborn refusal to say it.
Over the last 20 years, there has been a 73% correlation between the annual, rolling gains of the S&P 500 SPX, +0.15% and the level of the ISM manufacturing index. That makes sense — you would expect growth assets, like stocks, to be correlated to measures of economic growth.
According to the Deutsche Bank numbers, the S&P 500 sold off around growth peaks by a median of 8.4%, and dropped by a median of 5.9% when the ISM flattened instead of fell. And the timing of these drops was soon from the peak — usually two weeks after, lasting six weeks in total.
So when that peak comes is important. And Deutsche Bank says it will come in the next three months — not a huge shock given that the March reading registered 64.8%, a 38-year high.
“As growth peaks over the next three months, we expect discretionary investors to pare their positioning from extremely elevated levels, and see retail investors as unlikely to buy the dip. Using the historical experience as a guide argues for a near -6% pullback if growth flattens out near the peak, a bigger -8.4% pullback on an inverted-V in growth,” said strategists led by Binky Chadha.
