This week’s action has focused on the bond market, not the stock market, as Treasury yields have risen in reaction to the progress of a new stimulus package as well as the global launch of COVID-19 vaccines.
The S&P 500 SPX,
has declined for three days in a row, but by only 0.5%, suggesting that the stock market has not panicked over the moves that have generated the 10-year Treasury’s TMUBMUSD10Y performance,
at approximately 1.30% and the 30-year yield of TMUBMUSD30Y,
up to 2.10%.
Dhaval Joshi, BCA Research’s chief European investment strategist, has stated for a while that low returns meant the recovery of stocks and other assets, it made sense: a rational bubble, if you will. “Rational, because the assessments of the nosebleeds are justified by a fundamental motor. And not any fundamental factor, but the main fundamental factor: the performance of the bond “, he writes.
But not now. Multiple price-to-profit futures have increased even as yields have increased. The profit performance of the most growth-focused sector, technology, has now been surpassed by bond yields plus a fixed amount, as the chart shows.
There are three ways to fix this. One, is that stock prices fall; another is that bond yields are declining; a third is for neither to move, but profits to increase, to improve stock valuations. (This third factor seems unlikely, for now, at the end of the earnings season).
“Our current recommendation is to stay tactically neutral for the next few weeks to see if valuations of risk assets can return to rationality. That means keeping existing investments in the market, but setting fire to new cash deployments, “says Joshi.” If the valuation returns to rationality in any of the three ways listed above, investors can safely deploy new cash. in the market”.
And if not? Joshi says that if the market becomes irrational, the key will be to see if investors on longer horizons join the party. “As investors with longer and longer time horizons join the irrational bubble, there will be well-defined moments of increased fragility, in which the risk of correction increases. That’s what the irrational bubble burst in 2000 and any new irrational bubble burst. “
The buzz
Uber Technologies UBER,
fell 2% in pre-market trade after the UK Supreme Court ruled that its drivers are self-employed and non-self-employed, which will entitle them to the minimum wage and paid leave.
Facebook FB,
CEO Mark Zuckerberg had planned to speak with Australian Treasurer Josh Frydenberg after the company imposed a blockade on sharing news produced in Australia, a response to measures to get online businesses to pay publishers. Faced with the same potential law, Alphabet’s GOOG,
Google has reached agreements with publishers, including News Corp., which owns MarketWatch, the publisher of this report.
IBM technology services giant IBM,
is considering selling its IBM Watson Health unit at a loss, according to the Wall Street Journal.
Roku ROKU transmission device manufacturer,
reported a surprise profit for stronger-than-expected revenue. Dropbox DBX cloud service provider,
reported stronger-than-expected earnings and revenue for the fourth quarter. Applied Materials AMAT,
the microchip equipment maker, exceeded first-quarter tax profit estimates and led to better estimates for the current quarter than analysts had estimated. Agricultural Equipment Manufacturer Deere & Co. DE,
rose in premarket trading after easily surpassing analysts ’estimates.
French car manufacturer Renault RNO,
fell in Paris and undoed its dividend after reporting a loss of 8 billion euros by 2020. Renault also said the peak of microchip shortages facing manufacturers should be reached of cars in the second quarter.
The flash version of the Markit Purchasing Manager indices is due to be released at 9:45 a.m., followed by existing home sales data.
The latest fact about Senator Ted Cruz who left Texas deprived of electricity in Cancun (Mexico), for which he has apologized, is the report that left his poodle, Snowflake, at his home in Houston.
The markets
US stock futures ES00,
NQ00,
advanced.
Oils CL.1,
fell below $ 60 a barrel and the US dollar DXY,
slipped.
Random readings
Now that NASA’s Perseverance rover has landed safely on Mars, it will be tasked with collecting rock samples that may contain evidence from past life.
A 3D printer that produces vegetable fillets? This is the goal of this startup that has just raised $ 29 million.
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