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Leave room for Tesla
Notes on US investment policy
CFRA
December 23: On Monday, December 21st
Tesla
(ticker: TSLA) replaced
Management and investment of apartments
(AIV) to the S&P 500. Tesla was added to the S&P 500 Automobile subindustry index within the S&P 500 consumer discretionary sector. Since Tesla is now the fifth largest company in the world
S&P 500
by market value, the weights of the sector will change, one dramatically. In particular, the consumer discretionary sector grew 13.6% since its December 18 representation within the S&P 500 from 11.2% to 12.8% at the date of entry into Tesla on December 21st. To make way for Tesla, the rest of the sectors were initially reduced from 1.2% for energy to 1.9% for finance and materials.
“Sam Stovall.”
Green light for bank repayments
Ivan Feinseth Market View 360
Tigress Financial Partners
December 22: Late last Friday, the Federal Reserve announced the results of its second round of stress tests, allowing the country’s largest banks to resume share rewards in the first quarter of 2021, subject to certain limitations. , provided that the results of the fourth quarter meet the required levels. The sum of common dividends and share repurchases cannot exceed average quarterly net income over 2020. The good news is that strong banking results over this year, with dreaded levels of loan losses that did not go away never materialize, they have helped improve the profits of banks currently cheap valuation levels versus book value. Expectations are that the six largest banks will be able to repurchase a total value of $ 11 billion in the first quarter of next year.
All major banks won the news yesterday, along with many banks announcing new share repurchases.
JPMorgan Chase
(JPM) announced a $ 30 billion repurchase. Morgan Stanley (MS) announced a $ 10 billion share repurchase. Both of us
Citigroup
(C) i
Goldman Sachs
(GS) said they would resume share buybacks next year. News and announcements highlight the strength of the financial sector and a significant turnaround in business trends.
“Ivan Feinseth.”
Don’t be afraid of rising bond yields
Paulsen’s perspective
The Leuthold group
December 22: The ratio of bond yields to the stock market changes dramatically, depending on whether the yield on ten-year bonds is higher or lower than 3%. When bonds yielded more than 3% (almost three-quarters of the time since 1900), the stock market did its best when yields fell (+ 11.7% annualized return) and struggled when yields increased (-0.2% annualized return).
However, with yields below 3%, its impact is almost the opposite. Shares rose at an average annualized rate of + 4.2% when yields fell below 3% (only a third of the gain experienced when bond yields fell above 3%) and, surprisingly, when yields rose below-3%, the stock market rose by an average annualized clip of + 16.8%. In addition, the frequency of monthly stock market advances, when yields increase, is also surprisingly different. The stock market rose 52% of the time, when yields rose from levels above 3%. But when yields rose from an initial level below 3%, the stock market rose 68% of the time.
—James W. Paulsen
Market Mania
Cross currents
Cross-current publications
December 21: We can now say with certainty that the current environment is the biggest stock market craze in history, bigger than even the Roaring Twenties that ended in the Great Depression of 1929-1932 and, yes, even bigger than the fantastic technological mania that took over the nation. until the peak of March 2000. We can make this claim based on valuation measures such as Robert Shiller’s CAPE (cyclically-adjusted price-to-earnings ratio), now at 33.77, the second highest in history, and the S&P 500 P / E ratio at 37.38, also the second highest in history. In this case, we ignore the huge rise in P / E that occurred in 2008 as revenues plummeted. Neither the Roaring Twenties nor the fantastic technological mania can even remotely match the longevity of this period, despite the sudden and remarkable collapse of 38% in 27 sessions that began in February. It was certainly not a typical year.
The last two overly enthusiastic periods ending in 2000 and 2007 were followed by the worst bear markets in decades, both falling 50% from their highs. We are sure it will be repeated. If our historical and long-term technical studies disappear, the actions are headed for 51.5% success compared to last Friday’s peak.
—Alan M. Newman
Stocks outside the US look attractive
The radar screen of market strategy
Oppenheimer Asset Management
December 21: The fall of the US dollar this year has improved the returns of US investors in most foreign stocks and indices linked to foreign equity markets. In many markets, local currency yields are substantially lower than dollar yields.
The strength of the dollar in recent years had been derived from multiple factors, including the relative strength of the U.S. economy, the dollar as a safe haven asset, and the favorable yield differential of U.S. treasuries compared to international sovereign yields.
In our view, the recent weakening of the dollar offers US investors the opportunity to buy foreign stocks sooner than we expect to be a national and global economic recovery as the world moves forward (with the help of vaccines ‘efficiency) towards a pos- Covid Environment 19.
While we cannot predict with certainty that the dollar will remain at recent levels or even fall below current levels, past history suggests that as the United States moves toward an economic recovery in a post-crisis environment, the appetite of American consumers to import goods and leisure and business travel to foreign destinations is likely to increase foreign currencies, helping foreign countries, particularly those that are destined for export and those that are U.S. citizen travel destinations, moving toward economic recovery and expanding at a faster pace, in turn, could raise foreign stock prices.
“John Stoltzfus.”
Bitcoin is heading for $ 50,000
Equity strategy
BTIG
December 20: Over the three years since the bursting of the late 2017 / early 2018 bubble, cryptocurrency has come of age, with digital assets gaining the acceptance of consumers and businesses, and has increased the interest of institutional investors and governments. So are the financial markets in cryptocurrencies that come of age. The open interest in Bitcoin futures is six times higher in 2020 than in early 2018, as a two-way market develops.
By 2021, the key drivers: asset diversification, interest rate rises and deficits, a more comprehensive incoming administration of the asset class and the comfort of new investors with technological innovation and greater tolerance for volatility, already either in stocks or in cryptocurrencies, they establish Bitcoin will reach $ 50,000 next year.
-Julián Emanuel, Michael Chu
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