| Tuesday's Headlines 1. US markets rally on infrastructure spending plans 2. US May retail sales' historic rise 3. COVID cases spike in Texas and Florida 4. Mutual fund managers are sad bulls 5. The restaurant industry battles for survival Markets Closed
 Image courtesy Anchalee Phanmaha/Getty
Markets Today Investors love spending, and they got a healthy dose of it today, helping power global markets higher across the board. News on a potential $1 trillion U.S. spending bill on infrastructure sent construction, industrial, and materials stocks shooting higher. The rest of the market followed in a broad-based rally.
Retail sales in May increased a seasonally-adjusted 17.7%, the biggest spike since they started tracking them back in 1992. Auto sales led the surge as low interest rates and heavy incentives from dealers overloaded with inventory led the increase.
The S&P 500 posted its best day in two weeks, and it is just 8% below all-time highs. Don't tell that to mutual fund managers who think this market is overvalued. It is, and it must be tough to sit on the sidelines while stocks power higher amid a weakened economy. A lot of them haven't, joining the most crowded trades in the market. Even Fed Chair Powell thinks the recovery will be weaker than expected, according to his testimony to Congress today.
But spending has brought us from the depths of April, like it or not. The bill will come due for a lot of that spending down the road. We just need to stay on that road for now.  [NEW READER SURVEY: As promised, we are running another two-week survey of our U.S.-based readers to gauge your sentiment and see what moves, if any, you have been making with your money given the market recovery. We'll share the results, as always, and we thank you for your time and participation.]
Headlines:
 chart courtesy BofAResearch
Fund Managers Say Market Is "Overvalued" Call it a case of the moody bulls... Mutual fund managers are decrying high valuations for stocks as markets grind higher. They are not wrong by most traditional valuation metrics:
According to BofA Research, a record net 78% of global mutual fund managers it surveyed say the stock market is the most "overvalued" since 1998. They fear crowded trades like big technology and healthcare will implode, and they also fear a second wave of the virus hitting later this year.
While many may be reluctantly piling into big tech stocks with the rest of the herd, they have pretty low expectations for future returns. Most of those surveyed see returns over the next decade averaging no more than 5%, with the weighted average around 3.5%.  Restaurants Face Mounting Losses It has been an absolutely brutal 2020 for the restaurant industry, which is near and dear to my heart, having grown up in it. The National Restaurant Association predicts restaurants and the U.S. food service industry will lose a staggering $240 billion in 2020 due to COVID-19, with half of those losses having occurred between March and May of this year. That is dealing a fatal blow to millions of small businesses in and around the industry.
The prognosis for many of them looks dicey as more than three quarters say they are unlikely to make a profit this year.
source NRA.org  There Were Signs of Life... It looked like U.S. restaurants were staging a comeback that began in May when social distancing restrictions were lifted in some states. But that appears to have faded in June, according to data from the Open Table Network.
Many investors and economists are concerned that this spike and retreat will be emblematic of other consumer discretionary sectors that rely on in-person experiences.
Auto sales may have spiked in May, but if families aren't using those new cars to drive out to eat at a restaurant, this trend may continue.  Why It's Different This Time Ken Rogoff, a distinguished professor of economics at Harvard and former chief economist at the IMF, is an expert on recessions. His seminal 2009 book he co-authored with Carmen Reinhart, This Time Is Different, pretty much nailed the after-effects of the Great Financial Crisis, which included a rise in income inequality, low wage growth, and polarizing ideologies. Rogoff has been sounding similar alarm bells this time around, especially as trends towards de-globalization and re-shoring are amplified.
His take on where we go from here is worth the time if you are interested: 
 SPONSORED BY INVESCO
(chart courtesy YCHARTS)  Eli Lilly's stock price rose by nearly 16% after the pharmaceutical company's breast cancer drug, Verzenio, proved successful in preventing the recurrence of breast cancer in a recent trial. Shares of department stores, such as Nordstrom (13%), Kohl's (nearly 9%), and Gap (over 8.5%), are up following new U.S. Census Bureau data indicating that consumers are continuing to shop despite the ongoing pandemic.  Several mass media stocks, including Fox (over 3%), ViacomCBS (3%), and Discovery (over 2%), are all down today. Shares of Oracle fell by 2.5% amid Q4 revenue results that fell short of analysts' expectations. Word of the Day The P/E 10 ratio, or CAPE ratio as it is also known, is a valuation measure, generally applied to broad equity indices, that uses real per-share earnings over a 10-year period. The P/E 10 ratio uses smoothed real earnings to eliminate the fluctuations in net income caused by variations in profit margins over a typical business cycle. The P/E 10 ratio is also known as the Shiller PE ratio.  Image courtesy TheHenryFord.org
Today in History June 16, 1903: Henry Ford launches the Ford Motor Co. in a refurbished wagon factory in Detroit, with $28,000 raised from 12 investors, including a coal dealer, a carpenter, and a man who made windmills.
Want more Investopedia market news?
 Sign Up for 'Chart Advisor'
How can we improve the Market Sum? Tell us at marketsum@investopedia.com
CONNECT WITH INVESTOPEDIA
Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.
114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC. All Rights Reserved | Privacy Policy
|
Tuesday, June 16, 2020
Moody Bulls
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment