| Wednesday, September 02, 2020 Headlines 1. US markets rally behind financials and industrials 2. Tesla shares slide 10% as big investor bails 3. US budget deficit to soar to WWII levels 4. Institutional investors remain in neutral 5. Retail investors are feeling a little bolder Markets Closed
 Image courtesy GettyImages/matthiashaas
Markets Today U.S. markets raced higher again today, but the drivers were industrials, financials, and consumer staples, for a change. Tech stocks climbed, to be sure, as the Nasdaq crossed 12,000 for the first time, but Tesla, Zoom, and other recent high-flyers traded lower. Shares of Tesla (TSLA) fell 10% today, which is technically a correction for shares of the automaker.
The DJIA crossed 29,000 for the first time since February and is just 2% below its all-time highs. Gold and the U.S. dollar fell as recovery stocks climbed amid some optimism on the economic front, but oil prices fell to their lowest level in weeks on oversupply concerns.
The Federal Reserve's Beige Book, released today, revealed that manufacturers across most of the country grew last month, and consumer spending on new vehicles and our homes remained robust. Yet total spending by both businesses and consumers was still well below pre-crisis levels. Sadly, some companies were also turning temporary furloughs into permanent layoffs because of weak demand. Even in cases when companies wanted to hire, the Fed said, "...firms continued to experience difficulty finding necessary labor, a matter compounded by day care availability, as well as uncertainty over the coming school year and jobless benefits."
This will be a vexing problem throughout this recovery. Headlines:
 U.S. Government Debt to Exceed WWII Levels The amount of U.S. government spending to combat the economic disruption brought on by the pandemic has been historic, and it is blowing open the federal budget deficit to levels we haven't seen since the second world war.
The Congressional Budget Office (CBO) projects a federal budget deficit of $3.3 trillion in 2020, more than triple the shortfall recorded in 2019. At 16% of gross domestic product (GDP), the deficit in 2020 would be the largest since 1945—and it is just beginning. In the CBO's projections, the average deficit over the 2021–2030 period is two percentage points more than annual deficits have averaged over the past 50 years.
Federal debt held by the public is projected to rise sharply, to 98% of GDP in 2020. It will exceed 100% in 2021 and increase to 107% in 2023, the highest in the nation's history, according to the CBO's projections.
Modern monetary theory fans are having their day as they postulate that government spending and budget deficits are not as harmful as we were taught in the last century. Not that we have a choice given the pandemic, but the swollen budget deficit will ultimately have to be addressed—but not for several years.
Clearly, stock investors don't care too much about it.  Chart courtesy BofAResearch
Institutional Investors Are in Neutral Amid a feverish rise in equity markets, steep valuations, economic uncertainty, and the continued spread of the virus, institutional investors' sentiment is fairly tepid. Many of them were pulling their money out of equities before the pandemic and continued to do so through the spring. They were plowing money into government and corporate bonds and cash as the pandemic raged, but they have been creeping back into growth stocks (big tech) as the markets have eclipsed new records.
Still, according to BofAResearch's Sell-Side Consensus Indicator, which is a contrarian indicator in that markets typically rise as sentiment falls, institutional investor sentiment has flattened over the past several weeks after rising in July. BofA notes that historically, when the Sell Side Indicator has been this low or lower, total returns over the subsequent 12 months have been positive 94% of the time, with median 12-month returns of +20%.
Past performance means nothing, but institutional investors need yield and they are not getting it in the bond market. The yield of the S&P 500 is at a 70-year record multiple of bond yields, so there aren't a lot of options besides equities.  Individual Investors Are a Bit More Optimistic Individual investors like us are feeling a little bolder than the pros, according to the American Association of Individual Investors. (You actually do too, according to our ongoing survey, which we will roll out next week).
According to the AAII's weekly survey, pessimism among individual investors about the short-term direction of the stock market is no longer unusually high for the first time in 11 weeks. Optimism is at an 11-week high. Still, bullish sentiment remains below its historical average of 38% for the 25th consecutive week.
It's hard to believe markets keep making record highs with all this lukewarm sentiment, but as we said yesterday, we are living in the land of giants.
 SPONSORED BY US Bank
(charts courtesy YCharts)  Shares of DXC Technology are up by over 11.5% amid Topsail Re selecting the IT services company to deploy an end-to-end reinsurance administration platform. Brown-Forman's stock price rose by 10.5% following the alcoholic beverage manufacturer reporting a Q1 increase in sales.  All eight stocks that fell the furthest today belonged to oil companies, as a result of the commodity's price dropping to its lowest level in nearly a month. Word of the Day National DebtThe national debt level is a measurement of how much the government owes its creditors. Since the government almost always spends more than it takes in, the national debt continues to rise. 2020 has seen an enormous rise in the national debts of developed countries around the world as they have been battling the economic downturn brought on by the coronavirus pandemic.  Photo credit coins.nd.edu
Today in History Sept. 2, 1776: A committee led by Thomas Jefferson recommended to the Continental Congress that the U.S. create a basic unit of currency called the "dollar." The U.S. dollar derives its name from a Spanish and Austrian coin originally called the "thaler" (named for Joachimsthal, a silver-mining town in Bohemia).
http://www.usmint.gov/about_the_mint/mint_history/index.cfm?action=silver_dollar_1700s
How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? Copy and share the link below to invite friends to sign up
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
|
Wednesday, September 2, 2020
Super Spenders
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment