Market Commentary — Page 474

Market Commentary

COMMENT

Educational Segment. Interest rates have risen pretty steadily this year. Every time bond yields go up, someone calls the end of the bull market. Bond vigilante is an investor that is gut-check against central banks when they lose control of the fiscal purse. Interest rates have been falling for the last 40 years and this trend continues. In 2017-2018 Feds raised interest rates. The US 10 year needs to get above 3.5% and remain higher to say the trend is changing. We simply cannot afford higher interest rates however. The next tool is Yield Curve Control. Interest rates will be kept low.

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Market. The growth stocks initially did well when the pandemic started, then the cyclicals did well as inflation expectations increased. Inflation expectations have been increasing since last August but got ahead of themselves. Expectations for inflation should pull back somewhat. On a seasonal basis you find inflation tends to pick up until March. Industrials and materials tend to perform well in March and April, but there might be a turning point coming up here shortly.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The initial reaction to higher interest rates is the worst typically. There is some profit taking going on and investors are rotating sectors. Earnings are strong and we must keep a long term view. Unlock Premium - Try 5i Free

COMMENT

The reopening looks more likely and sooner with JNJ's vaccine being approved. Overlooked reopening plays include Ford, Ulta, Federal Realty and others. The airlines are obvious plays, but their balance sheets are in tatters.

COMMENT

Technical analyst Mark Sebastian explains VIX volatility Is there a volatility spike (quick) or swell (slow rise). If you want stocks to rise higher, you want a spike, like today's sharp rally, or in early June and early November. Buy! In swells, volatility slowly rises which happened last August into September as the S&P rose higher--then, markets fell in the autumn. Last week was a classic spike, so expect more upside in stocks; the VIX and S&P were not moving in tandem which happens in swells. We're not in the early stages of a major sell; in fact, the panic is over and the market is starting to roar.

COMMENT

Interest rates. Yesterday the bond rates traded at 1.6%. Rising interest rates means good economic growth. A little rise in bonds is also a good thing. How high should it go? Historically, as long as it does not go above 270 basis points from the low, it's okay. US rates could go back to 3.26% before you get into the pain points, almost a doubling from today. Near term interest rates has caused an intermediate correction in equities of 7%-10% which has happened. Once it's behind us, in the next 2 months, we see a good ride up for small caps and cyclicals. It could be a year for Canada to shine this year.

COMMENT

FANGS. They peaked around November of last year and they are trailing even today. Overall rates will impact on the near term, but the correction depends on which sector you are in. S&P will be less affected than the tech stocks.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. There is lots of worry over interest rates but central banks have vowed to keep interest rates low for at least another year. The current rise comes from sentiment and supply and demand. US bond auctions did not go well this weak due to weaker demand and rates spiked. Inflation may spike but this has not been the case historically with other periods of stimulus. Balance in sector weighting is key. Unlock Premium - Try 5i Free

COMMENT

We're in an inflation scare that has put a chokehold on tech stocks. A nightmare, though today interest rates took a breather and the Nasdaq rebounded some. He's looked at the past 6 inflation scares including the last one in 2015 which merit comparison to now: in 2015 like now, the economy was heating up; the Fed Chief raised rates; the highest-valued stock got hammered for WEEKS on end. However, the big difference is that Jay Powell has been crushing inflation and feels we underestimate the risk of high employment and overestimate high inflation. But Wall Street doesn't trust Powell. Rather they believe that inflation WILL hit after the impending stimulus because the economy will overheat. That's why they're dumping bonds and this always hurts stocks. Cramer's game plan next week: on Friday morning, if there's a big uptick in employment numbers in the non-farm payroll report then Wall St. the 10-year treasury yield will climb and there'll be another tsunami of stock selling. Be aware.

COMMENT

What do you think of the broad market? With interest rates rising on the long end, risk to higher growth and higher momentum stocks. YTD, we're still doing quite well. Over the next 12-18 months, we'll continue to grind higher. We might be a bit overextended at this point, but markets and investors see a clear line of sight to a global economic recovery. Vaccine rollout is accelerating globally, and we will see normalization and reopening of the economy.

COMMENT

Can we paint too rosy a picture in light of huge government deficits? Taxes can be an issue. But if the economy can grow out of the past recession, we can handle the deficits. US stimulus plan allows the world's largest economy to get going. Increasing numbers of vaccinations will help global economies open up.

COMMENT

The reflation trade. Financials, including banks and insurers, on both sides of the border make a lot of sense. Move away from tech into sectors like financials, industrials, and materials. Some areas, especially tech, are being driven by momentum and bordering on speculation at this point.

COMMENT

Healthcare names. Likes the healthcare space with names like AbbVie, Teladoc, and UnitedHealth in his portfolio. Teladoc has done well, despite its volatility.

COMMENT

Jitters in tech stocks over last few sessions. Not just tech. There's volatility everywhere. There's the global reflation trade. But you also have the stay at home trade, which boosted the tech side, but now you have the return to normal. Money being taken off the table from tech and put into cyclicals like financials, energy, industrials, materials. The Fed is caught between a rock and a hard place. If bond yields continue to rise in response to stimulus and trying to protect jobs, the Fed might be forced to tighten policy too quickly. But a complacent stance could cause overheating risks. Important catalysts coming up: US fiscal bill, JNJ emergency doses being added to supply. All creating unpredictability. He's sitting fully invested across 29 tech vendors and end users. He also has a 62% short equity hedge, which has been coming down.

COMMENT

Why is AAPL down 5% in a week? It was up 85% last year, so there's nothing wrong with taking profits and recycling them into cyclicals. Same with GOOGL and Salesforce. It's not as though people are becoming bearish on these types of stocks.

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A Comment -- General Comments From an Expert (A Commentary)

Educational Segment. (A Commentary)

Market. (A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. (A Commentary)

A Comment -- General Comments From an Expert(A Commentary)

Technical analyst Mark Sebastian explains VIX volatility(A Commentary)

Interest rates.(A Commentary)

FANGS.(A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research.(A Commentary)

A Comment -- General Comments From an Expert(A Commentary)

What do you think of the broad market?(A Commentary)

Can we paint too rosy a picture in light of huge government deficits?(A Commentary)

The reflation trade.(A Commentary)

Healthcare names.(A Commentary)

Jitters in tech stocks over last few sessions.(A Commentary)

Why is AAPL down 5% in a week?(A Commentary)

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