Riddle me this, Jay Powell – How can the Fed “create inflation” when the commodity energy complex (Brent in black, WTI in blue, HO in orange, & RBOB Gas in purple) looks like this?
Land of the Rising Some – Japan
Black Line = Elec. Appliances + Pharma + Prec. Mach
Blue Line = Nikkei
Orange Line = Topix
Purple Line = Tech Index
Growth Rel. to Non-Growth -- Daily mo moving lower at a faster pace & weekly mo shows neg. divergence @ extreme o/b
MMT expectations are rising once again. Both Republicans & Dems are signaling a ‘Phase 4’ stimulus package, while the Fed is signaling Yield Curve Control. Near-term these actions likely support valuations & Momentum. However, these policies don’t solve underlying problems.
Investor focus is starting to shift towards the election & the growing potential for a Dems sweep of the White House & congress. It appears investors view Biden as a moderate that would likely raise taxes, but also create stability around trade & handling the COVID-19 pandemic.
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Cloud platform management is the next step in the evolution of cloud. 451 Research identifies three categories of cloud management suppliers: hyperscalers, infrastructure incumbents, and independents.
The tug-of-war between central bank liquidity (i.e., the bulls) and weak fundamentals (i.e., the bears) continues. The latest has been rising MMT expectations in order to offset exploding COVID-19 infection rates in several states that have thrown reopening plans into question.
Is the Fed stress testing the banks for the wrong thing? If they’re so healthy why don’t they act better? Key support for the BKX 60.
Almost three quarters of investors surveyed expect tech to outperform the balance of the year. They slightly favor large cap over mid/small cap tech.
Two of the biggest drivers of thematic performance over the past 2 years have been Fed expectations and the growth outlook. Most recently, investors have piled back into Momentum into Jay Powell’s dovish signals while the growth outlook has been deteriorating.
A 451 Research survey finds that company disruption from Covid-19 is less than expected. Also, one-third of respondents see WFH conditions extending into next year.
Overbought conditions largely drove last week’s sell-off. However, expectations built into equity markets remain ahead of themselves. On an equal-weighted basis the S&P 500 is trading over 24x and the real economy isn’t expected to return to pre-COVID levels until mid- ‘22.
Carlota Perez thinks we still are in the Turning Point with the third bubble about to burst. On the other side, though, is a potential golden age of smart green growth. She believes more government with a revised welfare state is required.
From May 15 – June 8, Growth to Non-Growth fell 12%. Yesterday this ratio was up 2.7% and today it’s up 3.8%. Falling rates a plus for the numerator in this ratio
