Föhrenbergkreis Finanzwirtschaft

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Posts Tagged ‘Stocks’

Forecast 2021: The Stock Market

Posted by hkarner - 24. Januar 2021

On the Gripping Hand, Part 3

This will be the third part of my 2021 Forecast Series. You can read the first two parts here and here. The general theme has been “On the Gripping Hand.” Science fiction writers imagined a three-handed alien race with a left hand, right hand, and a very strong Gripping Hand. 2021 is the year of the Gripping Hand, and COVID-19 is what’s gripping us. Making a forecast without the virus at its center is pointless.

All that being said, today we are going to focus on my stock market expectations. As I promised last week, this is a “Generational Call.” For reasons we will go into below, I think we are at a pivot point for stocks, with some clear exceptions I will outline. So maybe like generational call* with an asterisk.

On the Gripping Hand, Part 3 Den Rest des Beitrags lesen »

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Brexit Forces Bankers to Shift Trading of European Stocks Out of London

Posted by hkarner - 7. Januar 2021

Date: 05‑01‑2021

Source: The Wall Street Journal

The abrupt move underscores the European Union’s broader plan to bolster its own financial centers

Trading in shares of companies including LVMH Moët Hennessy Louis Vuitton had to leave London due to Brexit. 

The fallout from Britain’s split from the European Union showed itself on the first trading day of the year as a big chunk of dealing volume in EU stocks moved from London to venues located in Amsterdam, Paris and the Continent’s other financial centers.

Britain’s membership of the EU had meant the region’s banks and investors could bypass the home exchanges of stocks such as Paris‑listed luxury‑goods giant LVMH Moët Hennessy Louis Vuitton SE and Amsterdam‑listed Just Eat Takeaway.com NV, the big food‑delivery company, and trade them in London over alternative venues. Those venues included Turquoise, a trading facility majority‑owned by the London Stock Exchange Group PLC, and rival platforms Aquis Exchange PLC and Cboe Global Markets Inc.’s Europe‑based marketplace. Den Rest des Beitrags lesen »

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Stock Futures Point to Extension of Record‑Setting Rally

Posted by hkarner - 30. Dezember 2020

Date: 29‑12‑2020

Source: The Wall Street Journal

S&P 500 appears poised to climb to a new all‑time high, building on its over 15% advance so far this year

U.S. stock futures ticked up Tuesday, suggesting that the major benchmarks may extend their rally a day after closing at records.

Futures tied to the S&P 500 and the Dow Jones Industrial Average advanced 0.5%. Both indexes closed at all‑time highs on Monday. Contracts on the Nasdaq‑100 index climbed 0.4%, signaling that technology stocks will also gain.

Stocks are powering higher in the final days of the year, driven in part by the cheap money unleashed by central banks and governments to shield the global economy from the coronavirus pandemic. The S&P 500 index has climbed over 15% this year, building on its 29% surge in 2019, while the Nasdaq Composite Index has gained over 43% in 2020 alone. Den Rest des Beitrags lesen »

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Stock Market Party

Posted by hkarner - 20. Dezember 2020

—Clarence Darrow (1857-1938), American lawyer

The end of 2020 has me looking back. I started writing the letters that later became Thoughts from the Frontline back in the late 1990s. Similar to COVID-19 today, we had a giant macro issue then, too: Y2K. It’s hard to believe now how frightened some people were. But as I expected, the big day came and the world didn’t end.

Another similarity is the stock market was rising like a rocket. This newfangled “Internet” thing had people super-excited, and rightly so. It was a world-changing paradigm shift. Unfortunately, some of the stocks born in that incredible boom weren’t world-changing paradigms at all. The market party ended, just as this one will, but went on far longer than almost anyone (including me) expected.

Had you bought the Nasdaq at the March 2000 peak, and held on, you would have got back to breakeven about 15 years later. And now, 20+ years later, your annualized return for those two decades would be around 4%. That’s not terrible. You beat CPI inflation by a couple of points. But people back then expected far more—15% annualized returns were thought to be easy. Den Rest des Beitrags lesen »

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Stocks Laugh at Economic Uncertainty, for Now

Posted by hkarner - 8. Dezember 2020

Date: 07‑12‑2020

Source: The Wall Street Journal

Three professors’ index of economic uncertainty is flashing that the economy and the stock market are out of sync. Is it a Roaring ’20s scenario?

Despite progress on Covid‑19, economic uncertainty is high—but so is the stock market. Shown, a line for Covid‑19 testing in Queens, N.Y.

U.S. economic uncertainty remains at near‑record levels, and the stock market is at an all‑time high. If history is any guide, something’s got to give.

That is the message flashing from an index of economic uncertainty created by three finance professors: Scott Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago. Before this year, there was a strong correlation between increases in this index and falling stocks. In fact, based on this historical pattern back to 1900, the S&P 500 appears to be about 20% higher than it should be.

Such a signal might seem surprising in the wake of the close‑to‑final‑resolution of the election and hopeful news on the Covid‑19 vaccine front. But here is how the professors’ index works.

The index is based on the frequency of mentions in major newspapers of words and phrases associated with economic uncertainty. In the accompanying chart, this index—known as the Economic Policy Uncertainty, or EPU, index—has retreated somewhat from its spike in April and May, but it remains nearly three times as high as its average over recent decades.

In an interview, Prof. Bloom explains that there are several ways in which heightened economic uncertainty hinders economic growth. It raises the cost of capital, for example, which means that businesses are unable to justify as many new projects as they would have otherwise undertaken. It causes both businesses and consumers to delay expenditures. And it reduces the effectiveness of government stimulus programs.

The U.K. experience

To illustrate the negative effects of uncertainty, Prof. Bloom points to what happened to the U.K. economy following the country’s Brexit referendum in 2016. The U.K. version of the EPU skyrocketed and British business investment fell 11% over the subsequent three years. Investment fell even further during the Covid‑19 pandemic, of course.

Over the same period in which U.K. business investment was falling 11%, business investment in the U.S. rose 20%. This difference was mirrored in the relative returns of the two countries’ stock markets: In U.S. dollar terms, the MSCI United Kingdom Index lagged behind the S&P 500 over this three‑year period by 29 percentage points (assuming dividends were reinvested).

The U.K.’s experience helps us to appreciate why it is so worrisome that the U.S. stock market is at a record despite heightened economic uncertainty. It means that investors face the not‑inconsiderable risk that this Wall Street‑Main Street disconnect will be overcome by the stock market falling significantly.

The federal government’s extraordinary fiscal and monetary stimulus this year has played a major role in preventing that from happening, at least so far. A significant chunk of that stimulus money undoubtedly found its way into the financial markets, propping up prices.

Notice, however, that this government stimulus doesn’t actually resolve the Wall Street‑Main Street disconnect. It instead merely postpones the eventual day of reckoning.

‘Roaring ’20s scenario’

One way the disconnect could end without stocks plunging, of course, is for economic uncertainty to fall significantly. This presumably would happen if and when successful vaccines become widely available, the pandemic comes to an end and the economy quickly recovers. Vincent Deluard, head of global macro strategy at investment firm StoneX, refers to this possibility as a “Roaring ’20s scenario,” drawing an analogy to the economic boom that emerged out of the destruction of World War I and the Spanish flu pandemic.

Businesses themselves don’t appear to be envisioning their futures through these rose‑colored glasses, however.

Consider the Survey of Business Uncertainty, another tool devised by Prof. Bloom and others, including the Federal Reserve Bank of Atlanta. This survey focuses on what business leaders anticipate over the subsequent four quarters. The latest reading, for November 2020, which reflects survey responses after the Pfizer / BioNTech SE and Moderna vaccine results had been announced, indicates that uncertainty about sales over the coming 12 months is 70% higher than the average since data began being collected in 2016.

This illustrates the extent to which the long‑term economic consequences of the pandemic are far from clear, according to Prof. Bloom.

Even if the Roaring ’20s scenario comes to pass and economic uncertainty falls significantly, it isn’t clear that the stock market would perform all that well. Since equities haven’t fallen as much as they normally would during this year’s heightened uncertainty, they might not gain as much as they otherwise would have as uncertainty declines.

The stock market might even fall in a Roaring ’20s scenario, according to Mr. Deluard. He says an economic boom would precipitate a major stock‑market rotation away from growth stocks to value stocks. He reminds us that such a rotation happened in the 2000‑02 bear market, and though the average value stock actually rose during that time, the overall market averages—dominated as they are by the large‑cap growth stocks—fell.

Mr. Hulbert is a columnist whose Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

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Dow 30000 and the Problem With Long‑Term Capitalism

Posted by hkarner - 27. November 2020

Date: 26‑11‑2020

Source: The Wall Street Journal

Unprecedented economic support and the rapid development of vaccines have helped investors look far beyond the horizon, but that carries risks of its own

A trader on the New York Stock Exchange trading floor Tuesday, when the Dow Jones Industrial Average closed above 30,000 points for the first time.

The Dow Jones Industrial Average hit 30000 for the first time on Tuesday, after a rally of more than 60% from its March lows.

Contrary to popular criticism of financial markets as excessively preoccupied with the immediate future—sometimes referred to as quarterly capitalism—equities are now clearly demonstrating investors’ long‑term horizon. In fact, that’s where the main risks to the rally now lie.

Concerted U.S. government action this spring meant interest rates were slashed, fiscal stimulus was launched and credit spreads for corporate borrowing came tumbling down. Equity indexes are now above where most analysts expected them to end the year, even before the pandemic.

Unprecedented relief from the largest real‑term economic shock in modern history has enabled investors to look far out into the sunlit uplands they expect to follow. With several vaccines now seemingly on the way—faster than was widely expected—the reasons to view 2020 as an aberration worth overlooking have only accumulated.

 The gulf between price‑to‑earnings ratios for U.S. equities based on this year’s expected earnings and what is expected by 2022 is enormous. Den Rest des Beitrags lesen »

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The Stock‑Market Disconnect

Posted by hkarner - 6. Oktober 2020

Date: 05‑10‑2020

Source: Project Syndicate by Kenneth Rogoff

Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co‑author of This Time is Different: Eight Centuries of Financial Folly and author of The Curse of Cash. 

The best explanation for why stock markets remain so bullish despite a massive recession is that major publicly traded companies have not borne the brunt of the pandemic’s economic fallout. But having been spared by the virus, they could soon find themselves squarely in the sights of a populist backlash.

CAMBRIDGE – Why are stock‑market valuations soaring when the real economy remains so fragile? One factor has become increasingly clear: The crisis has disproportionately affected small businesses and low‑income service workers. They are essential for the real economy, but not so much for equity markets. True, there are other explanations for today’s lofty valuations, but each has its limitations. Den Rest des Beitrags lesen »

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U.S. Stock Futures Rise After Promising Vaccine Study

Posted by hkarner - 16. Juli 2020

Date: 15‑07‑2020

Source: The Wall Street Journal

Shares in Goldman Sachs rose after the bank reported earnings that beat analysts’ expectations

U.S. stock futures rose Wednesday as investors cheered promising results from the study of an experimental coronavirus vaccine while reviewing earnings from more of the nation’s biggest financial companies.

Futures tied to the S&P 500 advanced 1.3%, signaling a second day of gains for the benchmark index. European stocks also jumped, led by travel‑and‑leisure companies. Shares fell in China after President Trump signed into law a sanctions bill to punish Chinese officials over Beijing’s crackdown on Hong Kong.

Investor sentiment was lifted by new details released late Tuesday about the first human study of Moderna’s vaccine. The results showed that the vaccine induced the desired immune response for all 45 people evaluated. Researchers said the study reinforced their decision to take the shot into a large, decisive clinical trial scheduled to start in late July.

“Every time we get some sort of positive news on the vaccine front, then understandably markets benefit from that,” said Paul Jackson, head of asset‑allocation research at Invesco. “The way it’s looking at the moment, it really looks as though a vaccine is the only hope. This thing is not going away.”

Investor sentiment was lifted by new details about the first human study of Moderna’s coronavirus vaccine.

Dr. Anthony Fauci, the government’s top infectious‑disease expert, said the large study could yield an answer by year‑end about whether the vaccine induced immune responses sufficient to protect people safely from Covid‑19. A positive answer would clear the way for wider use and potentially help curb the pandemic.

Coronavirus infections and deaths continued to climb in the U.S. Tuesday, with several states hitting records. Florida reported 132 new coronavirus‑related deaths, its highest single‑day tally since the pandemic began, and 9,194 new cases.

Den Rest des Beitrags lesen »

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Understanding the Pandemic Stock Market

Posted by hkarner - 8. Juli 2020

Date: 07‑07‑2020

Source: Project Syndicate by Robert J. Shiller

Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co‑creator of the Case‑Shiller Index of US house prices. He is the author of Irrational Exuberance, Phishing for Phools: The Economics of Manipulation and Deception (with George Akerlof), and Narrative Economics: How Stories Go Viral and Drive Major Economic Events. 

The worse economic fundamentals and forecasts become, the more mysterious stock‑market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.

NEW HAVEN – The performance of stock markets, especially in the United States, during the coronavirus pandemic seems to defy logic. With cratering demand dragging down investment and employment, what could possibly be keeping share prices afloat?

The more economic fundamentals and market outcomes diverge, the deeper the mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics.

After all, stock‑market movements are driven largely by investors’ assessments of other investors’ evolving reaction to the news, rather than the news itself. Den Rest des Beitrags lesen »

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Stocks Retreat as Investors Fear Rally Was Overdone

Posted by hkarner - 7. Juli 2020

Date: 07‑07‑2020

Source: The Wall Street Journal

U.S. futures, European stocks head lower as investors express concern about the recovery

Global stock markets were mostly lower Tuesday as investors grew anxious that the recent rally has gone too far amid gloomy economic forecasts.

Futures tied to the S&P 500 fell 0.7%, suggesting a pullback when U.S. markets open. The stock index closed higher for the fifth straight day on Monday, while the tech‑heavy Nasdaq hit a record.

The pan‑continental Stoxx Europe 600 slipped 1% Tuesday after reaching its highest level in nearly a month.

“Some investors will be taking profit after yesterday’s rally,’’ said Sebastien Galy, a macro strategist at Nordea Asset Management. “There’s been a real divergence between what the market believes and the reality of the economy.” Den Rest des Beitrags lesen »

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