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Good Morning. The equity rally is losing steam as Asia, Europe and US futures are mixed as economic data continues to show a mixed rebound. Biggest Concern: The Conference Board's consumer confidence index fell to a new "pandemic low" yesterday.
Here's what moves the markets.
- The mayor Asia indices are mixed with Hong Kong in afternoon trading Hang Seng The best of the lot with just one deal 0.02%.
- Better late than never. Apple is set to open an online store next month in one of the fastest growing cellular markets in the world: India.
- One of the most hotly anticipated IPOs of 2020 will be Jack Ma Ant group, filed in Hong Kong and Shanghai yesterday for a record amount. That is the most revealing big win reported in the filing papers.
- The European stock exchanges won after a weak start Germany's Dax above 0.5%.
- Germany, late Tuesday evening, extended his short-time work Payroll program by the end of next year at a price of around EUR 10 billion ($ 11.8 billion).
- The UK government has given scientists at Cambridge University £ 1.9 million ($ 2.5 million) Start with financing Try a new vaccine this is supposed to protect against a variety of coronaviruses.
- The US futures are mixed this morning. That's after tech stocks the S&P 500 and Nasdaq um – stop if you've heard this before – new records on Tuesday.
- in the Pre-market trading, Salesforce stocks rose more than 13%. It did so after the software company and the newest Dow entrant reported a big jump in profits yesterday.
- The incredibly shrinking aviation industry continues to shrink. American Airlines yesterday it announced plans Cut 19,000 jobs come October 1st. If Congress can see to expand that Payroll Support Programit might rethink it, however, says the CEO.
- gold is flat. The bright yellow stuff is trading around now $ 1,925 / ounce, out 7% from its August 6th high.
- The dollar has increased slightly.
- Raw is flat, with WTI a tad higher, even as the US energy industry prepares for a huge success from Hurricane Laura land somewhere along the Texas Gulf Coast.
Does the S&P rally have legs?
The S&P 500 has hit new highs in each of the last three trading sessions. Goldman Sachs isn't surprised. Goldman analysts set the benchmark index at 3,600 at year-end, which would suggest that at least one more rally of around 5% will be built in over the next three months.
The S&P has more than risen since its lows in March 50%. But the next 5% could be the toughest climb of all. The economic recovery looks rocky. Consumer confidence is shot. The job market looks downright sick. Oh, and Washington remains divided over a new stimulus measure that could keep the economy from falling into deeper recession.
And yet, given all of this, is your S&P weighted index fund a breeze to climb another 5% by Christmas morning? Hmm
There are many doubters out there as a growing chorus of voices is warning that the S&P is too expensive at these prices.
The final warning comes from Bank of America – with some caveats.
BofA went back to March 2009. You remember that well. The subprime mortgage crisis sparked the global financial crisis, and markets recovered in the fall of 2008. The global recession came as a huge shock, as did the loss of millions of jobs.
In spring 2009 the economic picture looked like it does today. There was one major exception: stocks were cheap back then. According to the BofA, in March 2009 stocks were "inexpensive for all but one measure we are pursuing – trailing PE".
And today? They are expensive in almost every way.
But there are still some bargains to be found if you look closely. The segments of the S&P with the lowest “implied uptrend” (by the forward P / E metric) are energy, consumer discretionary and industrials.
What is "Implied Benefit"? BofA relies on “comparing the current relative multiple with the historical average relative multiple. Sectors with a data history of <10 years are excluded. "
In this regard, technology is not a safe bet as IT stocks are trending up -4%.
The biggest uptrend (by the same metric) would be healthcare, real estate and finance. See grafic:
The S&P as a whole weighs in with an implied uptrend of -30%, which should make passive investors a little nervous.
But here's why the S&P is still a decent bet in general. According to BofA, the index delivers a return that is three times the 10-year treasury – the "highest since the 1950s". And “69% of the stocks in the S&P 500 pay a dividend that is higher than bond yields. We still prefer stocks to bonds. "
And that, ladies and gentlemen, is the explanation for this equity rally in a nutshell.
I wish everyone a pleasant day. I'll see you here tomorrow.
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