Right now, there is a tug-of-war between cyclical stocks and what has become the defensive game, the tech sector, apparently on a daily basis.
“Washington and the Fed continue to push money into the system. And if the economy remains weak, then bonds and defense will do quite well, ”says Bill Callahan, investment strategist at Schroder Investment Management in New York. “If the cases slow down and the economy recovers, you will see higher explosive movements in stocks and more cyclical raw materials,” says Callahan. For now, he jokes, the big tech stocks are “the new Treasures, any hint of bad news is triggering tech stocks.”
From a strictly market perspective, the recent surge in virus cases has come at a good time, he says.
“From a humanitarian perspective, we don’t want anyone to get sick, and from an economic perspective, we don’t want anyone to have to close, but the second peak may have come at a very good time for the markets, because it gives Washington the cover to do another great round of stimulus that is spent in the real economy, “he says.
Experience from the April market shows that investors only need signs of progress, not certainty, about the coronavirus. “Eventually we know that the cases will peak and drop. And I think the market is really going to like that, and I think, in particular, some of the more cyclical stocks will like it, “he says.
In terms of which sectors would benefit, Callahan highlights the travel and leisure, finance and energy sectors, without identifying private companies. “40 dollars per barrel [for oil] it doesn’t work for anyone, “he says of the energy.
However, the key point it makes is that a full recovery is not needed. “If you are a professional investor, it is really difficult to go to your investors and say, ‘Well, I bought banks instead of Amazon, and that’s why I got underperforming,'” he says. “People don’t want to hear, ‘Well, the ratings looked whatever.'” So everyone is on one side of the ship with the security technology trade. So when you get better news, that pullback, that closing the performance gap will be fast and violent. “
For now, he advises cutting the position of some of the winners and starting looking for stocks that trade as if “it was the end of days.”
The buzz
The news on the coronavirus front was not good on Wednesday: increases in deaths, new cases, and the positive test rate in the US, according to data from the COVID-19 monitoring project.
Tesla TSLA,
reported a surprising profit for the second quarter, giving the electric car maker four consecutive periods of profitability and preparing it to enter the S&P 500 SPX,
Microsoft MSFT technology company,
reported record revenue in its fourth fiscal quarter and guided revenue across its key divisions that met or exceeded Wall Street estimates. AT&T T,
reported a lower-than-expected profit and Twitter TWTR,
reported a surprise loss.
Unemployment claims data highlights the economic calendar as Republicans in the Senate debate whether to cut additional unemployment benefits from $ 2,400 per month to $ 400.
The mayor of Portland, Oregon, received tear gas by federal agents on another night of protest, while President Donald Trump said he would send more officers to the cities.
The markets
ES00 stock futures,
are higher, with the Nasdaq-100 NQ00,
Superior performance.
GC00 Gold Futures,
they were stronger while SI00 silver,
declined after two days of strong gains.
SHCOMP Chinese stocks,
fell due to rising tensions between the United States and China, while European stocks SXXP,
were led by the results of consumer goods giant Unilever UNA,
and the owner of Mercedes-Benz Daimler DAI,
The graphic
Citi economists are not optimistic about the likely path of business investment, as this chart shows. “While there may be pent-up consumer demand that bolsters retail sales and inventory replenishment that fuels industrial production, none of the rebounds constitutes a recovery. Business investment is the key ingredient for a sustained recovery, “they say.
Random readings
The cast of director Christopher Nolan’s latest film “Tenet” has a hard time explaining it.
A major UK soccer club was willing to hand over $ 1.25 million to a hacker before a bank stepped in.
How hydropanels are bringing water to the desert.
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