We have geopolitical tensions to add to a plate of investor concern filled with COVID-19 concerns.
However, US stocks point to a rally for Tuesday, after a slow start to the week. Our call of the day from Nordea’s chief macro strategist, Sebastien Galy, says it’s time to be more cautious with those high-growth stocks.
A drop for the Nasdaq COMP,
on Monday, followed by signs of some recovery in Nasdaq futures on Tuesday, “it is a shot across the bow that we have crossed the Rubicon, past the valley of common sense on the river of hope to the forest of fantasy.” When optimists start to worry, it’s time for adequate coverage and we improve our caution about growing stocks, ”Galy says in emailed comments.
His call comes when fund managers surveyed by Bank of America Merrill Lynch say a bullish position on US tech stocks has become the “busiest trade.” (See the chart below)
Galy says the market is seeing a limited number of investors trading with each other, “aided by fast money betting on momentum, like a wave slowly building until it rises and collapses. At first, each correction looks like a unique opportunity to buy the dream of saying Tesla TSLA,
and in fact there are Googles Googles,
and Amazonas AMZN,
so that the madness has a certain rationality. One should dare and they do it. ”
But the valuations at this moment are so “disconnected from reality, that so many growth reserves paint a picture of the future that it is impossible since the dropout rate is quite high. Euphoria is typical of any investment of this type and is only a concern when it becomes a panicked feeling of missing a dip. Another warning sign is when conservative investors finally move into large growth stocks, ”says Galy.
And while improving economic data should help keep a “fairy tale disconnected from reality,” investors should expect waves of slight corrections until a big move to the downside, possibly in September or October, he warns.
“When this happens, one is likely to find that growth stocks are still somewhat expensive as they are the hope for the renewal of an old economy,” he says, but then the market may begin to discriminate further. “Dare, prudence now,” he adds.
The market
Dow YM00,
S&P SPX,
and Nasdaq COMP,
futures are moderately higher, while European stocks SXXP,
are down Asian stocks also dipped, falling 1% for Chinese stocks 000300,
The graphic
BofA July Global Fund Manager Shows Investors Have Devoted To US Tech Stocks About 74% of respondents think it is the “busiest trade”, highest reading in history of the poll. Here is that table:
The statistic
5.4 million: That’s the number of Americans who lost their health insurance between February and May due to job losses, according to a study by non-partisan consumer health advocacy group Families USA.
The buzz
JPMorgan JPM,
and Citigroup C,
are increasing after the results, but Wells Fargo WFC,
it is down in disappointing results. and Delta DAL,
it is down after a larger than expected loss.
Read:Tesla earnings are in the spotlight next week, and a loss could halt its stock recovery
Data from China showed an increase in imports and exports. In the United States, a survey showed the increasing confidence of small businesses. Consumer prices are yet to come.
Orange County, California, is drawing attention after saying its schools will restart without masks or social alienation. That’s when the state has rearranged part of the business to close to stop the COVID-19 outbreak, and some counties have promised online classes. Hong Kong authorities are tightening social estrangement after a series of COVID-19 cases.
Random readings
The famous “MythBusters” robotist and host Grant Imahara died of a brain aneurysm.
In the absence of tourists, Queen Elizabeth II is selling homemade gin online.
Plague squirrels. Because it is 2020.
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