Friday, January 22, 2021

Markets are betting a stimulus deal will finally be struck – and soon

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Hello, Bull Sheeters.

US futures are on the rise again on Wednesday as investors bet Congress could strike a long-awaited stimulus deal at some point this week. If it’s like we’ve been saying this for months, it’s because we did it. And yet you bulls never lost your faith.

This optimism is pushing up global stocks.

Let’s check out what’s moving the markets ahead of a major Fed update today that could impact the bond market.

Market update

Asia

  • The main Asia Index are inundated with green in the afternoon exchanging with the Nikkei high 0.3%.
  • In Washington, they don’t seem to agree on budgets and stimulus packages, and yet Japan is about to pass its third “supplementary” budget this year – this one including a supplement 210 billion dollars to help the economy battered by COVID. Call it “Suga-nomics”.
  • If you think America IPO market is sparkling, take a look at china. Startups in China have raised a record amount so far in 2020, Bloomberg calculates.

Europe

  • the European scholarships are higher outside the doors, with the Stoxx Europe 600 high 0.9%. And this despite the deterioration of COVID data across the continent and the entry into force of new lockdown measures.
  • Shares in Amazon, Facebook and Alphabet’s Google pushed higher on Tuesday (but underperformed the wider Nasdaq) after Brussels and Brittany proposed strong new antitrust and content measures for the tech giants. Big fines and same break are the big sticks they pulled out.
  • the Euro Stoxx Banks Index was standing 0.3% at the start of the session this morning after BCE lifted its ban sure dividends and share buybacks for European lenders.

WE

  • American Futures have won all morning. It is after the S&P 500 broken one four day losing streak Tuesday, and as the three major indices closed higher on the session.
  • Stocks rose on Tuesday and the Nasdaq landed a new ATH, on hopes for a stimulus deal. A real deal. If I got a fraction of a share in a bland, all market ETF for every time I heard that one… I would write this Portofino newsletter. (I would still need to borrow a yacht from Bull Sheeter. Ahem.)
  • Shares in Modern fell 5% yesterday after FDA disclosed the drug manufacturer gets high marks for its Covid vaccine, paving the way for an emergency authorization. Don’t feel bad for Moderna. Stocks are on the rise 652% in 2020.

Somewhere else

  • Gold is on the rise, trading close $ 1,870 / ounce.
  • the dollar is off.
  • Gross is in place, with Brent futures trading nearby $ 51 / barrel.
  • Bitcoin is in place almost 2% Tuesday exchange $ 19,500.

***

Most crowded shop

Yesterday we talked about the loneliest trade. Today let’s go in the opposite direction, and let’s talk about the you too? trade of the moment.

I’ll give you a hint. It rhymes with “wreck”.

Yes be long technology is considered the busiest trade. Again.

That’s according to the latest global survey of fund managers from BankofAmerica.

But, as the graph above shows, the crowd of tech bulls is thinning. As the rotation from growth to value grows, a technology-intensive portfolio shrinks de rigueur. Meanwhile, the transactions that are gaining in favor are the poor dollar short-selling (growls, growls), the jump on the Bitcoin wagon, and long corporate bonds.

What caught my attention? Gold is also losing favor, no doubt as Bitcoin appreciates. Gold bulls must lose patience. The bright yellow stuff has been trading in a narrow range for months and is down 10% from its August high.

Long gold, however, is not the most opposite of trades. Investors are also turning away from health stocks and US stocks and most importantly, they find themselves strapped for cash.

According to BofA, the cash flow is at its highest in seven and a half years, triggering a “sell signal”.

What does this imply? “We say we sell the 1T21 vaccine,” advises BofA.

Note: This advice from BofA is for the contrarian investor, those who want to take a new position ahead of the crowd.

***

Have a very good day everyone. I’ll see you here tomorrow… But first, there’s more news below.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write tobullsheet@fortune.comor reply to this email with suggestions and comments.



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