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Hello. Stocks and futures rebound on Tuesday. And this despite little or no progress on the stimulus negotiations in Washington or on trade negotiations on Brexit in Europe.
Elsewhere, investors are so far sweeping away the latest foreclosure news, which threatens to put Christmas grips on both sides of the Atlantic.
In today’s essay, I enter the loneliest profession on the market: shorting the S&P 500.
Let’s check what’s moving the markets.
Market update
Asia
- The main Asia Index are generally lower in afternoon trading with the Shanghai Composite down 0.1%.
- Chinese economy is finish 2020 with strong momentum. Factory output and retail November figures have increased in line with analyst estimates, and unemployment has fallen.
- Equity analysts at Citigroup, Goldman Sachs, and Nomura Holdings are all quite optimistic about Asian stocks for 2021, say actions should climb at least 20% over the next 12 months.
Europe
- the European scholarships started in the red, before bouncing back, with Germany DAX high 0.2%. Just 10 days before Christmas, tough new lockdowns will take effect in London, Germany and the Netherlands this week, and Italy is also considering new measures for the holiday season – grim news for economies in recession.
- Another day has passed with no progress Brexit trade negotiations, but that doesn’t stop the region’s largest companies from sounding the alarm bells. Yesterday was Airbus CEO Guillaume Faury saying a disruptive divorce would force him to think scale-back in UK
- Great technology could face new strict rules for data use or be fined up to 10% of annual sales, according to the draft EU regulation seen by Bloomberg.
WE
- American Futures have won much of the morning. This was after the S&P 500 fell for a fourth straight day on Monday. The powerfull Russell 2000, meanwhile, continued its impressive run; the small cap index is up 19% since polling day.
- Newly created The favorites of the IPO Airbnb and DoorDash fell sharply on Monday and are trading lower in pre-trade. Like my colleague Aaron Pressman wonders, debuted on the stock exchange just break the IPO market?
- A fascinating story to watch for 2021 streaming wars. Disney shares on Friday hit a absolute record even after revealing its huge investments in Disney +, Hulu and other vaping services would take a big chunk of the profits.
Somewhere else
- Gold is on the rise, trading close $ 1850 / ounce.
- the dollar is flat.
- Gross is down on vaccination hopes, with Brent futures trading around $ 50 / barrel.
- Bitcoin is flat again on Tuesday, trading around $ 19,200.
***
The loneliest trade
Since the March nadir, US stocks (as measured by the S&P 500) are up 66%. And this bullish rally gives investors a sense of invincibility.
Just look at short positions. With the uncertainty of Election Day well and truly behind us – remember all those worries of a contested election? – investors are long stocks. Long with a vengeance.
According to Morgan stanley, interest on the median S&P share is well below 2%, the lowest level in nearly two decades, as shown in the chart below. (A small plug: in the last issue of Fortune, I wrote about the new breed of short sellers it disrupts the investment world. Worth a visit.)
This whole phenomenon is just the latest indicator that investor exuberance for stocks is off the charts. Morgan Stanley Wealth Management chief investment officer Lisa Shalett, for her part, sees cause for concern. This all-is-awesome stance, she says, “suggests complacency, which always becomes its own Achilles heel.”
For starters, the S&P is trading just 6.5% below Morgan Stanley’s 2021 end-of-year target, she said. “The short-term catalysts are mostly exhausted, fiscal and monetary policies are at maximum levels of accommodation, and sentiment and positioning indicators have very bullish readings. Thus, we signal caution, ”she wrote.
Morgan Stanley is hardly alone. Stock analysts see a strong economic recovery in 2021 and a surge in earnings. But stocks are so expensive today that we would need to see a wave of crisp beats to increase these relatively expensive denominators and bring P / E’s back to their historic range.
***
Correction: In yesterday’s Bull Sheet, I misjudged the mood of investors. As it was perfectly clear, it was a risky day before the opening bell in New York. Apologies for the confusion.
Have a very good day everyone. I’ll see you here tomorrow.
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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