Market Briefing For Tuesday, June 29
Peak over-confidence - isn't really an factor impacting S&P, even if logical. At the same time, complacency about overall stability is pretty high, even heard a couple bears of two weeks ago now saying you 'have to be' bullish. I worry when anyone says you have to be anything, but alive and a taxpayer.
Worry doesn't equate to bearishness, at least not for me. I tend to watch chart patterns, so that I will often be off a high or low waiting for a confirmation of an upside or downside move or lack of same. Alternatively I look for purges or of course a blow-off spike for indications of probably going the other way soon.
I suspect my Jan./Feb. of 2020 bearishness was an example of the former (a technical warning and then fundamentals reinforcing my negativity, followed by a collapse that triggered not only panic, but a Fed backstop initially ignored by most on the Street, so we got to nail the climactic low of March 23, 2020.
Now in 2021 we have signs of exhaustion (or just plan expensive leadership), as we all know in the momentum stocks, and don't need to belabor. Not even the antitrust efforts disrupt this market significantly, and they shouldn't in most cases (because like Amazon) as the parts may be worth more than the whole.
However the backdrop for more buybacks (as much as I disdain the process, at least for operating companies), supports higher prices for some. Example: today Morgan Stanley (MS) today announced they're doubling their dividends and this is the start of banks increasing payouts to shareholders even in revenue environments that aren't ideal with low interest rates. I prefer rising dividends than buybacks incidentally. I'm sure the Morgan Stanley brokers reading this, if they have heard internally, will welcome the greater cash flow.
JP Morgan (JPM) also increased dividends, but only by 10%. Morgan Stanley also is doing buybacks, up to 12 Billion shares (indirectly executive compensation as it pushes price up and you know the way that works with scheduled sales).
Also the market is obsessed with mapping expectations for future Fed hikes, at the same time inflation in some commodities 'is' easing, which supports the Fed's policy. I agree about some commodities, but not about wages retreating which is highly unlikely once you boost them.
History supports low rates even if we get a couple hikes, though the market if what we've seen surrounding tapering means anything, would react anyway. It is marginal change when you reduce stimulus and diminish liquidity flows, that can trip-up an otherwise bullish perspective many have about the market.
In-sum:
Little has changed with Monday's calm consolidation, a hair lower for the NYSE breadth, down for Dow Jones Industrials, but up for S&P, NDX, SOX, and Nasdaq itself (QQQ, SPY, DIA).
The antitrust issue would mark a big shift in the government’s approach to the concerns about monopolies that swelled during the last couple decades. We already knew the Administration wouldn't be content to just enforce antitrust laws, but would use federal power to actively spark competition in a vast array of businesses. While one view will hold it as somehow socialist / progressive, and they support it, there's another aspect or three.
First it may hot happen of course, but if it does you spread the opportunity in a very capitalist way, both by spinning of portions of behemoths, allowing small Nasdaq etc. companies better sway against entrenched big firms with lots of lobbyists (there is perhaps no better example than big pharma's connections).
Politically and financially, with Government / agencies / personnel, and how it stymies small biotechs and similar .. doesn't mean they don't get blockbusters now and then, but it slows the process and makes it tougher to get past these gatekeepers... is a pretty good example of impeding development at times, at the same time as it delays treatments and cures to the public (I am thinking of oncology more than COVID by the way, but it applies to both and more).
This is an excerpt from Gene Inger's Daily Briefing, which is distributed nightly and typically includes one or two videos as well as charts and analysis. You can subscribe more