Economy
Stock market looks like ‘Wile E. Coyote,’ running off ‘a cliff,’ says expert
The S&P 500 index is teetering on the edge of a rarefied perch, persistently brushing aside uncertainties created by the COVID-19 pandemic in its ascent.
Although arguably the most important stock-market benchmark in the world is clambering toward a record, the rally by has stalled out in recent days and its proximity to an all-time closing peak has made a number of investors uneasy to say the least.
“Never before have I seen a market so highly valued in the face of overwhelming uncertainty,” James Montier, behavioral economist and member of GMO’s asset allocation team, wrote it in a recent research paper titled “Reasons (not) to be cheerful: Certainty, Absurdity, and Fallacious Narratives.”
“
The U.S. stock market looks increasingly like the hapless Wile E. Coyote, running off the edge of a cliff in pursuit of the pesky Roadrunner but not yet realizing the ground beneath his feet had run out some time ago
”
“It appears as though the U.S. stock market has drunk from Dr. Pangloss’ Kool-Aid – where everything is for the best in the best of all possible worlds,” he wrote, referring to Voltaire’s character in Candide, who asserted the Pollyannish philosophy that the current state of affairs always represents the best of all possible worlds.
Of course, like Voltaire’s satirizing in Candide of 17th century philosopher Gottfried Wilhelm Leibniz, who also espoused the thesis of a sort of dauntless optimism, Montier thinks market participants may be far too cavalier about the equity index’s burst higher in the face of a unprecedented economic calamity created by the worst pandemic in modern times.
“It is as if Mr. Market is taking a tail risk (albeit a good one) and pricing it with certainty,” Montier wrote.
On Friday, the Dow Jones Industrial Average
DJIA,
booked a weekly gain of 1.8%, finishing about 5.5% from its Feb. 12 record close, and the S&P 500
SPX,
rose 0.6%. The S&P 500 briefly traded above its Feb. 19 closing high of 3,386.15 on Wednesday and Thursday, but was unable to hang on.
The Nasdaq Composite Index
COMP,
meanwhile, finished barely positive for the week, up 0.1%. The index has posted 32 records so far in 2020.
If the S&P 500 is able to join the Nasdaq Composite in record territory at any point over the next several weeks, it will have traversed its bear-market low to a record high in the shortest span of time on record, according to Dow Jones Market Data. The current record recovery was 310 trading days from Feb. 9, 1966 to May 4, 1967. Thus far, 102 trading days have passed between the S&P 500’s March 23, 2020.
Montier’s concern at the pace of the recovery in stocks is one held by a number of bearish and bullish investors alike. How can the market surge so mightily after tumbling more than 30% to its lows in March against a backdrop of economic carnage.
The GMO investor said that only the Great Financial Crisis of 2008-2009 represents a parallel to the so-called V-shaped, fast and potent, bounce higher that we have observed in the market.
“It is certainly true in theory that the stock market is meant to be a forward-looking device, capable of seeing through short-term issues,” Montier notes. “History teaches us that the market is usually a master of double-counting, attaching peak multiples to peak earnings, and trough multiples to trough earnings,” he adds.
Worries about a further fiscal stimulus from Congress, a China-U.S. flare-up, as the two countries indefinitely canceled plans to hold talks about Beijing’s adherence to terms of a phase-one trade accord, and worries that the viral outbreak could mount a punishing resurgence in the fall and/or winter are just a couple of pressing concerns for market participants.
However, Thomas Lee, founder of Fundstrat Global Advisors, remains unabashedly sanguine about the market’s outlook. He raised his year-end target for the S&P 500 by 75 points to 3,525. “From our vantage point, this is just a waiting game. That is, we believe there are catalysts to support a move well beyond 3,393.52,” he wrote in a Friday research note.
That said, Lee’s prediction for the start of a bullish burst higher for the market, sparked by so-called epicenter stocks, financials, energy and other sectors, that have been left behind in the recent rally, failed to materialize on Aug. 14 as he had predicted. It’s, perhaps, worth giving the strategist a few more sessions to see how that call shapes up into next week.
It’s hard to glean the outlook for the economy and the market by observing Wall Street luminaries either.
Read: Jobless claims fall below 1 million for first time since start of coronavirus pandemic
Also checkout: Did the expired $600 federal jobless benefit keep people from going back to work?
On Friday, a backwards looking peek into funds run by billionaire George Soros indicated that he was loaded up on financial firms, including Bank of Americ
BAC,
a, Morgan Stanley
MS,
Wells Fargo & Co
WFC,
, Citigroup
C,
and PNC Financial Services
PNC,
which would suffer the most if the economy fails to manifest the V-shaped recovery that stocks appear to predict. At the same period, Warren Buffett’s Berkshire Hathaway
BRK.B,
BRK.A,
was unloading or lightening his position in many of the same names and scooping up shares of gold miner Barrick Gold Corp
GOLD,
according to public filings that offer a snapshot of investor holdings at a given point.
So, who’s right about the outlook?
Montier offers some advice, though: “Rather than acting as if the uncertainty doesn’t exist (the current fad), the value investor embraces it and demands a margin of safety to reflect the unknown.”
What’s ahead?
Looking into next, week the economic calendar looks light also as corporate earnings reporting season winds down to a trickle.
The usual report on U.S. weekly jobless benefit claims on Thursday take center stage and before that on Wednesday, the Federal Reserve will release the minutes to its July 28-19 meeting, which provide some further insights about policy makers’ views of the economy.
Many Fed members have been insistent that fiscal stimulus is a key pillar of the next phase of the economy’s recovery after the Fed has doled out trillions to prop up financial markets.
There is also regional manufacturing surveys of the New York and Philadelphia regions due next week, which will help investors gauge whether the revival in heavy industry accelerated in August, as is likely.
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Economy
What factors impact financial markets?
The global financial markets are now hugely complex, with traders and analysts around the world looking closely for signs of movement. What are some of the most important factors to be aware of that impact the financial markets?
Geopolitical events
With news breaking from different countries throughout the day, many different stories could affect the markets on any given day. For instance, economic indicators such as the European Central Bank’s inflation rates and gross domestic product numbers released by each country can determine which direction the markets take. Stocks, currencies and other financial instruments can all vary depending on these areas.
Major events such as war breaking out, natural disasters and elections also have an effect. When we look at the commodities market, climate change is an issue to bear in mind, with unusual weather sometimes causing scarcity or abundance of a certain product.
An interesting aspect of the modern financial world is the way that the different markets are linked. This means that any important event or news story that affects one area could easily affect another, even if the link isn’t obvious at first sight. We can also see how local shocks and events can quickly have an effect at a global level.
The financial crisis of 2008 is a good example, as it started with a serious downturn in the US housing market. Although this appeared to be a localized issue at first, it soon revealed some major issues with the global banking setup that caused problems around the planet affecting millions of people and diverse industries.
Speculation and investment trends
The previous factors all point toward the markets changing, and there’s no shortage of traders around the world waiting to see what happens next and how they can benefit. This means that we need to take into account other issues such as speculation and investment trends in the markets.
Armed with a variety of tools, including candlestick charts, traders try to identify trends such as support and resistance levels. They use the information they glean from the charts to make their moves, which can influence the general market if enough people make the same moves or if the amounts involved are significant.
Once an investment trend begins, it can have a knock-on effect that would have been impossible to predict at the outset. The example of Bitcoin and other cryptocurrencies shows how something that starts small can grow impressively. Cryptocurrencies have now gained enough mainstream appeal to influence and disrupt many industries, from healthcare to gaming and banking.
It’s important to understand how the leaders of a company operate and how they have faced challenges in the past. If we look at banking and the Bank of New York Mellon in particular, we can see that its history can be traced back to 1784, so it has overcome all the major events that have occurred since then. With some of the biggest names in the business world making up its key institutional investors, this is a company that we would expect to react effectively to changing markets.
Regulatory changes and company results
Just about every industry represented in the financial markets has laws and regulations that govern it. This means that the fear of harsher new laws is an almost constant threat. Meanwhile, the hope that beneficial changes to the regulations help businesses prosper is the other side of this matter that investors keep a close eye on.
Let’s not forget the role played by the profit and loss results produced by major companies. It’s clear that these results have an almost immediate effect on their stock prices. However, we should also bear in mind that this effect can reach other areas of the economy. A surprising set of results for a large business can produce shock waves that travel around the market.
What impact do they cause?
From the wide variety of examples that we’ve looked at here, it’s clear that the impact isn’t going to be the same in every case. While one set of circumstances might snowball and cause a huge impact, another might cause a limited impact before the news disappears as other events overtake it.
Having said that, one of the key issues that they cause is a higher degree of market volatility. We can see how this works by looking at an area such as the COVID-19 pandemic in 2020. The markets became a lot more volatile as the different aspects of the pandemic became clear. Streaming companies, healthcare companies and video conferencing technology firms made huge profits, while airlines and hotels were among those to lose out massively.
Working out the overall impact of a particular situation is almost impossible to do now. With so many traders looking over the latest news stories and numbers with advanced tools, the original impact can quickly grow or simply disappear. Therefore, the key for investors is to understand emerging trends and react to them before it’s too late.
These details reveal how complex the global financial market is now. It’s a fascinating world, and with more information at our fingertips than ever before, it’s something that anyone can start to research and understand in their own way.
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Economy
Everything has been delivered. 10 Bugatti Centodieci are already in the hands of the owners
OAll Bugatti Centodieci have been delivered, the Molsheim-based brand said on Monday. Cristiano Ronaldo received the number 07 in October this year. and Bugatti has now revealed that the latest unit – #10 – is already in the possession of its owner.
“The Centodieci combines all the values of the Bugatti brand in an extraordinary package: rarity, innovation, heritage, craftsmanship and unrivaled performance. The production batch of 10 units was so in demand by our customers that it was sold before the Centodieci. was even officially presented,” said Christophe Piochon, president of Bugatti.
This latest example is finished in Quartz White with carbon fiber trim on the bottom and matte grilles. The brake calipers are painted in Light Blue Sport, as is the logo on the rear that refers to the EB110, the iconic Bugatti model that inspired this Centodieci. Inside, the predominant color is also blue, as you can see in the images above.
This block is powered by the same block as the other nine instances. The 8.0-liter W16 with four turbines is capable of developing 1600 hp. In terms of performance, this allows the Centodieci to hit 100 km/h in just 2.4 seconds and reach a top speed of 380 km/h.
Recall that each unit costs the owners eight million euros before taxes.
Read also: We already know when the Bugatti Centodieci fell into the hands of Ronaldo.
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Economy
The first Dacia hybrid. “The cheapest hybrid family on the market”
BUT Dacia revealed this Monday that the hybrid engine has been available since March on the Jogger, the Romanian brand’s model known to be available with a seven-seat variant.
The Jogger Hybrid 140, Dacia’s first hybrid, will hit dealerships in March, but customers can expect and order it as early as January.
The price has been revealed by Dacia and since it’s only available in the seven-seater SL Extreme, it starts at €28,800. The brand claims it is “the most affordable hybrid family car on the market.”
Available in six existing colors to celebrate the launch of this hybrid, there will be a slate gray version, as you can see in the images above.
Equipped with a 1.6 liter four-cylinder petrol engine with 90 hp, the Jogger is also powered by two electric motors (a 50 hp engine and a high-voltage starter-generator). The total power is 140 horsepower. The electric transmission is automatic, four-speed, connected to an internal combustion engine, and two speeds are connected to an electric motor. This combined technology was possible, according to Dacia, only due to the lack of clutch.
Combined with the energy recovery levels of the 1.2kWh (230V) battery pack and the efficiency of the automatic transmission, regenerative braking delivers all-electric traction on 80% of urban journeys and saves up to 40% of fuel compared to a combustion engine vehicle.
Read also: Dual-fuel Dacia Jogger Eco-G. We tried 5 seater and LPG…
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