A Tenacious Market

The market is tough, strong and sturdy, and able to withstand the ‘tech’ route. After all when you live by Big Tech, you die by Big Tech. That’s just what happened this past week. Big techs floundered and lost ground, but the value stocks maintained their course. Outstanding earnings reports by these mammoth techs didn’t salvage their values at week’s end. More than 300 companies in the S&P 500 ended in positive territory, with some gains quite sizable. Watching the Russell 2000 Index the past few weeks gives a hint of the resiliency of the ‘smaller’ non-tech companies. (Closing out July with great gains) The months-long rally in the U.S. stocks has slowed in the recent weeks, on worries about the outlook for the economy as coronavirus cases rise again. Also, concerns about China’s clampdown on its internet and technology businesses, as well as big expectations for future corporate earnings. Nevertheless, the rallying shares of utilities and real-estate companies give optimism to investors. The coming of August means entering what historically has been the most treacherous stretch of the year for stocks, according to data going back to 1928 compiled by Bank of America analyst Stephen Suttmeier. He finds that the S&P 500 index has a negative return averaging 0.03% in August, September, and October–the worst three-month span of the year for big-cap benchmark. In fact, they constitute the only three-month period that averages in the red. Of course that could all change based on the superheated economy we are experiencing due to the massive pandemic. For the week the Dow Jones Industrial Average slipped 149 points or 0.4%, to 34935, a smidgeon off its high, posting a 1.3% gain for the month. The Nasdaq Composite lost 105 points, or 0.7% to 14672, near its all-time high, adding 1.7% for the month. The S&P 500 fell nearly 24 points or 0.5% to 4398, up 2.3% for July, marking its sixth consecutive month of gains.

Global Economy ‘Roars” Back From Collapse…Wealthy nations are returning to pre-Covid levels while developing countries are lagging. The world economy likely returned to its pre-pandemic size this spring, according to economists, marking an extraordinary comeback from the ‘deepest’ global downturn in decades. But new variants on Covid-19 are casting a cloud over the global expansion. In Europe and North America, businesses and households are starting to look tentatively beyond the pandemic, thanks to widespread vaccinations. The eurozone economy grew at an annualized rate of 8.3% in the months through June, outpacing the larger U.S. economy and ending a brief recession in the winter months, according to data published by the European Union’s statistics agency Friday. EU officials expect the bloc’s economy to return to its pre-pandemic size during the final quarter of this year. The IMF this week lowered its growth forecast for five Southeast Asian countries–Indonesia, Malaysia, Philippines, Thailand, and Vietnam. As these countries catch up, vaccination-wise and help are on the way, their economies will firm up.

Bitcoin Rallies….The price off Bitcoin jumped to nearly a six-week high Monday, with some strategists attributing the rally to ‘short positions’ being liquidated, and, speculation that Amazon.com Inc. might be ‘venturing into digital currencies. Bitcoin soared as high as $40,000, according to Dow Jones Market Data, reaching its highest level since mid-June. Recent bullish comments from some notable high-profile proponents of cryptocurrency have helped support the price gains. Last week Tesla Chief Executive Elon Musk stated his rocket company SpaceX held Bitcoin, and, that Tesla would likely accept cryptocurrencies as payments again, if the process of generating it, known as mining, becomes less reliant on fossil fuels. “There’s been a lack of good news in the cryptocurrency market in the last two months,” said Bobby Lee, founder, and CEO of Ballet, a cryptocurrency hardware wallet. “Now they’re starting to trickle out, so investors and speculators are using this opportunity to build up their positions and buy back Bitcoin, causing the price to rise pretty dramatically. Interestingly, the number of Bitcoin addresses with at least two material transactions going in and no outgoing transactions has been rising in recent weeks, according to data from research firm Glassnode


Vlad Tenev, Robinhood CEO, after the disappointing debut of the online broker’s stock. Barron’s “I’m used to being doubted personally, I think, from the very beginning.”

Mathew Mobreg, Lead Portfolio Manager, Franklin Dyna Rech, (MBA, University of Michigan) Barron’s “In growth investing and trying to figure out what’s going to happen in the future, I often use my history major more than my CPA,” he says. “Businesses are often very simple from a financial perspective, but thinking about these long-dated assets and what’s going to happen over 10 or 20 years…often requires a historical perspective.”

Brian Olsavsky, Amazon CFO. Barron’s “People are getting the vaccines and leaving the house to buy things that just a few months ago they would have bought online. They’re also shifting some disposable income from online shopping to travel, restaurants, and even events.”

Sebastian Mackay, a multiasset fund manager at Invesco. WSJ “There are so many cross-currents going on at the moment influencing markets,” says Sebastian. “We’ve entered a more volatile period for markets, but markets will continue to move higher because we’re still seeing economic growth.”

John Kolovos, chief technical strategist at Macro Risk Advisors. Barron’s “While the stock market is down and losing upward momentum, the market of stocks have stabilized,” says Mr. Kolovos.