The Steadfast Bull

The stock market closed out the week with bullish gains in lower volume, led by financial, energy, and materials stocks. The ‘topsyturvy’ week ended with the indices hitting fresh records. The Sentiment was positive as money flowed out of bonds and into stocks. The 10-year yield snapped a sharp weekly decline, rising 7 basis points to 1.36%, significant news for a market-ready to execute. Many investors rushed to buy stocks after the market dip on Thursday, a trend that has become a ‘feature’ of the stock markets’ rallies over the past year. That desire, along with the easing of concerns about the economies’ recovery lifted stocks on Friday, totally overshadowing any worries about President Biden’s executive order to limit corporate dominance. Even as investors grew worried about the new Covid variants, supply chain bottlenecks, labor market concerns, by Friday those concerns were far behind, and the buying began. Some analysts have suggested that the bond market has been signaling more caution about the economic recovery than the stock market, which is trading at highs. As Ben Levisohn, of Barron’s so aptly phrased it: “there’s a good chance economic growth has peaked, but that doesn’t have to signal the end of a bull market, far from it.” As the week ended, the Dow Jones Industrial Average advanced 83 points or 0.2% to 34,870, while the S&P 500 rose to 0.4% to 4369, and the Nasdaq Composite gained 0.4% to 14701, as the indices managed to finish the week with record highs.

A Sweet Commodity…Sugar. Investors might want to sweeten their portfolios with a ‘touch of sugar’ this summer, as prices for the commodity look ready to continue rallying. A combination of existing crop damage, more likely inclement weather in key growing areas, robust oil prices, could lift sugar prices. “The only way the potential sugar shortages get resolved is for the Asian harvests to come in with big crops,” says Shawn Hackett, president of the financial firm Hackett Financial Advisors. He sees the price going as high as 22 cents a pound, or 25% above a recent 17.6 cents. During the second quarter, the sugar market went on a tear, gaining about 20% since March 31. That surge was primarily driven by dry weather in Brazil and the deterioration of the crop. For optimal cultivation, sugar cane requires warm, moist weather. For the cane harvest in the 2020-2021 season, Brazil exported 32 million metric tons of sugar, about half of global exports. The cane harvest in Brazil doesn’t go only toward making sugar; some of it gets converted to ethanol which oil refiners blend into gasoline. “When oil prices are elevated, some refiners increase their use of ethanol in gasoline blends to save money,” says Jake Hanley, portfolio manager at ETF provider Teucrium. In turn, that increased ethanol demand boosts demand for sugar, helping keep prices higher. “Historically, you see a correlation: With higher oil prices, you get higher sugar prices,” he says. Presently oil is hovering in the mid-70s. Oil and Sugar…a sweet combo.

A Steel Snapback…Prices for hot-rolled coils of steel sizzled during the recovery, and the ‘heat’ has ignited the steel equities market. As Credit Suisse analyst Curt Woodworth sees it, steel isn’t cooling down soon. Tight supply has lifted the benchmark price of hot-roll-coils to $1,600 peer short to from $500 a year ago. Woodworth believes that today’s upcycle will endure a least a couple of years- and that those investors should ‘award’ the stocks higher multiples. “The rebirth of the U.S. steel sector is a real event,” he writes in a note. Woodworth believes that Wall Street is discounting a sharp correction in steel prices. But there is a new normal, for savvy investors, he says.

President Biden signed a broad executive order that aims to promote competitive markets across the U.S. economy and ‘limit’ corporate dominance that the White House says puts consumers, workers, and smaller companies at a disadvantage. The executive order, the centerpiece of a new Democratic emphasis on restraining the nation’s most powerful companies, lays out a detailed plan to address what the Biden administration sees as trouble spots across industries, from everyday concerns- to some of the most cutting-edge issues facing the government, such as first-ever antitrust regulations for internet platforms. These directives are likely to set up heated battles with U.S. companies that could take years to litigate. “Capitalism without competition isn’t capitalism. It’s exploitation,” Mr. Biden said before signing the order. A strong mandate that will evoke a strong rebuke.


Chris Grisanti, a chief equity strategist at MAI Capital Management, referring to the executive order by President Biden to limit corporate dominance. WSJ “It’s certainly on my list of worries that weren’t there yesterday,” said Mr. Grisanti. But he said that for people wondering if the party is over yet: “I don’t think so.”

Katerina Simonetti, a private wealth advisor at Morgan Stanley Private Wealth Management WSJ “Our overall economic forecast remains positive. We see this as a bull market.”

Hani Redha, a portfolio manager at PineBridge Investments. WSJ “Rising Covid 19 cases in many parts of the world are prompting concerns about extended lockdowns and another potential blow to the tourism sector,” he said. “It is a cocktail of a lot of crosscurrents,” said Mr. Redha. “One camp out there is arguing we’re going back into slow growth all over again and it starts now and we’re not getting a vigorous reopening bounce or if we’ve had it, the party’s over.”

San Francisco Fed Chief Mary Daly Barron’s “I think one of the biggest risks to our global growth going forward is that we prematurely declare victory on Covid. We are not through the pandemic, we are getting through the pandemic.”