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Mr. Market's going for gold (Olympic Gold)!
What the Market? - Aug 02, 2021
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What the Market?
Mr. Market was a bit of a nervous ninny for a bit there eh? Well, the Fed spoke, and they’re still willing to sustain asset prices through accommodative monetary policy. Which Mr. Market took a sign that he could keep the party going, and there was a lot to celebrate with impressive earnings reports across the board. Like always though, we have to wonder, how long can Mr. Market keep going like this?
What’s driving the market?
About last week’s FOMC Meeting: The Federal Reserve opted to hold interest rates steady once again, and indicated that the American economy is moving in the right direction despite increased concerns about the Delta variant. In his habitual press conference, Powell insisted the economy is still far from making significant progress towards maximum employment and reiterated his recent rhetoric towards a cautious dovish approach to monetary policy. These comments were enough to deter any expectations that the Fed may reduce its asset-purchasing program in the immediate-term. The next update will be during the Jackson Hole meeting in late August when the Fed is expected to announce a timeline for tapering and potentially some commentary on an interest rate hike for late 2022. Analysts have suggested that investors may begin taking profits as they price in the “extra hawkishness” of the next Fed meeting.
What’s an investor to do?
Jay Powell is giving us a green light to relax a bit and enjoy the recovery as we sway in the right direction. With the economy starting to show healthy signs of recovery, it is important to keep an eye out for economic news that will pave the way to how the Federal Reserve adjusts its strategy. Remember that the Fed’s support and dovish policy is not sustainable in the long term and pull backs will happen. The goal is long-term sustainability and growth, not inflating assets in the short term for the benefit of traders.
Indices have been rallying lately, and summer months historically tend to show lower volumes and more pullbacks. Don’t fret, as the overall economic narrative looks sound. No need for panic selling if you trust what you’ve got. This is a good time to apply the old mantra of risk-consciousness and ask yourself if your holdings let you sleep at night. With the infrastructure bill coming to the floor shortly and an improving economic backdrop, there may still be time to venture into value-based investments.
A note on China: Investor’s have begun to rethink their strategy after China’s regulatory clampdown. The new regulations (read here) triggered a sell off that drove markets down across both Asian and Emerging markets. Analysts expect the crackdown to continue as the communist party demonstrates its force within the Chinese economy. Not great news for speculative holders, but a potential opportunity to keep building positions for those betting on the long-term value creation of what will probably become the world’s largest economy.
Keep an eye on the economy
July Jobs Report: The employment report will provide a sensible gauge of the pace of the economic recovery. Analysts expect the labor market to have gained around 900k jobs,a strong indicator of recovery heading into August. Combining this data with the manufacturing and services PMI should provide depth into the expected demand as well as possible backlogs in supply.
Consumer Cyclical: Under Armour, Marriot, Ralph Lauren, Royal Carribean Criuses, General Motors, Beyond Meat, Booking.com, MGM, SeaWorld, Shake Shack, Expedia, Yeti, Norwegian Cruise, Caesars Entertainment, Wynn Resorts
Consumer Defensive: Clorox, Kraft-Heinz, Kellogg’s, Goodyear Tire
Tech: Uber, Lyft, Roku, Electronic Arts, Etsy, Zillow, Dropbox, Wayfair, Draftkings, Activision Blizzard, Coursera, Lemonade
Others: Square, Virgin Galactic, Allstate, New York Times, Vulcan Materials, Moderna,
Monday: Chinese, Eurozone, US and UK manufacturing PMI
Tuesday: Eurozone PPI, US factory orders
Wednesday: Eurozone Retail Sales and Services PMI, US employment report, mortgage applications and services PMI
Thursday: Bank of England monetary policy decision and press conference
Friday: US Non-farm payrolls and unemployment rate
If you didn’t know, now you know
As foreign troops pull out of Afghanistan, the Taliban has increased their offensive and has captured up to half of Afghanistan. The Islamist militia has captured vital border crossings with Iran and Pakistan. Afghan military is fighting back alongside anti-Taliban warlords who have mobilized citizens to take on the Taliban as well.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
The Tomorrow War on Amazon Prime. An entertaining sci-fi starring Chris Pratt. Humanity is losing an alien war 30 years in the future and must come back into the past to recruit more humans to the fight.
Jose Cuervo Reserva De La Familia, Extra Anejo. This is hands down, one of the best Tequila’s out there. Not the brand you’d think of for world class Tequila, but the family reserve is a bottle every Tequila drinker must taste.
This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.