Two Very Different Views of the Bond Market

With the volatility in the stock market in recent years, I know more than a few (overly?) caution folk who still prefer the safety and guarantee of bonds over the much higher but also much more rollercoaster yield of stocks.  We're all aware that the stock market has been going crazy for several years since the Fed has kept interest rates near zero so investors must be in stocks if they plan to make any kind of decent returns.  But the bond market may be changing now and becoming more competitive with stocks. 

S&P 500, Dow close at record highs as solid jobs data boosts cyclicals

The payrolls report came in quite a bit better than expected with an increase of some 73,000 jobs above the forecast. This lead to more record highs on both the S&P and Dow and drove the unemployment rate to a 16-month low. Once again there is a renewed confidence in the recovery evidenced by yet another rotation out of growth and into cyclical and value stocks. The Q2 profits forecast now stands at an unprecedented 92.9% with 427 S&P companies reporting and 87.6% beating forecasts, the highest on record.  Robinhood continues its rollercoaster ride, today with a boost of 7.9%, adding billions to its value this week.  But sentiment continues to be haunted by fears of inflation and a sudden tapering in Fed stimulus, which  is why the focus now will be on the Jackson Hole conference later this month when the Fed is expected to decide future stimulus strategy.  Volume remains below average at just over 8.6 billion. 

Nasdaq, S&P 500, set records as jobless claims decline

It was risk-on today as new claims for unemployment continue to decline and layoffs dropped to the lowest level in 21 years creating a new pre-pandemic low. The Dow surged 271 points and the Nasdaq and S&P to new records while investors anxiously await Friday’s jobs report. If it’s another disappointment like Wednesday’s employment report it could trigger new doubts about the recovery. Or it could trigger more optimism that the Fed will hold off longer on rate hikes and continue stimulus. Robinhood, after four straight sessions of gains, lost nearly 28%, clearly indicating this is a volatile risky stock and that more panic selling may ensue. Volume was below average at just over 8.8 billion. 

Wall Street closes mixed, S&P 500 ends off record high

Yesterday it was risk-on, today is risk-off again with the Dow plunging 323 points but the Nasdaq picking up 19 and the S&P falling from a record high. It’s the same story – global uncertainty regarding economic disruption and though the Fed issued another statement about raising interest rates sooner rather than later, the Nasdaq, which is interest rate sensitive and should have fallen, instead rose. It just goes to show that nothing is predictable in this business.  The employment report was a disappointment meaning Thursday’s unemployment benefits report and Friday’s payrolls report become all the more important. Robinhood, after a less than stellar start last week, jumped 50% today, its fourth day of gains. Volume was right in line with recent averages at just under 9.8 billion. 

S&P 500 closes at record high as Apple, healthcare stocks help shrug off Delta worries

The last two sessions have been risk-off, today was risk-on again as investors picked up bargains and bought into healthcare over the Delta surge. Factory orders were up 1.5% vs a forecast of 1% and overall sentiment is once again optimistic as consumption is very strong leading to the conclusion that another broad lockdown will not happen.  The Dow surged 278 points, the Nasdaq 80, S&P Q2 earnings are now expected to climb 90% and, as today’s expert put it, “people are underestimating the strength of recovery.” The market anxiously awaits both the services sector report and jobs report due later this week.  Volume was a little below average at just under 9.3 billion. 

S&P 500 edges down on virus woes, slowing economy

There was yet another modest pullback today with the raging Delta variant worrying the markets about the recovery and not helped at all by some rather pessimistic utterings from Fed Governor Christopher Waller who opined that the stimulus may be scaled back as early as next month, quite the change from earlier announcements that nothing would change before 2023.  Manufacturing reports show that it is beginning to slow as the obstructions in the supply chain begin to get repaired. The main issue today were fears that growth may slow and the winning sectors today were utilities and real estate, the safe bets during struggling times.  With manufacturing slowing down, all eyes will be on the services report due Wednesday and, as always, the jobs report due Friday. As uncertainty rises and investors await more data, volume was below average at 8.8 billion. 

WARREN BUFFETT LESSONS

Well, there's no better person to learn the lessons of investing from than the world's most successful investor which is why I found this week's episode of the PBS program "WealthTrack" to be particularly worthy of sharing. Her guest on the program is law professor Lawrence Cunningham who has become an expert on Buffett having authored several books on the Wall Street guru.  As has been the case for about two months now, there is no weekly summation being published by Barry Ritholtz anymore. Hope everyone had a great weekend.  It certainly has been a beautiful weekend.