Trapped Investors, Here Is Your Chance To Escape An Overexploited Stock Group, Says Strategist

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Investors are at least partly rethinking Friday’s abrupt sell-off inspired by omicon variants, with stocks and other assets rebounding at the start of the week.

We may have the word “light” to thank for that.

Taking the weekend tour was a comment from a South African doctor which initially sounded the alarm on the new variant of the coronavirus in patients, but reported “extremely mild” symptoms. As we are in the early days with this new variant, it would be positive for equities if this is true, tweeted billionaire Pershing Square, hedge fund manager Bill Ackman.

But this same doctor also pointed out Potential risks older, unvaccinated patients. In the end, we don’t know much more than Friday and it will take some time to figure out this next step, although at least some of the shock has dissipated.

While waiting to answer two big questions, “the reopening, value (especially in relation to quality) and risk assets in general face this new surplus,” said a team from JPMorgan led by Mixo Das. They are: what is the likelihood of serious outcomes – hospitalization and death – and how will the new variant respond to existing vaccines and treatments?

Our call of the day is JonesTrading’s chief equity strategist Michael O’Rourke, who sees a silver lining in Friday’s sale. “The great Pandemic Plays rally is an opportunity for trapped investors to come out,” he told clients in a note Sunday.

For example, ZM Video Zoom,
+ 5.72%
and PTON Platoon,
+ 5.67%
jumped about 5% each on Friday and slipped a bit into the pre-market action. After huge gains in 2020, these stocks are down 55% and 35% respectively since the start of the year.

“Countless times throughout 2020, we have warned against extrapolating an atypical year indefinitely into the future, but the market has done it anyway. Collectively, the group has been given multiples that will take years and, in some cases, decades, to develop. This should turn out to be the rebound that investors have been waiting for, ”said O’Rourke.

The quarterback reminds us that “the Bull gang doesn’t stay long enough to cover their short and the bear doesn’t stay long enough for the longs to sell,” he said.

“The political normalization process will continue because inflation is real and has no hope of subduing if the Fed does not continue the normalization process. Over the past 13 years, the FOMC has afforded itself the luxury of a benign inflation environment to allow it to seemingly react to every drop in the stock market, and now that luxury is gone. As such, the value is very attractive compared to the growth, ”he said.

Oil stocks are among the value games that it sees remaining in demand.

Echoing some of these thoughts, Mark Haefele, chief investment officer, global wealth management at UBS, urged investors not to act in haste because he said the sale was a lesson in staying diversified in the markets. and sectors.

“We are maintaining our positive outlook on energy and financial services despite this latest episode of volatility. We believe the energy sector will be supported by oil prices which will likely remain high this year and next, ”he said.

The steps

ES00 futures contracts,
+ 0.73%

YM00,
+ 0.55%

NQ00,
+ 0.88%
envision a decent rise with Dow futures up 200 points, following the worst Black Friday session in over 50 years. The Asian markets were less encouraging, with a decline of 1.6% for the Nikkei NIK,
-1.63%,
while European SXXP equities,
+ 0.85%
are doing a little better. CL00 oil price,
+ 4.99%

BRNF22,
+ 4.50%
are up about 5%, after dropping 13% on Friday. TMUBMUSD10Y bond yields,
1.555%
are in place and or GC00,
+ 0.32%
is higher.

The buzz

The omicron variant has now been found in more countries, notably in Europe, as the World Health Organization has urged widespread testing and warned of the potential ‘serious consequences’ if the new variant fuels flare-ups. . Japan has joined with Israel in banning all foreign tourists.

U.S. officials such as Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and chief medical adviser to the White House, are urging people not to panic.

Black Friday online shopping would have been reached $ 8.9 billion, the low expectations of the industry watchdog Adobe, and it was the first time that spending did not reach the level of the previous year. Some early discounts can be to blame. In any case, watch retailers like Amazon AMZN,
-2.12%,
Walmart WMT,
-1.12%
and TGT target,
-0.88%.

The data could prove to be a distraction for investors this week, with November employment data coming on Friday. Home sales pending for October are ahead.

Table

Goldman Sachs presented four global growth scenarios that could play out due to the omicron variant. They include a few downside scenarios, one worse than the other, one where the variant turns out to be a “false alarm” and an upside scenario. Until the situation becomes clearer, chief economist Jan Hatzius says the investment bank is not changing its forecast.

Random readings

Travelers stranded by snow spent three fun nights in a pub in North Yorkshire, England.

Merriam-Webster’s not-so-surprising word from 2021: vaccine.

It’s boring to be 60, but it’s better than being dead says actor George Clooney.

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