This commentary was posted recently by fund managers, research firms and market newsletter writers and was edited by Barron’s.
September 16: Jerome Powell’s term as Federal Reserve Chairman is expected to end in February, and President Biden will have to decide who to appoint. Should he stay with Powell or go with someone else?
Online betting markets give Powell an over 85% chance of being renamed, with Fed Governor Lael Brainard a far second with around 10%. These probabilities seem reasonable to us.
In our opinion, there is little difference in the views of Powell and Brainard on monetary policy. The latter has never opposed a decision of the Federal Open Market Committee in her seven years on the Board of Governors, and we would classify both as “dovish.”
There is more difference in the regulatory views of the two leaders. Brainard has expressed his dissent 23 times since 2018 on regulatory policy votes. Much of his dissent came from votes on relaxing regulations put in place in the wake of the 2008 financial crisis.
A stricter regulatory environment, if enacted, could potentially exert slight downward pressure on loan growth. That said, it would likely take a drastic change in regulatory policy, which does not appear to be in sight, to have a noticeable effect on lending and the economic outlook over the next few years.
We would not be inclined to change our economic outlook if President Biden chooses either President Powell or Governor Brainard.
âJay H. Bryson, Sarah House, Michael Pugliese, Hop Mathews
Bearish sentiment: bullish sign
The McClellan Market Report
McClellan Financial Publications
September 16: With concerns on the rise over September’s bad reputation for the stock market and with stock prices falling slightly, investors suddenly appear to have turned much more bearish. This downtrend is fuel to maintain an uptrend as all of these bears will turn into buyers when they return to a less bearish position.
Some analysts like to follow the spread between the bulls and the bears in the weekly AAII [American Association of Individual Investors] Investor Sentiment Survey, and I’m looking at that too. But I also find that looking at each of them separately can be helpful.
[The latest reading] is the highest reading for the percentage bearish since October 2020, as we were still recovering from the Covid crash and investors were still woefully pessimistic. This is a kind of trough indication for stock prices ….
Normally, it takes real downward price movement to turn people into a more bearish state. We didn’t have a lot this time. I suspect the rise in the decline this year has been fueled by more than normal talk about low seasonality in September.
Weak dollar ahead
The Market Strategy Radar Screen
Oppenheimer Asset Management
September 13: The Bloomberg Dollar Index, a weighted basket of the top 10 currencies of the United States’ trading partners, has appreciated in recent weeks to a new high for 2021 on August 20. The index has since slipped 0.87% from that high until September 10. Despite the recent decline in the greenback, the dollar is up 2.25% year-to-date.
Due to the relative strength of the dollar for much of this year, foreign stock market returns for U.S. investors have been slashed for much of the year so far.
However, we still expect the dollar to trend lower as vaccines begin to stem the spread of Covid-19 more widely across the world and the United States moves towards sustainable economic expansion that drives the global economy towards recovery. As a result, one would expect the currencies of foreign exporting countries to strengthen against the dollar due to the growing demand for imported goods from US consumers and businesses.
âJohn Stoltzfus and his team
Why inflation will moderate
The Independent Market Observer
Commonwealth Financial Network
September 14: Inflation is one of the most pressing and consistent questions I receive. With the numbers high, the concern is that we are going back to the 1970s and inflation will either stay at the current 5% or rise further. This conclusion seems reasonable, given the large deficit and federal spending over the past two years. Combined with the signs of slowing growth, this could indicate stagflation. The 1970s are calling. Maybe the disco will come back too.
All of this could happen, and there are signs that inflation will start to increase a bit more over the next couple of years. But I’m still not convinced the 1970s are back. We have high inflation figures, but we also have good reason to believe that these high figures will not persist for very long. We have historical data that looks scary, but the forward trends look better. And we have a slowdown in growth, but that slowdown in growth is just returning to prepandemic normal, which is arguably what inflation is doing too … We’ll probably see inflation soar for at least the rest of the year and quite possibly until 2022. But we see the trend change, which shows that the economy is on the mend.
– Brian McMillan
The case of industrialists
September 13: Our overweight in industrials is unique for growth investors, but there are good reasons for this. These companies offer high barriers to entry, strong and lasting competitive advantages and a long path for growth. In addition, environmental, social and governance, or ESG, considerations can enhance their benefits ….
The stocks of many industrial companies can be volatile as the market tends to overreact to economic cycles. This can create opportunities for active managers to deploy capital in poorly valued creators of value and to protect value when the market is too enthusiastic in the short term.
Aerospace is a good example. The Covid-19 crisis almost brought air travel to a halt, and the market value of aerospace stocks fell 60% in one month. This has created a unique opportunity to purchase what we believe to be some of the best industrial assets in the world at a significant discount to intrinsic value. We expect aerospace growth to return to trend as health concerns recede and the removal of restrictions releases pent-up demand for travel. Longer term, we believe secular aerospace growth will be driven by a growing middle class in emerging markets, greater affordability, and an overall shift in spending toward services.
Weekly PWM observations
Polumbo wealth management
September 11th : There are many signs of market overshoot, and this is one of them. A collection of 101 non-fungible Bored Ape Yacht Club tokens sold for over $ 24 million this week.
Unbelievable! Maybe we’re just too old to appreciate the value of NFTs, but we also remember the ârareâ $ 5 baby beanies that sold for thousands of dollars in the late 1990s. Needless to say, they no longer sell at such bonuses. The similarity is that the late 1990s was also a time of over-market, so excuse us if we’re skeptical of the value of apes. That’s right. $ 24 million for 101 digital photos of monkeys. If you are confused, welcome to the club.
âPhilip G. Palumbo, Doug Augenthaler
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