Home About Archives RSS Feed

@theMarket: Week of Surprises Keeps Investors Hopping

By Bill SchmickiBerkshires columnist
There were plenty of reasons why the stock market was a bit jumpy this week. Let's go through them.
 
Two weeks ago, I wrote that I was worried "that we could suddenly see a spike in new Delta variant cases that impacts economic growth. Remember that less than half of all Americans are fully vaccinated. President Biden, his chief medical advisor Anthony Fauci, and the Fed are all sounding warnings over this risk, yet the markets are ignoring it."
 
Investors finally caught on this week and began to realize the risk presented by the Delta variant and its impact on the re-opening of the U.S. economy. It is impossible, in my opinion, to maintain the economic pace of recovery in the U.S. and achieve full employment without herd immunity. Herd immunity would require a vaccination total of 70 percent of the population, according to medical experts at the Center for Disease Control.
 
The radical right, and their elected officials, which represents roughly 40 percent of the population, refuse to get vaccinated, or even follow the most rudimentary medical safeguards. It is partisan politics at its worse. And as a result, in my opinion, the economy will have an extremely difficult time realizing its potential, nor will the United Sates truly recover from COVID-19.
 
The next news item roiling investors involves the minutes of the last FOMC meeting, released on Wednesday. We already know that the Fed is planning to begin tapering, so it is really a question of when. Fed members were quoted as saying that "they might need to pull back their support for the economy sooner than they anticipated because of stronger than expected growth … ."
 
Despite Chairman Jerome Powell's assurances otherwise (that tapering would happen later, not sooner), we read that "various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of the incoming data … ."
 
Investors simply took that to mean that sooner, rather than later, was now the Fed's timetable for tightening. When markets are at record highs, those are the kind of words that can (and did) ignite a decline.
 
And then we have the worrying yield trend of the U.S. Ten-Year Bond. The yield on the "Tens" fell to 1.25 percent this week. Less than a month ago, the worry was that yields would rise to 2 percent before the end of the year. What happened? It could be that fears of the new Delta variant have forced bond investors to seek safety in bonds, while adjusting the growth rate of the economy downward.
 
Another concern is that the OPEC-plus members have yet to come to any kind of production agreement. Traders expected that lack of compromise to put even more pressure on prices, but the opposite occurred. Some energy bears say that the United Arab Emirates' (UAE) refusal to back an increase in production has created a potential crack in the solidarity of the oil cartel. In which case, anything could happen.
 
Finally, the debacle involving the $4.4 billion, initial public offering of Didi, the Chinese ride-share company, has thrown global investors for a loop. Last weekend, a day after the IPO, the Chinese government ordered the company to cease accepting new users and to close down its app. Chinese regulatory authorities are probing whether Didi, as well as other companies, illegally collected and utilized personal data.
 
In the past year or two, these regulatory probes of Chinese companies have been increasing. Chinese, global growth companies like Alibaba, and its wholly owned subsidiary, financial credit giant, Ant Group, have been ham-strung by the Chinese government's initiative to exert control over social media and how they handle, collect and share data. Regulators in November of 2020, for example, simply halted Ant Group's multi-billion-dollar dual listing in Hong Kong and Shanghai at the last minute.
 
Didi's share price was down more than 20 percent since its IPO and other large Chinese companies, especially those in social media and e-commerce, have dropped more than 30 percent in the past few months. That has put even more pressure on the markets.
 
Readers should expect more volatility in the days ahead. There are fewer traders, less volume and more opportunity for algos to move markets up and down at the drop of a hat. It is a good time to take some time off and enjoy the summer weather. Stay invested.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Clarksburg Sees Race for Select Board Seat
Crosby/Conte Statement of Interest Gets OK From Council
WCMA: 'Cracking the Code on Numerology'
BCC Wins Grant for New Automatic External Defibrillator
Clark Art Screens 'Adaptation'
Drury High School to Host End-of-Year Showcase
Clarksburg Gets 3 Years of Free Cash Certified
Pittsfield CPA Committee Funds Half of FY24 Requests
MCLA Men's Lacrosse Falls in League Opener
Letter: Vote for Someone Other Than Trump
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (184)
Archives:
March 2024 (6)
March 2023 (2)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Stock Market Deficit Taxes Recession Debt Selloff Bailout Oil Banking Stimulus Interest Rates Euro Japan Energy Commodities Retirement Federal Reserve Europe Employment Debt Ceiling Europe Congress Metals Rally Jobs Greece Currency Stocks Pullback Banks Markets Economy Fiscal Cliff Election Crisis
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
The Retired Investor: Immigrants Getting Bad Rap on the Economic Front
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising