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Bull Sheet

Stocks and crypto steady ahead of Powell’s big speech

August 27, 2021


Happy Friday!

Set yourself an alert for 10 a.m. E.T. today. That’s when Fed Chair Jerome Powell speaks. Investors will be paying close attention to any comments about the central bank’s plan to taper asset purchases, a move that would essentially remove a bit of jet fuel from these equity markets.

A reminder: a majority of Fed members see the need to pump the brakes by the end of the year, as we learned from the minutes of the last FOMC meeting. We’ll see if the latest spike in U.S. COVID cases changes that calculation.

In the meantime, global stocks are holding steady this morning, as are Treasury yields. There’s not much action ahead of the Powell speech.

Over in the crypto corner, that too is trading sideways. Bitcoin is flat, but off its lows.

Let’s see what else is moving markets.

Markets update
Asia
• Asia is again mixed with the Nikkei down, but the Shanghai Composite is rebounding 0.4%.
• There’s a new price tag on vaccine nationalism (aka, vaccine inequality): $2.3 trillionAccording to the Economist Intelligence Unit, that would be the hit to the global economy if country after country cannot inoculate at least 60% of its population. We’re waaaaay behind that right now in the developing world, and there are plenty of rich countries—ahem, United States—where vaccination rates are stuck below that level, too.
• As infections climb in Southeast Asia, Thailand, Vietnam and Malaysia all fell to the bottom of a list of Bloomberg’s Covid Resilience Ranking, a measure of where the outbreaks are being managed well, and not so well.


Europe
• The European bourses are flat with the Stoxx Europe 600 up nearly 0.1% in early trading. The benchmark risks closing out the week in the red.
• Shares in Italian luxury brand Brunello Cucinelli, HQ’d in the splendid Umbrian hilltop borgo of Solomeo, climbed 3% at the open after the cashmere specialist reported a return to profits in the first half, and delivered an upbeat outlook. I’m sure Bull Sheeters have a closet full of Cucinelli polo shirts and handbags.


U.S.
• U.S. futures are bouncing back this morning ahead of Powell’s big speech later today. That’s after sellers yesterday snapped a five-day rally on the S&P 500 and Nasdaq. The deadly blast in Kabul gave stocks a jolt in afternoon trading.
• Energy stocks and small-caps led the sell-off yesterday as 10-year Treasury yields jumped to a two-week high.
• Shares in Gap are rallying in pre-market, up more than 7%, after the retailer reported an impressive top- and bottom-line beat.


Elsewhere
• Gold is up, trading around $1,800.
• The dollar is lower.
• Crude is bouncing back, with Brent trading above $71/barrel.
• Bitcoin is flat, hovering around $47,000.


***

Bull Sheeters have their say
I got a batch of really thoughtful responses over the past week from Bull Sheet readers, which you can find below. You poignantly shared your feelings about the state of the markets, your portfolios, and whether it might be time to sit out—or double-down on—the uncertainty ahead. (A fair number of you, truth be told, also left me a few comments about Scilla, and the sheep. I liked those, too. 🐑🐑🐕)

I really enjoyed putting this compilation of reader responses together. I learned a lot from you—so much so that I’d like to make this a somewhat regular feature. So, if you want to add your thoughts to the next round-up, please let me know.

Here we go!

Locking in gains
Typically, I don’t make a habit of trying to time the market, but last week I sold all of my domestic longs and went to cash. 

Things are nice and calm right now after a historic stretch of performance. Generally, I try to sell stocks when it feels comfortable and buy them when it doesn’t. 

Indices are at or near all-time highs and Powell has painted himself into a corner. If he tapers? Growth stocks go poof! If he doesn’t taper or continues to ignore good economic data, that may become an even bigger story. I don’t see a crease for him to slither out of the easy-money era without the market taking a breather. Has there been a 10% pullback in the S&P yet this year? Hmmm….

I know it took a few years for the ‘00 NASDAQ bubble to burst, but I’d rather lock in gains now. Losing out on the next leg up won’t bother me—if you lose 50%, you need to make 100% to get back to where you were.

—O.L.

Brain exercise
I have felt for 4 to 5 weeks a correction of some type is coming so I have sold some winners and I am sitting waiting for the pullback. It won’t come and I will jump back in and then of course…..pullback. Ha 

I am a long-term investor with over 200 positions in 3 accounts mostly value, financial, commodity, and mature big tech. I will say this….the changes everywhere in our world are coming at us at light speed and it makes it difficult for someone like myself to read the tea leaves. However, that is why the markets are so fascinating and fun as we try to outguess the next market moves. I am 70 and it is my crossword puzzle/sudoku brain exercise.  

—T.G.

Riding the course
My portfolio isn’t huge—75% of it is tied up in my 401k, and thus invested in various ETFs and Mutual Funds. Although I’m only about 3 years from retirement, the other 25% is invested fairly aggressively.  I’m only 58 and based on family history, I have good odds of making it until 100…that money has to last!  

I have watched my 84-year-old Dad’s investment patterns of buying low and holding good performing dividend stocks and occasionally throwing in on something like AppleGoogle, etc.  I’ve done the same and even added some crypto.  Do I worry?  Nope.  Do I like when it dips?  Nope.  But I know I’ll ride the course secure that I made good choices and all will be fine.

—M.G.

Selective memory
Investors are a funny lot, We remember selectively. 

We reflect on the fall of last week, stomach churning, remembering that ignored advice saying, “I shoulda listened to uncle Harry and sold”…but forgetting that today I am still up 18% from Jan. 1, up 98% from the COVID low and on a great trajectory for now, indeed, for a decade.   

No complaints. Even a 5 or 10% slump would be bearable…pun intended. 

—B.D.

Let it ride!
Well, I’m going to let it ride!

Not because I believe that stocks will keep going up forever, but because I am a long-term investor. I try not to panic when the market corrects. I have a pretty conservative portfolio. And in the end— I’ve learned the hard way over the years— I can’t time the market!

—C.T.

No surprises here
I also have been thinking, we’ve got hit a correction at some point, right? And we all knew, the taper talk had to start at some point. And on that note, I really liked the Powell/craps analogy.

—J.A.

Yields and stability
I keep resisting taking profits because every time I contemplate selling, the market rises and I dislike facing the opportunity cost of missing the increase. Of course, I’d dislike falling prices more, but there seems to be so much liquidity chasing yield that, even in the face of slightly rising interest rates. The US stock market is one place investors can get yield and political stability. My father was an investment advisor for 70 years, having just passed last year, and was generally unflappable. He bought quality stocks to hold and never seemed to worry.  I keep wondering what he would do.

—G.M.L

Cosmic gumbo
My portfolio is a “cosmic gumbo.” It consists of pharma, tech, green energy, cannabis and meme stocks. The returns for 2021 are green, but I think it’s time to speak with an advisor.

—my nephew, M.W.

***

Have a nice weekend, everyone. I’ll see you here on Monday.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

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Market candy 


And the most overpriced housing market is?

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