Wall Street Flatlines, Didi Dives Deep & Pfizers Optics Test
Housing is justice
Great news, The big ones!
No, I didn’t just save a lot of money by switching my car insurance. However, I have found evidence that Wall Street is starting to return to reality. (Ope, there goes rabbit, he …)
Even better? Unlike Eminem in 8 miles, you probably don’t have to worry about mom’s spaghetti.
What am I talking about in the ever loving market? Let the chief economist and strategist at Rosenberg Research, David Rosenberg, explain:
The fact that the GDP recovery and reopening indices are now treading instead of hitting new highs “indicates that the market is moving towards a ‘peak growth’ view, with much of the reopening news and the recovery completely in price. “
Good news, right? What – oh, that’s not very clear, is it? Let’s break that down a little further.
In this quote, Rosenberg speaks of two specific indices:
The first is the “GDP Recovery Index,” which is comprised of S&P 500 companies operating in the fields of energy, packaging, chemicals, steel, copper, building products, construction, electrical equipment, machinery, road and rail transport, commercial services, professional services, consumer discretionary, semiconductors, media and movies and entertainment.
In other words, this index tracks all S&P 500 companies that will benefit greatly from an economic recovery.
The second is the “Reopening Index,” which includes the Rosenberg S&P 500 airlines, apparel, hotels, restaurants, leisure and aerospace / defense companies, and office, hotel and retail REITs.
These particular companies will benefit greatly from an ongoing reopening of the U.S. economy amid the COVID-19 pandemic lockdowns.
Rosenberg has some nifty diagrams to accompany his reasoning which you can see by clicking here. (Look – diagrams and a quote in a day!) The skinny is that these two indices are flat.
But sir Great stuff! Doesn’t that mean that growth is slowing down! Isn’t that bad for us investors?
No and yes. Let me explain …
That doesn’t mean that growth is slowing down. Not at all. All economic indicators continue to point to a steady US recovery from the pandemic.
What the slower recovery and GDP indices mean is that the rallies for these companies’ stocks are slowing – not economic growth. The two are usually linked, but we all know that stock prices have increasingly moved away from reality over the past year.
For laypeople, this means Wall Street is finally curbing its exaggerated expectations for post-pandemic growth.
That is a Well for the market, because investors are finally realizing what I’ve been saying for months: that year-to-year comparisons with an economy plagued by pandemics are no indication of a rampant bull market.
But is this reckoning bad for investors?
If you expected massive growth from the overall market, then yes. Hopefully there aren’t any The big ones out there with such unrealistic expectations. If so, I haven’t done my job.
Right now, the economy is catching up with those inflated expectations as stocks are already pricing in the peak of post-pandemic growth.
If Wall Street expectations stay ridiculously high … the comedown could be devastating.
In other words, flat is righteousness. A sideways stock market is better than a full correction. In order for Wall Street to have a smooth transition from a pandemic to a post-pandemic market, we need a little bit of rationality in stock prices.
Rosenberg’s data is a good indication that sanity is finally coming back to the market.
Sure, it was a confusing time for investors. But today you are getting the clarity you have been looking for.
The man who has already guided over 100,000 Americans with his investment insights shows you where the market will go in the next 10 years … and which stocks will lead the way. He personally sent out a warning a week before the coronavirus crash. And his company has predicted a number of booms and busts with amazing accuracy.
You should be very careful: Click here for details.
The good thing: license to drill
During the entire pandemic lockdown, remember when remote workers realized their boring beige boxes weren’t much better than the office …
And then, like Home Depot (NYSE: HD) and Lowes (NYSE: LOW) enjoyed and made tons of money from remote workers turned interior designers?
I beautify every inch of this cramped apartment – from the windows to the walls. Look at me; I am my own contractor!
Yes, about that … Lowe’s and Home Depot are in the middle of a difficult reopening. The caged customers who enjoyed the excitement at the hardware store are all but gone. Now contractors and other DIY enthusiasts are back in the stores, ready to flood the aisles and move their carts around for better or for worse.
Who would have thought that after places reopened, literally going anywhere sounds a lot better than doing more housework? Even meeting Darryl down at Dave & Buster sounds like Woodstock compared to (checks to-do list) Replacing the kitchen cabinet knobs.
Well that everyone is the “just pay someone for it!” Route is the problem for the DIY duo to woo said contractors. About 45% of Home Depot’s sales come from home improvement, compared to 20-25% of Lowe’s sales.
It becomes clear that if any of the home improvement chains are looking to grow the same as last year, targeting those contractors will be critical compared to the remote workers who are now spending less time at home.
Evil: Shot through the heart
And COVID-19 is to blame. Darling, Israel gives Pfizer (NYSE: PFE) … a bad name.
It had to happen. With so many competing vaccines, sooner or later one of them just had to stall, right?
Unfortunately, the Pfizer BioNtech COVID-19 vaccine doesn’t hold its end of the bargain for millions of people right now.
On Monday, the Israeli Ministry of Health reported that the effectiveness of the Pfizer vaccine in preventing infection – the primary role of a vaccine – has decreased to only 64%. The country is currently grappling with a significant delta variant outbreak, despite 59.8% of the population being fully vaccinated.
However, health ministers said the Pfizer vaccine was still 93% effective in preventing serious illness and hospitalization … well, Pfizer has it all, which is nice.
Wall Street is taking the news pretty well now. PFE stock finished marginally today as investors largely ignored the news.
However, if we see more reports undermining the effectiveness of Pfizer’s vaccine, it could further undermine PFE stock.
The Ugly: Down Down, Ba Didi Down
Are you with Didi Global (NYSE: I HAVE), The big ones? Woah, woah, woah!
The shares of the Chinese ride-hailing company fell more than 23% this morning in response to Chinese crackdown on US-listed companies. In particular, the Chinese cyberspace administration forced Didi to remove its app from the app stores and prevented new users from logging into the app.
The move is part of the Chinese State Council’s crackdown on regulations and laws related to cybersecurity, cross-border data flow, and the security of confidential information. Basically, it is China’s version of national security concerns.
But Michael O’Rourke, Chief Market Strategist at JonesTrading, sees it a little differently: “The Chinese government’s tactics seem to have a dual purpose of keeping their corporate leaders in check while at the same time keeping investor pain in the USA lands China. “
That’s pretty painful, too, after DIDI closed a $ 4.4 billion public offering on Wall Street last week – the second largest U.S. IPO by a Chinese company.
Existing Didi users can still use ride-hailing services, but the company will not be able to add new users until China publishes its new regulations. The situation highlights the risk of investing in Chinese companies.
However, with DIDI now trading well below its $ 14 IPO price, this could be a buying opportunity for those with some risk tolerance.
What do you think, The big ones? Is China’s crackdown on cybersecurity regulations long overdue or a shock out of the blue? And what is your current position on buying Chinese companies – even those that are listed on US stock exchanges like Didi?
Let me know in the old inbox-a-roo: GreatStuffToday@BanyanHill.com is where you can let your words fly like the wind and join in Great stuff. And in the meantime you can also find us here:
Until next time stay Large!
Editor, Great stuff