Published
9 months agoon
Good morning, Bull Sheeters. The global rally in stocks continues this morning. Investors again are pinning their hopes on big fiscal stimulus packages and the further reopening of the global economy.
Let’s see where investors are putting their money.
The markets are looking forward. COVID-19? That was yesterday’s news. GDP collapse? Depression-era unemployment levels? Ancient history. New trade tensions with China? Okay, not so fast. That could still be a big deal, but for now equities investors are shrugging off the possibility, sending stocks on a rally that, in some places, is greater than 30%.
The global economic rebound is, at best, a U-shaped affair. The global equities rebound though is very a much a V-shaped phenomenon.
And what’s driving the upward leg of the “V”? Things like oil, copper, banks and Italian mid-cap stocks—what BofA Securities calls its “reopening portfolio.” These beaten-down assets are way off their lows, and driving much of the rally in recent weeks. They should be the first to rebound when lockdown measures ease, and people start to resume something resembling a normal life. You can see some of the “reopening” assets in BofA’s table below (right-hand column).
What’s in the “lockdown portfolio”? Things like gold, discount retail, biotech, Big Pharma and Big Tech. You can see them in the left-hand column above.
During this current rally, the “lockdown” assets are still holding their own, but the “reopening” assets are beginning to close the gap, as this second BofA chart below shows. (The BofA chart was published at the end of last week; the gap has narrowed further over the past three trading sessions.)
That yellow squiggly line is what’s largely driving the markets higher in recent days. For example, financial stocks yesterday had a good day, led by American Express and Goldman Sachs.
These reopening assets are still way off their February highs, but they’ve been roaring back.
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Have a nice day everyone. I’ll see you back here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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