Futures are lower to start the week with the bond market rather flat. Don’t get too excited about one down day, the S&P 500 made a fresh new high on Friday closing at 4128. The VIX also just made a 52-week low on Friday closing at 16.7. Bond volatility and equity market volatility have been moving in the opposite direction for over a month now. We don’t expect this to change with over $270 billion USD of Treasury new issuance
this week and a key inflation report; that could increase the pressure on an already shaky bond market.
Markets appear to be on firm ground as we head into earnings season later this week with the Goldman, JP Morgan and Wells Fargo reporting on Wednesday. Though valuations are undoubtedly stretched, we’ll now get to see if companies are willing and able to grow into these valuations. We’ll also be on the lookout for comments and concerns over inflation pressures and supply chain issues.
Alibaba is rallying with extremely heavy volume following the weekend news that China will slap Jack Ma’s baby with a $2.8 billion USD fine after their antitrust investigation
. Bad news for the company, but investors hate uncertainty, and this removes the fear that the fine could have been much worse. The Chinese government said the retail giant stifled competition and violated their anti-monopoly law. The fine represents 4% of Alibaba’s 2019 domestic sales. The fine is three times higher than the $975 million fine China imposed on Qualcomm back in 2015.
The Canadian dollar is lower against most currencies, despite crude prices rising over 1% and topping $60/bbl once again. Risk off day begets some strength for the Yen and Swiss Franc, however the U.S. dollar isn’t exactly strong. It’s weaker against most European pairs, notably Euro and the British Pound. The latter is benefiting from a successful vaccine rollout, averaging 3.8 million daily doses. The U.K. has thus far avoided any third wave, with just a few thousand daily new cases last week. England is now opened to pints, shopping and haircuts
On Thursday, Blackrock launched a new ETF called the U.S. Carbon Transition Readiness ETF
. It was the biggest launch in ETF history, with investors pouring in $1.25B in its first day. The goal is to select companies that are prepared for the transition in Energy. However, it is best to look under the hood in these situations - the holdings correlation between the ETF and the S&P 500 is very strong. See for yourself by clicking on Portfolio
There has been a ton of 'easy money' made in the markets over the past 12 months. Many investors now ask themselves the same question, 'What happens after the stock market is up big
'? Similar events have happened in history, and this author breaks them down. Diversion
: NASA shared this remarkable photo of a sea of dunes on Mars.