28th of June 2021
The world’s stock markets are sailing from record to record at the beginning of the summer. Nothing seems to be able to stop the machine that is running amok. In fact, according to the experts, it is not even running away; it is simply an economy that is glowing with health as we emerge from the most serious health crisis we have seen in 100 years. Confinements have not hurt the economy, mass layoffs have not prevented historic records.
The FED is our dealer
Not only has it not stopped it, but seeing central banks going out of their way to provide our monthly drug in the form of economic support and governments going into debt until they are thirsty, motivates investors even more. Last week’s tenth stimulus package from the U.S. government gave an extra shot of adrenaline to a market that just finished its best week since February and can’t seem to stop. Technicians see the S&P500 closing above 4280 as a “sign” that it will continue, some even think that the combination of lower volatility, collapsing yields and a rally in Junk Bonds could trigger a spectacular rally in the next few days and take the S&P500 straight to 4,400 to celebrate this wonderful world we live in.
A world where there is no longer any doubt that COVID is defeated. A world where you have to pay people to come to job interviews and a world where we expect an explosion of job creation and where making money in the stock market has become the easiest thing to do since the stock market was invented. Everything is simple, everything is explained on the forums and all you have to do is follow the explanations of the new financial stars who tell you how to retire in six months. I’m surprised that in this world you have to pay people to go to job interviews! Why would they look for a job when fortune is just waiting for them by logging on to the right forum on Reddit?
And it’s good stuff
Anyway, the general manipulation in which central banks and governments have embarked is working perfectly and nothing seems to be able to make us doubt anymore. If we have a bad number somewhere, it doesn’t even matter anymore, because we know that the next one will be better! When a company is on the verge of bankruptcy, it doesn’t matter anymore, just let the hedge funds short it and then call the investor forums and trigger the mother of all “short squeezes”, and then if the FED threatens to raise rates in the next 2 years, just show that the market is afraid and the President of this same FED will soon turn around and stroke us.
When I read what I read in the Sunday financial press, when I see the enthusiasm around everything that happens in finance or in the economy. When I see that more and more people are jumping into the deep end by becoming a trader or better, a crypto-trader, I tell myself that the markets will never go down again. That we will never be weak again and that we just have to buy, buy and buy again, since it will never go down again. The only question to answer is why should I sell, since it’s almost official, it will only go up.
And now, what do we do?
This morning Asia is starting its week rather quietly as a wave of new COVID cases seems to be emerging in the region. The markets are plunged into doubt because of this news. Which is perfectly ridiculous, because in this wonderful world we live in, there is no doubt that in the end the market will win anyway and governments and central banks will go into debt to support us, to support the economy and to boost growth. As for the virus, it’s only a matter of weeks before we kill it with miracle vaccines and get back to normal life so we can go back to spending and consuming. As for the indebtedness of governments and central banks, who cares, it will be passed on to the next generations. Do you really believe that Biden is concerned about the American debt?
In the news of the day, the Americans and the Iranians start the week by greeting each other with missile shots. We couldn’t wait to see who Biden was going to go to war with, well, that’s what happened. The good thing is that the soldiers who were supposed to come back from Afghanistan for September 11, will have a shorter flight, they will be able to redeploy them directly to Iran. To talk about funnier things, we also learn that the crypto-exchange Binance has been banned from operating in the UK, the authorities believe that it is not “safe” enough for the consumer. Otherwise, to start this month of July we will have something to do, since we will have to watch who, from Richard Branson and Jeff Bezos will be the first to go into space. After the flight authorization obtained by Branson, it is not so sure that Bezos will be the first billionaire in orbit. We’ll also have Elon Musk and Jack Dorsey having a little live session on Bitcoin during the month of July – we’re not done laughing. And then we’ll also remember that the WHO is encouraging fully vaccinated people to keep wearing the mask and sometimes we wonder if the WHO wasn’t just created to spoil the party.
Figures of the day
To start the week smoothly, there will be no economic figures, but only guys who work for central banks who will come to talk and give their opinions. So we should start this first day of trading relatively quietly with futures slightly up, but who cares, since from now on, we know that we will never go down again and that in a decade, crashes and other corrections will be shelved as “urban legends”.
A very good start to the week to all and see you tomorrow for new records and a new session of rise to dissect.
Thomas Veillet
CIO Merion Swiss Partners