Saturday , January 23 2021

Investors in shock do not know where the next bomb will hit the economy

Anxiety is an occupational hazard and is part of the life of professional operators. After all, even on good days, always, somewhere, something is wrong.

But when everything starts to go wrong at the same time, imagination can go crazy. Like now, when you look, something explodes. In commodities, this is a record high in oil. In stocks, there are six weeks of turbulence in the S & P 500. Debt markets have been shaken by the overall turmoil GE and PG & E. Bitcoin Only decreased 13% Y Goldman Sachs, The famous investment bank, has been through its worst week since 2016.

On their own, none of them would be enough to arouse panic. But if everyone breaks in together, and even the roughness of Wall Street can begin to look paranoid. Does GE have anything to do with Goldman? How does bitcoin affect the stock market? Forest fires have nothing to do with oil attacks, but they are bad news for banks.

"What is not understood is where and how things are related," said Malcolm Foley, who oversees $ 1.2 billion as chairman of Stuart Capital Advisors, Indiana, "Almost anything can create panic, create contagion and it does not have to be Something logical. "

In the global nervous system that connects modern markets, synapses fail. It started about a month and a half ago in stock, when the Nasdaq 100 started running in 22 out of 30 days.Then the oil began to swing, gaining 12 days down to complete the longest run in history.General Electric, 20% in mid-October, has seen its shares fall from more than $ 13 to less than $ 8, while its bonds continued to fall on Thursday. Goldman Have canceled $ 12 billion of market capitalization.

The bad things that came together do not surprise Donald Selkin, Newbridge's chief market strategist who sees this as the result of such good things. He wakes up every night to see the futures.

"People say, 'Get me out of everything,'" he says. "Everyone is anxious, I'm worried, you buy a good company and you expect the best and you pray that it will not be destroyed, look at Apple, which fell $ 40. Look at some of the best-known companies that were destroyed.

Perhaps it is too far to say that everything is connected. But it is difficult to argue that the impact of the fall of oil does not affect all markets. When crude oil fell, energy producers became the largest drag on the world's stocks. Credit was affected, with energy accounting for about 15% of all US bonds.

Bitcoin is considered an isolated ecosystem, but it has a relationship with chip makers, a speculative corner of the market, measured to measure investors' appetite for risk. The peak of the digital currency in December was two months before S & P 500's worst fall in two years .

The relationship between GE and the banks? After debt reduction has made it more difficult for the manufacturer to borrow through commercial paper, it has taken credit lines provided by banks to finance businesses. According to its quarterly presentations, the industry conglomerate has reached credit lines of $ 41 billion from more than 30 financial entities.

"When it finally finds a bottom, panic will be everywhere," said Jim Paulsen, chief investment strategist at Leuthold Weeden Capital.

Not everyone is so pessimistic. After the fall, the economy's growth rate and corporate profits are expected to remain positive for at least the next two years. In any case, a storm in the current market may force the Federal Reserve to reduce monetary tightening and President Donald Trump to moderate his belligerent stance on world trade, some strategies and investors say.

Stock exchange investors have always launched the attacks, and for most of the past two months, people have been able to point to corporate bonds as their signal market is less dire and more relevant to global economic health. In fact, the credit spreads on investment grade bonds remained mostly in October, even when the S & P 500 fell to a 10% correction.

"We've seen a series of unique stories like GE, GS, PG & E that are not necessarily a sign of market correction," said Dorian Gary, CFO of NN Investment Partners, which managed € 240 billion in June. . "US credit and macro fundamentals are solid as confirmed by recent macroeconomic indicators."

However, they were not completely immune to combustion. The largest publicly traded fund that buys high-yielding debt lost more than $ 1,500 million this week, and the short-term interest rate, calculated by IHS Markit, rose to 26%.

Investors also moved away from investment class companies and took money from the iShares iBoxx Investment Grade Fund on the second day, but closed short-term bonds in droves, which are more insulated from the increase in corporate tariffs and spreads.

"We focus not only on valuations but on the quality of the balance sheets in the future," says G & S Smith, vice president of investments at CLS, based in Omaha, Nebraska, which manages $ 9,000 million. Low rates have enabled funding for repeated purchases of shares with higher loans and dividends, he added. "Some of these factors can probably translate into things that create more agony or anxiety for future investors as people begin to think whether these companies actually spent too much on their credit cards."

The last string of explosions is contrary to what happened earlier this year, when the money turned around. Are emerging markets in trouble? Investors have found confidence in stocks in the US Whether Fang's actions are losing their luster, put your money in oil or financial stocks.

Advanced camera is fast to date technology, energy and banks in turn to bring down the stock market. With the S & P 500 ready to suffer one of the worst years since the bull market began in 2009, a coordinated mass sale sounded alarm for some. Is this the beginning of an end?

After one of the longest economic expansions in history, slower growth and lack of leadership underscores investor fears that no one is immune to the cycle. And many of them are willing to escape the first sign of danger.

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