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Good morning, Bull Sheeters.
We have full markets action again, and stocks are wobbling. All the drama is in commodities after the closely watched OPEC+ summit broke up yesterday with no deal.
That’s pushing Brent crude to a 3-year-high, and West Texas Intermediate, the American benchmark, to a near-7-year high. Surging oil is good news for energy shares, but a downer for growth stocks. On cue, Nasdaq futures have been under pressure all morning.
Over in the crypto corner, Bitcoin and Ethereum are holding on to modest gains.
Let’s see what else is moving the markets.
Markets update
Asia
- The major Asia indexes are mixed in afternoon trade, with the Nikkei, the best of the bunch, up 0.2%.
- Shares in Didi Global, which went public last week on the NYSE, is down 25% in pre-market this morning. Investors are jittery about Chinese tech firms again after a Chinese “cyberspace” regulator ordered local app stores to remove the Didi app for a data-protection breach.
- Inflation hawks, you won’t like this news. Crude prices are soaring this morning after OPEC+ partners failed to reach a deal on jacking up oil supplies in the face of surging demand.
Europe
- European stocks were falling out of the gates with the Stoxx Europe 600 down 0.2% in the opening minutes. Energy stocks lead the way higher; auto and tech are the laggards.
- The pound sterling is gaining after Boris Johnson announced on Monday the lifting of COVID-19 restrictions starting July 19. With Delta variant concerns sky-high, Europe is warily eyeing the move.
- Heathrow Airport reopened a second runway yesterday as Europe’s busiest airport prepares for a flood of travelers in and out of the country.
U.S.
- U.S. futures are mixed this morning, off their highs. The benchmark S&P 500‘s winning streak is now at seven straight sessions. Could it go for eight? As I type, S&P futures are in the red.
- Shares in Amazon are flat in pre-market trading as the Andy Jassy era commenced yesterday at the e-commerce giant. The 53-year-old former head of the Amazon Web Services unit is no Jeff Bezos clone, Bloomberg reports.
- On the calendar this week: it’s pretty light with the exception of the Fed publishing its June FOMC meeting minutes on Wednesday. Next week: we get bank earnings.
Elsewhere
- Gold is up, trading above $1,800/ounce.
- The dollar is falling, but the recent rise in Delta variant cases has dollar bulls excited about the weeks ahead.
- Crude is gaining, with Brent trading above $77/barrel. Motorists are feeling the pain at the pump with U.S. gasoline prices hitting a near-7-year-high over the weekend.
- The crypto market has been pretty dull of late. Bitcoin is trading below $35,000.
***
Good news, bad news
After a long weekend, let’s recap where we left off in the markets.
All three major exchanges closed in the green on Friday. Meanwhile, the 10-year Treasury note has dipped to 1.44%. The labor market is resurgent, and share buybacks are booming. That looks like all the trappings of a bull market.
And then there’s this: the S&P 500 closed on Friday at 4,352.34. Here are the top-performing sectors through the first half:
At its current level, the benchmark index is now 52-points-and-change above Goldman Sachs’ full-year 2021 forecast.
So, surely, you’re thinking, Goldman will review its overly conservative prediction, and revise that 4,300 figure upwards. Right?
Wrong. Goldman is sticking with 4,300.
But wait. We just agreed that bond yields are subdued, and that the economy is firmly back on track, and that companies are splurging on stock. Why not then price in more good times ahead?
Because, as Goldman explains, they see storm clouds on the horizon. To be precise, they see two storm clouds. “Our economists’ expectations of higher interest rates and higher corporate tax rates by year-end are the primary reasons we forecast that the S&P 500 will trade sideways during the next six months,” the Goldman team, led by U.S. equity strategist David Kostin, writes.
In fact, the Kostin & co. believe that “equities during the next six months are more likely to experience [more] contractions than expansions.” And that’s because stocks, they say, have hit the Goldilocks point—they’re just right.
In their view, the full-year P/E for stocks continues to sit exactly at 4,300—so, essentially, no change for the rest of the year even as the prospects for Corporate America continue to improve.
Before you all groan, consider this: the S&P is now, as of Friday’s close, up 16% in 2021. In January, a lot of investors would have signed up for that.
***
Postscript
A little warning: this Postscript has nothing to do with the markets, and very little to do with Italy.
Oh, and there will be some Greek and Latin.
Last summer, as some of you will recall, I shared a little story about the day my daughter came into the world, nearly 12 years ago. She was born with a rare disease, esophageal atresia. A linguist would probably spot that that word-combo means she was born with a gap (Gr., atresia) in her feeding tube, the esophagus. The problem with this particular rare disease is it often comes with a related malformation: a fistula, which is Latin for “false chamber,”— a dodgy connection, really. For the tricky cases, the esophagus detours into the trachea, and that’s known as a tracheal fistula. Okay, that’s it for the Latin and Greek lesson.
The good news is pediatric surgeons these days can repair these tubes, and reroute them to their intended destination—the esophagus makes it to the stomach; the trachea reaches the lungs, that kind of thing. The bad news: these patched-up preemies often still have all manner of medical issues throughout their early years. Food sticks in the mended esophagus during feedings. There are breathing issues, too. And then there’s recurring issues of gastro reflux, the kind that bubbles up in the middle of the night, and wakes the child with a violent spasm of… you get the point.
Try falling to sleep after that.
Many parents of these kids come to dread feeding time and sleep time. Somehow, my daughter, wife and I made it through those early years. My wife and I even formed a support group for families in Italy of EA—as the disease is often called—survivors. I then went on to become a board member of the international group, EAT, which is a collection of the most no-nonsense, kick-ass people I’ve ever met. We are now 80 countries strong, and growing. We have a large, accomplished medical advisory committee that includes pediatric surgeons, pulmonologists, researchers and ENT specialists from across Europe and North America. (One of my jobs, as an EAT board member, is to raise awareness for this rare disease. And that is why this little item is landing in Bull Sheet this morning.)
This weekend, we had our annual meeting, and I left the Zoom conference call feeling once again incredibly moved, and hopeful. I want to share two stories.
First, the Dutch team. I could go on and on and on about the marvels of the Dutch health care system, this virtuously collaborative public-private-patient-clinician-led approach to tackle all manner of chronic diseases. It’s a true model. This is a county that’s been fighting back the sea for centuries. Maybe that’s why they believe the most effective way to tackle the really big problems is with input (and output) from everyone involved.
Case in point: those crazy, sleep-interrupted nights and stress-filled feedings sessions I mentioned above. My coping method was to bury those uncomfortable memories in a large chest in a remote spot in my male brain, and dwell very little on it. But not the Dutch.
About a year ago, two Dutch moms began to ask a bunch of questions, including: Are we the only family going through this? Are we the only ones calling an ambulance at dinner time? Are we the only ones shattered with stress?
To find out, they started interviewing EA parents around the country to learn about their experiences, and they methodically built out a database. This being the Netherlands, their findings were presented to the top hospitals in the country. Their report was a revelation. It shattered all kinds of bogus assumptions, from the not-so-small—statements from medical professionals like, here’s the emergency number, but nobody ever calls emergency services—to the misguided—the hard part is over; you’ll get through even the most traumatic moments, everyone does.
Listening to their presentation, I was flooded with all kinds of memories. How the hell did we ever make it through those years?, I wondered. I’ve come to understand that if you ever ask yourself that question, no matter what the context, you’re doing something wrong.
My other story is Argentina. South America comprises the newest region to our support group universe. They came on last year, and, in a year’s time, have expanded to comprise 11 countries—from Mexico to Chile. In the spirit of solidaridad, they are rapidly networking across LatAm, working together to push best-practices in surgery and after-care. They run packed monthly webinars with fellow compañeros—parents, surgeons and specialists—from across the region, and as far away as Spain.
On our weekend Zoom call, a pediatric surgeon from Argentina did all the speaking, discussing the group’s growth. She kept apologizing for her English during the presentation, which was packed full of results and data points and real demonstrable progress—nothing like the PowerPoint bluster that I’m accustomed to.
LatAm has grown so fast, so quickly that we want them to tell their story at the EA world congress next year, hosted by the Cincinnati Children’s Hospital Medical Center.
It’s Argentina. The patient support group founders have no budget to travel to international medical conferences. But they have us—EAT. We’ll figure out a way to get them to Cincinnati. That’s the power of compañeros, which is what we’ve all become.
If you’ve made it this far in today’s Postscript, thank you.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
IPO bonanza. Last week saw the best week for new listings since 2004. And that's great news for the big banks. Combined, Wall Street's biggest underwriters pulled in more than $600 million in fees and stock gains, CNBC reports. We should hear a lot more about this income stream next week when the banks kick off earnings season.
The Madoff-Trump connection. If you're looking for parallels to the tax fraud investigation into the Trump Organization and its longtime CFO Allen Weisselberg, look no further than the dealings of Bernard L. Madoff Investment Securities. The convicted Ponzi schemer's company routinely used to pay his CFO's building fees, school fees for his kids, country club dues and all manner personal expenses in a clumsy effort at dodging taxes. And that's hardly the only parallel. Fortune's Geoff Colvin, who knows both cases well, explains.
Bella Ciao. Beep, beep! Shares in Piaggio, makers of Vespa motor scooter, are up more than 50% in the last year as the company comes out of the pandemic with sales revving up. Eric J. Lyman takes readers on the streets around Rome to explain why the iconic scooter is once again in such hot demand. It's a fun read!
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Market candy
171.6
Among the many details that jumped out to me in Robinhood's S-1, filed last week, is the amount they've had to pay out in fines and penalties for questionable business practices. In the past 18 months, they've had to fork over to the SEC, FINRA and the New York State Department of Financial Services a combined $171.6 million—that includes the biggest fine ever paid to markets regulator FINRA—for a kitchen-sink worth of red flags, including service outages, its anti-money laundering practices and for making "materially misleading statements" to customers. The glass-half-full view is once they pay off the regulators, and clean up their act, they should be a shoo-in for profitability. Right? For the glass-half empty take, read Jessica Mathew's piece on how regulators are cracking down on their bread-and-butter pay-for-orderflow business, which accounted for more than 80% of their business in Q1.
