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Good morning, Bull Sheeters.
Friday’s rally in stocks was no blip. At least it doesn’t appear that way this morning. U.S. futures are climbing. Asia is rallying, and Europe is holding onto early gains.
Again, there’s not much trading volume. Those investors who are active are buying on last week’s dips, giving plenty of love to sectors that were hit hard last week, particularly energy, retail and luxury stocks.
Speaking of gains… Bitcoin this weekend crossed the big Five-oh plateau. BTC trades above $50,000, highs it last hit in May.
On the calendar this week we have the Fed’s annual Jackson Hole meeting. This will keep the focus on tapering, rates and bond purchases—all of which could have a big impact on your portfolio. I explain more in today’s essay.
But first, let’s see what else is moving the markets.
Markets update
Asia
- After a down week, the major Asia indexes are bouncing back in impressive fashion. The Nikkei is up nearly 1.8%.
- Chinese tech stocks, the proverbial dogs of summer, are rebounding this morning, though they’re well off their intraday highs. Last week, the Hang Seng Tech Index slumped 11%.
- China says local COVID cases are down to zero… Not everybody’s buying China’s rosy picture of virus containment, however.
- Australia and New Zealand are all but abandoning their “zero strategy”—zero tolerance to get to zero cases—as infections spike.
Europe
- The European bourses were gaining at the open with the Stoxx Europe 600 up nearly 0.7% in early trading.
- With crude rebounding, energy stocks are up 0.9% in early trading. The sector fell more than 4% last week.
- Another sector that took it on the chin last week was European luxury stocks. The likes of LVMH, Kering and Burberry all sank last week on China’s latest tough talk against the country’s growing billionaires club. They’re all gaining as investors buy on the dip.
U.S.
- U.S. futures are solidly in the green as I type. That’s after the Big Three all closed out last week in the red. Despite last week’s dud, all three major exchanges are still in positive territory for August.
- The big event this week is the annual Jackson Hole symposium—a virtual affair thanks to an outbreak in Teton County. Investors will be looking for clues on when, more or less, Powell & Co. will reduce—”taper,” in central banker vernacular—their $120 billion/month bond-buying program.
- What else do we have this week? The most notable names left on the earnings calendar are Salesforce (Wednesday) and Intuit (tomorrow).
Elsewhere
- Gold is up, trading above $1,780/ounce.
- The dollar is down with stocks resurgent.
- Crude is bouncing back, with Brent trading above $66/barrel. That’s after Brent fell 7.7% last week, the worst performance of the year.
- The big 50K… Bitcoin is holding onto its weekend gains, padding its three-month high.
***
Up yonder, in Jackson Hole
For a traditionally slow news month, there’s an awful lot going on (even if the trading volumes remain thin).
With the Jackson Hole confab kicking off on Thursday, the next Fed move will be—stop me if you’ve heard this before— the big focus of market chatter this week. Wall Street pros are bracing for the moment when the Federal Reserve pronounces it’s ready to pump the brakes on bond-buying—but when?—and that, in turn, will have a cascading effect on the markets. Bond yields will climb and growth stocks will be under pressure, the thinking goes.
If you’re looking for a fork in the road, this could be one.
A lot of investing veterans see the tapering announcement as a good time to rethink your portfolio—if you haven’t done so already. But mostly, they’re preaching patience.
“Investors with cash on the sidelines don’t need to be in a hurry to jump into the market,” Rod von Lipsey, managing director at UBS Private Wealth Management, wrote in an investor note on Friday. “This is a good time to be choosy: look for high quality, dividend paying stocks, with strong pricing power. It’s better to buy stocks on sale.”
Von Lipsey, for one, sees more growth ahead as the re-opening trade progresses. That’s good news.
The less-good news: the great reopening hasn’t been a straight-line-up recovery. Just ask that deli-owner downtown, the one next to all the office buildings.
While the outlook for pastrami sandwiches looks a bit iffy, the bulls are banking on a big second half.
“We expect U.S. economic GDP to recover to pre-pandemic levels by the fourth quarter of 2021, as vaccine distribution offers sufficient protection for mobility,” von Lipsey writes. “With the continued economic recovery, we favor financials, energy, and industrials.” As I glance at the European stocks, energy and financials are in fact having a good day.
Which leaves me to… Last week, in the middle of all that markets volatility, I asked readers to drop me a note about how they felt about their portfolios. I got some good responses, but I want more.
Let me know how you’re feeling as we roll into Jackson Hole/back-to-school/second half/whatever, and I’ll share some choice reader thoughts here later in the week. My email is below, and you can also DM me on Twitter.
Drop me a line!
***
Postscript
This morning’s alarm bell came earlier than expected. It was actually a clang of bells. Scores of them.
The sheep are back, in the field below the house. They’ll be here all week, or until they chomp up all the tall grass and move on.
All the commotion is too much for Scilla.
Sheep, as you know, travel with a phalanx of enforcers. The heavies. Sheep dogs. The flock doesn’t make any big moves without an alpha dog leading the way. There’s probably a WallStreetBets metaphor in there somewhere.
Last August, I joked the flock was spelling out F-A-N-G. This morning, I could swear it’s T-A-P-E-… you get the point.
The sheep dogs around here are the Maremmano Abrusezze, a protective breed that’s known to get between wolves, bears and the flock. Don’t mess with these dogs.
In truth, they don’t have it easy. They’re always on the patrol for danger. And that often poses all kinds of problems for those of us who mean no harm. More than once, while cycling, I’ve been chased off a back-country road by a pack of these determined protectors. And so we’re all on alert when the sheep come back to our little hamlet here—more so now that we have a dog (who’s fluffy enough to pass for a sheep.)
This morning, I let Scilla out while I made coffee. Before I could put the pot on the stove, Scilla was already getting into it, barking away. I went to shush her when I saw two sheep dogs—than a third, and a fourth—bounding up the hill straight for her.
They towered over her. Scilla stood her ground. (That’s her thing; you may remember that crows story.)
Bello, I groaned.
When they got close, she sprung into action. She leapt up at one, and then darted behind the other. She did this again and again, managing to disarm the pack. Before I could take another step forward, they were rolling around in the grass, tails wagging. Yes, there was butt-sniffing, and playing.
I was genuinely shocked. I’ve never seen this playful side from the maremmani. One approached me on her haunches. She rolled over, exposing her tummy. Of course, I obliged. Later, I gave them all something to drink.
That’s it. I don’t have any wisdom to share about the leader-flock dynamic—except, maybe, you should give the lead dog some water every once in a while.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.co
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's read
Coinbase is spending half a billion dollars of its own money on cryptocurrency—Fortune
Job-hopping heats up: 65% of U.S. workers are looking for a new job—Fortune
God, Money, YOLO: How Cathie Wood Found Her Flock—New York Times
Small-Cap Stocks May Be Pricier Than They Appear—Wall Street Journal
‘No one wants to go back’: Covid scuttles IPO and debt roadshows—Financial Times
Market candy
Quote of the day
No bottom yet.
That's Shawn Church, editor of the trade publication Random Lengths, which follows the wild ups and downs of the lumber market. The price of lumber has collapsed, falling 74% since its late-May high. "Not only has the bursting lumber bubble erased all of its 2021 gains, but it has also sent prices all the way back to 2018 levels," my colleague Lance Lambert reports.
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