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Stocks and crypto rebound following Tuesday’s bruising sell-off

September 29, 2021, 9:00 AM UTC

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Good morning.

The bulls are back. Yep, you heard that right. With the exception of Japan, stocks and futures are rebounding nicely this morning on the strength of finance (and even some tech) stocks, after yesterday’s brutal sell-off.

On cue, bond yields and crude prices are in retreat.

Oh, and crypto is showing some signs of life.

What gives? I try to answer that in the essay below.

But first, let’s check in on the global markets.

Markets update


  • The major Asian markets are mixed with the Hang Seng up nearly 0.7% in afternoon trading.
  • Stocks in Tokyo came off their lows following news that Japan’s former foreign minister Fumio Kishida, a strong U.S. ally and a big fan of stimulus spending, won the top post in the ruling party, paving the way for him to become the country’s next prime minister.
  • The drip-drip-drip of bad news around China Evergrande Group continues today. Fitch cut its credit rating on the embattled property developer ahead of another big debt payment. But shares in the now-penny-stock rallied nearly 12% at one point.


  • The European bourses were gaining, with the Stoxx Europe 600 up 1% in the second hour of trading. Banks stocks, a big loser yesterday, is one of the sector leaders.
  • European chips juggernaut ASML raised its 2025 revenue outlook—yes, 2025— as they see huge demand for their semiconductor-making machinery. The stock is flat this morning, but it’s doubled in the past year.
  • French energy giant TotalEnergies has a dire warning for the winter ahead. Fuel inventories across Europe are so low that the energy crunch will persist well into the new year, CEO Patrick Pouyanne tells Bloomberg Television.


  • U.S. futures are bouncing back—and even gaining—as I type. That’s after the S&P fell more than 2%, its worst one-day slide since May. Tech stocks were the big underperformer.
  • Unless Congress gets its act together, the U.S. Treasury will run out of cash by Oct. 18, Janet Yellen warns. That’s about 20 days worth of cash. By that measure, I’d reckon my nephew’s finances are a bit more solid than Uncle Sam’s.
  • For a fourth straight month, U.S. house prices hit a new record high, up 19.7% year-on-year… Sorry, nephew.


  • Gold is flat, trading around $1,740/ounce.
  • The dollar has been a big winner in this lousy month for stocks. It’s up again this morning.
  • What’s this? Crude is lower? Brent trades around $77/barrel.
  • Crypto is stable this morning, with Bitcoin trading above $42,000. Ethereum’s Ether is up too, but continues to trade below $3,000.


Markets gotta move

Big sell-off followed by big bounce-back. Sound familiar?

We saw this pattern a week ago when investors dumped their shares on the Evergrande news only to see the markets roar back, and even close higher for the week. Something similar happened the week prior when the Fed signaled it would begin tapering. And now?

The dip-buyers are back. U.S. futures have been padding their gains all morning.

The glass half-full crowd would tell you there’s plenty of reason to go bargain-hunting today: the COVID outlook continues to improve as vaccinations ramp up; the Evergrande fiasco appears to be confined to China; we finally have solid visibility on the Fed’s next steps—they’ll start tapering in the coming months with tightening happening after that; and equities still offer the only meaningful return out there.

Take bonds, yesterday’s bogeyman. The yield sits at 1.515%, pretty wimpy by historical standards. Even if they shoot up to 1.8%, or even 2%, as many on Wall Street predict, that’s still well below the rate of inflation. Would you be dumping stocks for trusty T-notes under those conditions?, the equity bulls might badger you.

The bears might jump back in and tell you that, even after recent markets volatility, valuations are still stretched. They’d continue: Congress is a basketcase; inflation is very real, and not going away; supply chains are battered and this energy crunch is going to make things worse. (A reminder: don’t put off Christmas shopping til the last minute this year). They might even mention the word, “stagflation,” which we haven’t seen since the Carter Administration (and the first half of the Reagan presidency).

A measure of this kind of bull-bear push-pull can be found in a single measure: the VIX, or the CBOE Volatility Index. It’s not perfect, but it’s a decent indicator for markets sentiment.

What does it say today? Not much, to be honest. Yeah, it spiked yesterday, but it’s been trending in the nothing-to-worry-about range for months.

I read a lot of commentary in the aftermath of yesterday’s sell-off. I think UBS’s Paul Donovan, whom I quote a lot here in Bull Sheet, best summed up what’s going on—or rather, what’s not going on:

Equity markets fell and bond yields rose yesterday. The world’s media have rushed to offer a smorgasbord of causes—quantitative policy, the US debt ceiling, whether or not to reappoint Fed Chair Powell, inflation concerns, Chinese property, etc. There were no dramatic changes in economic fundamentals yesterday, and it seems unfair to blame economists and the economy for the inevitable market volatility. The process of economic normalization continues, however markets want to move about.

I know. The markets-gotta-move conclusion is a deeply unsatisfying answer.

I feel like now’s a good time to open the question once again to Bull Sheet readers: What do you think’s going on with the markets? After this wobbly run we’ve been on, are you still in the bull camp? Or, are you thinking of pulling out of the markets until things cool down?

You know how to reach me. Send me an email. I’ll then share the responses here.


Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

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