Suddenly everyone thinks the stock market is going to take a dip: Morning Brief



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Monday, September 13, 2021

But that doesn’t mean you should sell

Calls for a market correction are starting to blow through the streets of Wall and Broad.

We are not talking about the reiteration of a Nouriel “Dr. Doom” Roubini-like call for a stock market crash due to the still easy valuation and inflated public debt arguments (the S&P 500 is up 506% since then. March 1, 2009). Instead, we’re referring to calls for a stock market correction of at least 10% by some of the brightest minds on Wall Street, whose work I really respect.

“You should always expect a 10% correction. If you invest in stocks, you need to be prepared at all times, ”Mike Wilson, chief investment officer of Morgan Stanley, told Yahoo Finance Live. “The bottom line for us … is that the risk reward is not particularly high at the index level from here on, regardless of the outcome. This is why we have no advantage over the S&P for the rest of the year.

Well received.

Deutsche Bank strategist Binky Chadha also recently warned of the possibility of a short-term correction in the markets. Bank of America’s Savita Subramanian has also issued a market warning. I would even read the recent sale of Tesla shares by Cathie Wood from Ark Invest as a red flag on high multiple stocks.

The question investors need to ask themselves is simple. Should you be laughing at those calls from the greatest minds on Wall Street? I imagine the answer is yes, for several reasons.

On the one hand, take a peek under the hood of the market and you’ll see evidence of a continued correction (as Wilson likes to call it) that may soon bubble up to the major indexes making headlines. About 90% of Russell 2000 shares have already fallen in a correction, as Bloomberg notes. Morgan Stanley work reveals that the average S&P 500 stock is down 10% from its 52-week high. Cyclical stock exits since June 15 totaled $ 15 billion, according to a recent Jefferies memo.

These are indications of a change in sentiment in the markets, and it is shifting with good reason.

Within a week, well-known companies such as Sherwin-Williams, United Airlines, Delta Air Lines, Southwest Airlines, and PPG Industries all issued third quarter earnings warnings due to the impact of the Delta variant (among other factors ). And MGM Resorts told investors last week that cancellations were resuming. Most of these negative comments are lurking as companies are present in investment banking this month.

In other words, the fundamentals that supported the market rally through September have changed For the worst. Don’t let diehard bulls tell you otherwise, the proof is in the pudding (big business warnings).

Meanwhile, all of this is taking place just as the Federal Reserve’s super-accommodative policies – a big driver of the equity rally during the pandemic – are set to ease by year-end. . Wilson told me that investors should be cautious about FAANG stocks (Facebook, Apple, Amazon, Netflix, Google) before the Fed cuts, which makes perfect sense since those stocks are falling with the wider market. , given their size and importance.

All of that doesn’t mean you switch to all cash and bitcoin and take refuge in an underground backyard bunker. But maybe it is time to take profits on winning positions and wait for more opportune entry points. There is nothing wrong with banking earnings.

According to recent business updates, Ark Invest’s Wood has sold shares of Tesla in its Ark Innovation, Ark Next Generation Internet, and Ark Autonomous Tech & Robotics ETFs. The 180,000 shares Wood sold amounted to $ 139 million, per Bloomberg. Tesla’s stock has risen 21% in the past three months, so it’s no shock to see Wood sell off a bit of his most prominent position. Wood recently told Yahoo Finance Live that she sees Tesla’s fair value at $ 3,000 per share (Tesla shares are currently trading at $ 736), so I wouldn’t expect her to leave the market entirely. name that put it on the card anytime soon (if at all). Wood continues to view Tesla as being years ahead of the crowd in the expanding electric vehicle market globally.

So don’t call me a fear sower on Twitter, I’m not trying to sell you anything here.

Here’s a business I’m monitoring this week:

Chevron: With the activist investor focused on ESG Engine No. 1 reportedly kicking Chevron’s (CVX) tires after scoring a major victory over the Big Cats at Exxon earlier this year, Chevron executives will be looking for to keep their cushy concerts by organizing an environment-focused presentation on Tuesday. The event titled “Energy Transition Spotlight” will explain how Chevron “will plan to reduce carbon intensity in our operations and develop low carbon activities”.

There’s no doubt that Chevron CEO Mike Wirth (who joined the team in 1982 straight out of the University of Colorado, according to his LinkedIn profile) is stepping in with a few spots on his CEO newsletter. . First, Chevron shares have fallen 18% since Wirth’s announcement as CEO on September 28, 2017. No, he can’t take his hat off to Chevron shares outperforming oil rivals Exxon and BP over the course of this period (both are down more than 30%). Chevron stock is still down, while the S&P 500 is up 77%. Additionally, Chevron suffered an asset write-down of $ 10 billion at the end of 2019 due to weak gas prices. Considering that Wirth is a Chevron lifer, he deserves some responsibility for being part of a team putting those strengths into the ground.

And finally, where was Chevron’s ESG focus? before. Nowhere. So I hope for Wirth’s sake, Tuesday’s presentation resonates with investors and ESG activists as the # 1 driver. Because if it doesn’t, Chevron could find itself on the verge of losing an Exxon-type battle as the No.1 engine ramps up. -Exxon and eyeing targets. This potential battle may be good for the planet, but probably not for Wirth who still holds the post of president. Despite the stock plummeting, it received $ 29 million in total compensation in 2020. The No.1 engine did not respond to a request for comment.

Through Brian Sozzi, editor-in-chief at Yahoo finance and anchor for Yahoo Finance Live. Follow him on @BrianSozzi

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What to watch today

Economy

  • 2:00 p.m. ET: Monthly budget statement, August (-175.0 billion dollars expected, -200.00 billion dollars the previous month)

Earnings

Post market

Politics

  • Congress Democrats will officially unveil their tax plan today and a draft has already been disclosed. The proposal is estimated to cost $ 2.9 trillion in new taxes from wealthy Americans and businesses and will be discussed in committee hearings today.

  • President Biden heads west today for a two-day trip that will take him to Idaho, California and Colorado. It will focus on forest fires with a stop at National Interagency Fire Center as well as politics with a campaign stop for Governor of California Gavin Newsom before tomorrow’s recall election.

  • US Secretary of State Antony Blinken will be in the hot seat with his first appearance before Congress since the United States withdrew from Afghanistan. Blinken is expected to face some of the most aggressive interrogations of his career in a hearing scheduled for 2:00 p.m. ET.

Also: Retail sales, Consumer Price Index: What to know this week

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