This commentary was posted recently by fund managers, research firms and market newsletter writers and was edited by Barron’s.
July 16: The Covid-19 pandemic is a rare historic event that has had a devastating effect on the stock market. Retail stocks were particularly hard hit. The pandemic turned shopping into a mostly online experience, which was bad news for physical stores, but good news for retail in general. The initial prognosis was grim, with more than 8,300 stores in the United States closed in 2020 and 400 stores announced to close in 2021.
Many investors holding retail stocks suffered losses during the pandemic. We decided to hold on; we added to our existing positions, and even added new ones. One of the reasons was that we viewed the pandemic as a temporary event. The other reason was that we looked carefully at their balance sheets and found that they were financially sound companies with good management to guide them through the crisis.
Take, for example, the second quarter of 2021.
American Eagle Outfitters
increased by 28%; Loop, 26%;
17%; and Skechers, 19%. Businesses have survived internet shopping and the pandemic, and continue to be good holdings. While there may also be downside risks, such as labor shortages, inflation of goods and services, supply chain and distribution issues, a slowing economy and online competition like
– as the economy continues to reopen, the retail sector could continue to rebound.
—Roger Frank, Russ Kaplan
The long and short of it: quarterly newsletter
Robinson value management
July 15: On August 27, 2020, the Federal Reserve made a significant and more accommodating policy change. If we translate President Powell’s speech into layman’s terms, it might look like this:
We are “fed up” with the bogeyman of inflation. It’s the 1970s so much. The stimulus from indexed interest rates to zero is simply not enough. Taking interest rates below zero is scary when you’re the global reserve currency, so we will have to print money. Blame the demographics. We will no longer let work overheat the markets frighten us of even more stimulus because inflation seems dead. In addition, we have met real people across the country in 2019 and they said they like a strong job market. We were surprised. But with this political hedge, we can go ahead and buy all the treasury bills Congress needs and will only slow down when it is real.inflationhas “averaged” at at least 2%.
So, Powell promised more price inflation and here it is! The Consumer Price Index for all urban consumers rose 5% from May 2020 to May 2021, the largest 12-month increase since June 1992. During the same period, the National Association of Realtors reported that the median home price rose 24% (from $ 283,500 to $ 350,000), and the S&P 500 rose about 40%. Same song, third verse. Bubble someone?
—Amy Abbey Robinson, Charles W. Robinson III
Newly bullish on bonds
July 15: The outlook for interest rates has changed. More and more, it is becoming evident that interest rates are going even lower and will stay low for quite a long time. Lower rates will be very good for bond prices. They should go higher and they will likely outperform some of the other markets. So now we recommend that you buy long term US government bonds with 15% of your total portfolio. If you prefer to buy a bond ETF, then buy TLT [iShares 20+ Year Treasury Bond], which tracks the 20-year US Treasury bond. We also like TIPS, the longer term inflation protected bond.
—Pamela and Mary Anne Aden
Buybacks pick up the pace
Focus US: Actions
Research Ned Davis
July 13: The first step many CFOs take to protect their businesses during a cash flow crisis is to suspend [share] buyback programs. There was no shame in taking this step at the start of the pandemic. Net redemptions of the S&P 500 have been cut by almost half, from a peak of $ 750 billion in 2019 to $ 382 billion.
As the return to record profits and cash flows emerged, companies began to announce a resumption of buyback programs. Successful stress tests should allow Financière, historically the second-largest buyer, to be a major contributor. The rebound in earnings should fuel more buybacks, providing another source of demand for stocks.
—Ed Clissold, Thanh Nguyen
The appeal of alternative assets
Mid-year outlook 2021
Defiant Capital Group
July 12: The correlation between stocks and bonds has been positive since March 2020, the longest period of positive correlation between the two assets in two decades. Low rates, an appropriate monetary / fiscal policy, and highly interconnected global markets have limited the diversification benefits of a typical portfolio of stocks and bonds. In the long term, we believe there is still potential for a “60/40 baseline” to diversify risk, but in the short term we expect the benefits of diversification to remain limited given:) economic growth concerns regarding the delta variant of Covid, and 3) persistent inflation.
To diversify portfolios, we suggest investors look outside of traditional asset classes for alternatives, real assets (infrastructure and REITs) and private debt (lower middle market), which can all perform well in the market. the current environment.
Boom hours for architects
Market Commentary for the second quarter of 2021
Seelaus Asset Management
July 8: In the era of the pandemic, companies have spent huge sums of money to be able to operate remotely. Traditional spending on capital projects and long-term capacity additions has been suspended. Now, as businesses see increased demand and a return to normalcy, they must catch up to increase capacity and upgrade equipment. A sign of what is happening is the recent announcement by United Airlines of its biggest ever purchase for $ 30 billion of
jets. That’s quite a change from a year ago, when the skies were nearly empty and investors wondered which major airline would fail and whether Boeing would survive without federal help. Now the worry is that the demand is so strong, how will producers handle the surge in manufacturing activity?
The ISM Manufacturing Index for June of 60.6 indicates demand is robust (anything above 50 means expansion), but 17 of 18 manufacturing industries reported suffering from slower deliveries due to material shortages. raw or input. The Architectural Building Institute’s activity index has jumped, while requests for new projects have skyrocketed. Kermit Baker, Chief Economist of the American Institute of Architects, summarizes the current situation succinctly: “Despite rising costs of building materials and delays in delivery, design activity is returning as more and more places reopen. We own a variety of companies benefiting from accelerating demand for capital spending projects across a multitude of industries, many of which are still selling at attractive valuation levels.
—James P. O’Mealia, Jed Glick
E-mail: [email protected]