Entrepreneurs

Thetired Stock Market And The Perfect Economic News


4 min read


This story originally appeared on ValueWalk

In his Daily Market Notes report to investors, while comenting on the tired markets, Louis Navellier wrote:

Q1 2021 hedge fund letters, conferences and more

Tired Stock Markets

The stock market is tired and the economic news is perfect. Retail sales, the fact that the fed anticipates inflation to be transitory, the growing bottlenecks everywhere that’s going to keep manufacturing strong, the earnings environment. Everything is good. But the market is bored, it seems tired.

The economic news, as good as it is, the news coming out of the beltway seems to be distracting investors. The most powerful person in Washington, DC is West Virginia Senator Joe Manchin. He won’t end the filibuster, and he won’t let corporate taxes go to more than 25%.  So as the Biden Administration negotiates with Congress on an infrastructure plan, they basically just got to talk to Senator Joe Manchin. He’ll figure it out for them … But the bottom line is, if and when they do raise taxes, it’s not going to be as bad as we think, because, because of Senator Joe Manchin from West Virginia is the swing vote.  That’s good news because Wall Street doesn’t like change.

These are peak first quarter sales and earning and sales and earnings will not be as strong.  The average surprise was, believe it or not, over 30. This is stunning. Obviously, the good earnings are coming out early. Our bad earnings will come out a little later. But wow, this is nirvana.

We’ll never get a better earnings environment than this.  We just need some enthusiasm, because Wall Street is acting right now like it just ate a big meal and it has to burp. That’s how it’s acting.

Fear Surrounding The 10-Year Treasury Yields

Now, interest rates did go up a tad today on the 10-year Treasury. That’s the only real fear out there, that the 10-year Treasury yields could be a 2%. They’re nowhere near that right now, but they did back up a bit. But the velocity of money, how fast money changes hands, should be picking up. That helps tax revenue, that helps prosperity rise and helps unemployment fall

The US is definitely on track for over 8% GDP growth in the first quarter. That’s according to the Atlanta Fed. Because the market’s tired and bored right now, any weakness in strong stocks is a great buying opportunity.

A lot of investors believe growth managers pay incredible premiums for stocks. They do near term, but not longer term. When we have a company announcing 500% earnings growth, you expect it to go up 500%. I expect its P/E ratio to get compressed and maybe the stock will go up 100%. Wall Street has broadened out, and it’s a built a good base for another move upward, but needs a spark.

What that spark will be is less certain because the economic news and the earnings are perfect. It’s very odd for the market to have such light volume, but it’s already corrected and it already exhausted the previous capitulation that happened back in February, in the NASDAQ.  So as far as I’m concerned, it’s still lock and load time folks. 

There’s nowhere to go and the money supply is very high.  Money is sloshing around all over the place. You can thank Treasury Secretary Yellen and Jerome Powell for boosting the money supply.  That money will gravitate to stocks and drive them higher. I think a few weeks from now, we’ll see that today is probably one of the best buying opportunities you will ever have.

Paypal vs Coinbase

800 Pound Gorilla v. 800 Pound Gorilla . . . If you are looking at playing crypto, Paypal Holdings Inc (NASDAQ:PYPL) might offer a better opportunity than Coinbase Global Inc (NASDAQ:COIN).  Fees PYPL generates crypto are minimal at the moment, but PYPL has about 20x Coinbase revenues and 40x earnings.  Being too early to the crypto party might prove perilous as it is still early days.  Remember the early entrants in the PC market?  Neither do I.

Crypto is going to grow and that bodes well for Coinbase, but growth or not, crypto is volatile, and Coinbase is 100% exposed to this volatility.  Over at Paypal, come what may, people will always be sending money. 

New buys: BioNTech SE (NASDAQ:BNTX)

New sells: Sprouts Farmers Market Inc (NASDAQ:SFM)

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