US equities will open higher after the Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
closed at record highs last week.
It comes as the yield on the US Treasury TMUBMUSD10Y for ten years,
held steady at 1.619%. However, attention will quickly be drawn to the Federal Reserve meeting on Wednesday, which has become key in the context of rising bond yields over the past few weeks. The central bank is under pressure to prevent a further destabilizing rise in yields.
In us call of the day, JPMorgan strategists said that the rise in bond yields was not over yet and that it was premature to start selling cyclical stocks and buying back defensive stocks, such as healthcare and technology stocks.
The strategies of the investment bank, led by Mislav Matejka, said that the valuations of cyclical stocks – those that will be profitable as economic activity increases – are starting to look ‘top’ after their strong run over the past year.
European cycles, for example, have outperformed defense stocks by 57% over the past 11 months – reaching the highest recovery position in the past. As a result, they said that most of the cyclical / defensive movement ‘may be behind us’, given the size of the cyclical run and their protracted valuations.
But the strategists warned that it was still ‘premature’ to position for a turnaround. “For that, one has to see the highest PMIs, weaken relative earnings and put an end to the rising effects,” they noted.
It is likely that these three important things are unlikely to happen yet, and the earnings momentum for cycles will continue to accelerate over the next few quarters. In terms of purchasing managers’ indices, the de-synchronized nature of the global cycle – with China potentially peaking, the US peaking and Europe wanting to pick up in the summer – means a peak is not imminent, they said. .
The most important factor for cyclical interest rates remains the direction of yields of bonds, and importantly, JPMorgan strategists said that the rise in yields is not yet complete. ‘Yes, in the short term policymakers will continue to push back, but [they] will likely accept higher returns as the economy strengthens. ”
“As long as yields rise, cyclics should not be sold,” they added.
Value stocks, on the other hand, still look very attractive, JPMorgan said, as it focused its long positions on banks and the reopening of trading.
The graph
Deutsche Bank DB,
strategists forecast their S&P 500 earnings per share (EPS) for 2021 to $ 202 and for 2022 to $ 222, following the passage of the $ 1.9 billion stimulus package and economic forecasts.
Source: Bloomberg Finance LP, Haver, Deutsche Bank Asset Allocation
The tweet
The value of short-term commitment to specialty venture capital (SPACs) has tripled since the beginning of the year, according to data from S3 Partners published by the Wall Street Journal.
The markets
US futures contract YM00,
ES00,
NQ00,
point slightly higher in front of the opening. European equities rose 0.6% higher in the early trading session with the pan-European Stoxx 600 index, significantly better. Asian markets were mixed overnight as investors looked ahead to the Fed meeting.
The buzz
Bitcoin BTCUSD,
prices reached a record high on Saturday, rising above the $ 60,000 milestone. The cryptocurrency has since fallen back and last traded at $ 56,272, according to CoinDesk.
Elon Musk officially changed his title to “Technoking”, according to a Tesla TSLA,
submission announced Monday.
Mexican President Andrés Manuel López Obrador criticized the U.S. government on Sunday, saying the U.S. had not helped Mexico with COVID-19 vaccines.
Danone BN,
The board of the French food group confirmed on Monday that chairman and CEO Emmanuel Faber is retiring. This comes amid pressure from activist investors in recent months.
Swiss pharmaceutical company Roche Holding ROG,
said on Monday he had agreed to acquire GenMark Diagnostics GNMK,
in a transaction worth approximately $ 1.8 billion.
Digital payment firm Stripe said on Sunday it had closed a $ 600 million round of funding that valued it at $ 95 billion – more than double its valuation a year ago.
Beyoncé and Taylor Swift made history at the Grammys, where the best awards were won by female musicians.
Random reading
Father and son discover the tunnel of the First World War that was hidden in France for a century.
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