How To Make Money With Penny Stocks In a Down Market

How To Make Money With Penny Stocks When The Market Is Down

Waking up to see your portfolio in the red is one of the worst feelings for any penny stock investor. However, there are some tips and tricks to avoid this and have the best chance of making money from penny stocks. In the past year and a half, we’ve seen more volatility in the stock market than in many years before.

Given the combination of the pandemic, high inflation and great uncertainty working against you, how can you make money on penny stocks when the market collapses? To do this, we have to think about what is happening.

Today, July 19th, the S&P 500 fell more than 700 points, indicating one of the worst declines of the year. At the same time, the Covid cases in the USA are increasing rapidly due to the highly transferable Delta variant.

While this is daunting for most traders right now, there are always natural ups and downs in the market. And when the markets are declining just like they are today, this gives investors the opportunity to buy into at extremely low prices.

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In addition, we are in the middle of the earnings season. This is another added stressor to an already tight thin market. With companies like Netflix Inc. (NASDAQ: NFLX) and Johnson & Johnson (NYSE: JNJ) reporting their quarterly earnings this week, investors are stressed to say the least.

While some penny stocks are doing well right now, it takes a prudent and educated investor to find the best ones. With that in mind, let’s examine three tips and tricks for making money on penny stocks when the market is declining.

Making Money With Penny Stocks In A Declining Market

1. Trading Penny Stocks: Risk Tolerance
2. Find penny stocks that could benefit from a bear market
3. Buying and selling penny stocks at the right time

Trading Penny Stocks: Risk Tolerance

Understanding your risk tolerance is one of the most important factors when buying and selling penny stocks. While this doesn’t seem to be an issue, many investors are unable to endure the high volatility that comes with this area. In the case of penny stocks, high volumes and low prices mean that the values ​​change significantly over the course of a trading day.

And this is especially true when we factor in the impact of retailers and meme stocks. These include penny stocks like 1847 Goedeker Inc. (NYSE: GOED), Jaguar Health Inc. (NASDAQ: JAGX), and more. However, there are hundreds of options for penny stocks that are less volatile and better suited for more conservative investors. However, knowing what type of trader you are can ensure that your portfolio is aligned with your investment objective.

[Read More] 3 top penny stocks for your Monday morning watchlist

One metric that investors can use to determine volatility is known as beta. This is a metric that measures exactly how volatile a stock is relative to the overall market. When the stock’s beta is above 1, it is considered more volatile. When it is below 1, it is less volatile. Obviously, this is a simple definition of a relatively complex term, but it’s a great metric to use on your watchlist. With all of this in mind, you can better understand your risk profile so that your portfolio can meet your investment goals.

Find penny stocks that could benefit from a bear market

This is arguably the most important step in making money from penny stocks when the market is declining. The ability to find potentially valuable penny stocks in a bear market will extend to all market conditions. The biggest piece of advice here is understanding how certain businesses could benefit and thinking outside the box.

For example, when Covid started, many biotech penny stocks quickly lost value. This was a result of great market uncertainty and general fear of the future. However, as quickly as they fell, markets began to rebound and companies made record highs.

[Read More] The Best Tech Penny Stocks to Buy in 2021? 3 seen in July

While this affected biotech companies working on a Covid vaccine or treatment, it also largely affected those who weren’t. In addition, many investors chose to bet on penny stocks in retail in the hopes that the economic recovery and stimulus would benefit the retail market. And those who did, in many cases, could win big.

Finally, investors looked at the energy market to see how it could benefit from the pandemic. When Covid started, energy penny stocks, like biotech, fell in value. This made sense because there were fewer people out and most of them were stuck at home.

The obvious implication, however, would be that once the restrictions wear off, people would have a greater desire to travel. And because of this, many energy penny stocks have rallied in large numbers since then. While these are just a few examples, they illustrate how thinking outside the box can make money when the market is declining.

Buying and selling penny stocks at the right time

Buying and selling penny stocks at the right time is the final step in rounding out your bear market investment strategy. While the day of a big decline may seem like a good time to buy it all up, downtrends can usually continue for at least a few days. So if you keep a close eye on the market, you can see when the right buy-in time might be.

Additionally, investors should take a look at analyst sentiment to see what the forecast prices are for a particular penny stock. While these should be used with caution, the extensive research that goes into these lists makes them great resources to use in your hunt.

And just as important as knowing how to buy penny stocks is knowing how and when to sell them. If you’re a short-term trader, like most of those who trade penny stocks, setting a price target and time frame will be a huge advantage for you. This will help mitigate FOMO and, ultimately, major losses.

If you’re a long-term trader, setting a price target is also a huge asset, but usually the longer the time frame, the better the odds. With that, all of your research at this stage should be useful and help you make your decisions. At the end of the day, knowing how and when to buy and sell penny stocks is a great addition to your overall portfolio.

Are penny stocks worth it when the market is down?

Ultimately, investing in penny stocks is a very individual experience. Knowing what type of trader you are and what risk tolerance you have will be vital on your path to profitability.

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So when the market is bearish, it can be a good time to find penny stocks that could have long-term value. Since most large drops are based on speculation, many investors expect the invisible hand to work its magic at some point in the future.

While it can be difficult to predict what the market will do, it is always handy to have a strategy and know how to trade penny stocks when the market is declining.

Midam Ventures, LLC | (305) 306-3854 | 1501 Venera Ave, Coral Gables, FL 33146 | news@pennystocks.com

source https://thedailytradingnews.com/how-to-make-money-with-penny-stocks-in-a-down-market/

Bored Ex-Lehman Trader Builds $ 6.7 Billion Fortune With A Hot App

A Revolut spokesman declined to comment on Nikolay Storonsky’s involvement.

It took Nikolay Storonsky seven years to leave investment banking for good. At 20, he worked for Lehman Brothers and Credit Suisse Group AG before leaving the industry in 2013.

“As a banker, I had already reached the maximum,” Storonsky, who traded equity derivatives for both banks in London, told Bloomberg four years later. “It got very boring.”

It was partly because of professional malaise that Storonsky, originally from Russia, decided to use Revolut Ltd. Co-founding company that provides online financial services. Last week, Revolut raised $ 800 million from investors including SoftBank Group Corp. and Tiger Global Management by Chase Coleman, at a valuation of $ 33 billion. At that level, Storonsky’s stake is worth around $ 6.7 billion, according to the Bloomberg Billionaires Index.

The latest funding will in part support Revolut’s expansion into the US and entry into India, according to a company statement last week.

A Revolut spokesman declined to comment on Storonsky’s stake.

The company’s valuation has increased six-fold since its last round in 2020 and is the newest financial technology company to raise money at a notable valuation. In March, mobile payments company Stripe became the largest startup in the United States after its final round of fundraising, valued at $ 95 billion. Revolut’s local rival, Wise Plc, went public through a direct listing this month and is now valued at about $ 13 billion, nearly three times its valuation from 12 months ago. That has raised some concerns about a valuation bubble.

Rapid expansion

Revolut has grown rapidly since Storonsky, 36, launched it in 2015 with Vlad Yatsenko, a technology developer who previously worked for Deutsche Bank AG. It started with a prepaid debit card with no overseas transaction fees, but its services now include bank accounts, international money transfers, cryptocurrency and stock trading, and billing and budgeting tools.

“The idea has always been to expand beyond the currency market,” Storonksy, a trained physicist, told Bloomberg in 2017. “We’re trying to start as soon as possible, how big do we want that to grow.”

This gateway model has helped attract young users who have slowly started to expand their use of Revolut.

Owen Barron, a 29-year-old from Dublin, Ireland, started Revolut in 2017. He liked the lower fees for international transactions and using ATMs abroad.

Now he uses the app every day.

“It’s like having Instagram or WhatsApp on your phone,” he said.

About 18 months ago, Barron began using another feature of the app: investing. His first trade was with Microsoft Corp.

The only downside Barron sees with Revolut is the fees. He currently uses the free account, which has limits on withdrawals before fees are due. In Ireland, they can withdraw up to five ATMs or withdraw € 200 (US $ 236), whichever comes first, before a 2% fee is charged.

Premium features

Pedro Coelho pays £ 12.99 ($ ​​18) for his Revolut account. His “Metal” membership gives him premium features including 1% cashback in cryptocurrency, up to £ 800 for free ATM withdrawals and unlimited commission-free trading. He says the latter benefit justifies the monthly cost.

Like Barron, 25-year-old Coelho was first drawn to Revolut by a single feature. He had to sell an unwanted Eurostar ticket in 2018 and the buyer wanted the money through Revolut’s peer-to-peer money transfer service. Three years later, Coelho is now a paying customer in the company’s top tier.

Analysts wonder if more consumers will join him.

“We have never seen strong demand for consumers willing to pay a monthly service fee,” said Jim Miller, executive managing director of banking and payments at research firm JD Power. “Maybe if it’s membership fee?”

Miller also questions Revolut’s advance into new services. Traditional banks have long used checking accounts as an opportunity to build rapport with consumers in the hopes that at some point they will age into mortgages and insurance.

“I’ve been in the financial services industry for over 30 years and all along we’ve been talking about capturing the whole relationship, the ‘financial supermarket’ approach. If anything, it has become easier for consumers to spread their relationship during this period, “” he said. “In a way, it almost logically organizes things in someone’s head.”

Regulatory review

Revolut’s ambitions have also brought it into the focus of regulators.

UK financial regulators investigated why the company temporarily disabled a suspicious transaction blocking system in 2018. Former employees have also reported issues such as burnout-inducing working conditions at Revolut, which posted a neon sign in its offices instructing employees to “Get St Done!” Winner Take All Race.

Still, these ambitions have paid off for Storonsky, Revolut’s largest single shareholder. Looking to make the company one of the largest financial services companies in the world, he is still suspicious of the regulations in the banking world where he began his career.

“Making compromises is simply not possible in our environment,” Storonsky told Bloomberg in 2019.

–With support from Alastair Marsh, Silla Brush, Tom Metcalf, Stefania Spezzati, Andrew Heathcote and Alexander Sazonov.

(Except for the headline, this story has not been edited by NDTV staff and will be posted via a syndicated feed.)

source https://thedailytradingnews.com/bored-ex-lehman-trader-builds-6-7-billion-fortune-with-a-hot-app/

‘Not going to be normal by September’: taking stock as Delta spreads

When revelers returned to the nightclubs just a minute after midnight to celebrate the lifting of social restrictions in England on Monday, investors were less cheering.

Instead, they watched a global sell-off unfold in equity markets, pushing down many of the sectors that had pushed global stocks higher earlier this year, some of them in correction territory – 10 percent below their highs.

The reopening of England heightened fears among some investors about rising cases of the Delta variant. The European Stoxx 600 index had its worst trading period of the year. In the USA, where the Delta variant is now also spreading, the S&P 500 lost 1.6 percent.

The seemingly unstoppable uptrend in the S&P 500 and other stock indices over the past few weeks had denied the turmoil simmering just below the surface. The euphoria generated by the vaccine rollouts this year has subsided and has been replaced by creeping concerns about the durability of the economic recovery.

“This virus [variant] is spreading rapidly. A collective eye has opened that this could delay things, ”said Alex Veroude, chief investment officer, North America, Insight Investment.

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“Many had hoped that we would return to normal in September. In September it won’t be normal. Will it be that bad in September? No, but it won’t be normal. “

The losses were mainly focused on cyclical sectors that go up and down with changes in the overall economy. These industries were the main beneficiaries of the reopening of trade, but that trade has started to disintegrate.

For example, the Dow Jones Transportation Average, which includes big names like shipping giant FedEx and railroad operator Kansas City Southern, slipped into a technical correction on Friday last week. Worse still, the major airlines in the index fared, falling into a bear market, defined as a decline of more than 20 percent from their peak.

Other areas closely related to US expansion have also been hit hard. Companies in the raw materials sector are down more than 11 percent from a recent high, while chemicals maker Dow lost 19 percent over the period. Energy stocks fell 4 percent on Monday, the sixth straight losing day.

The Russell 2000 Index could have been a canary in a coal mine. It measures small and medium-sized businesses, which tend to be particularly sensitive to changes in the US growth rate, and investors began to piss off about them months ago rather than weeks ago. It hit an all-time high in March and has been walking on water since then. The 1.5 percent decline on Monday resulted in a loss from that high to just under 10 percent.

Since investor inflation expectations peaked in mid-May, more than half of the companies in the S&P 500 have depreciated and 16 percent are down more than 10 percent. The broader Russell 3000 – the 1,000 largest companies plus Russell 2000 – had at least 24 percent of its constituent parts in the correction area as of Monday.

Morgan Stanley strategists on Monday warned that the pace of economic recovery in the US was unsustainable and advised clients to take a more defensive approach to investing.

“There’s no doubt that things like eating out, live entertainment, and travel need to be caught up,” said Michael Wilson of the bank, but after moving into cars, furniture, and home improvement, consumers have less need to repeat these purchases. “It is… It was clear that the demand was massively pulled forward.”

Investors have moved to hedge against further price falls in the stock markets by buying put options that would pay off if stocks fell. The so-called put-call ratio, which measures the number of put contracts bought compared to the number of call options bought on a given day, reached its highest level since mid-May on Monday.

“What is happening today revolves around this Delta variant and a horror that is completely understandable, since the cases occur in all 50 states,” said David Kelly, strategist at JPMorgan Asset Management. “

Investors have sought the relative safety of US Treasuries, pushing benchmark ten-year bond yields below 1.2 percent on Monday, their lowest level since February. Real yields, which hide the impact of inflation on yields, fell to minus 1.12 percent for 10-year government bonds, their lowest level since January.

Both data points were picked up by the bears as harbingers of a rapid economic slowdown, as was the flattening of the yield curve: the gap between the yields of long-term and short-term government bonds has also been narrowest since the beginning of February.

The flattening of the curve has dampened investor enthusiasm for bank profitability, based on the crude thesis that it narrowed the gap between what they pay to bring in cash and what they can make from lending.

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A slower-than-expected economy, meanwhile, bodes well for the demand for credit among its customers. Sluggish credit growth was a feature of the sector’s earnings in the second quarter last week.

As a result, US bank stocks are down 14 percent from a June high. Bank of America stocks are down 15 percent from their recent high, while Citigroup is down 19 percent.

Mike Lewis, head of US equity cash trading at Barclays, said that while he expected the stock market decline to be short-lived, investors were no longer holding onto a strong V-shaped rebound.

“It is clear that investors think the rebound could take a little longer and reopening trading may not be as attractive,” he said.

source https://thedailytradingnews.com/not-going-to-be-normal-by-september-taking-stock-as-delta-spreads/

Stocks Skid as Virus Fears Shake Markets; Dow Falls 2.1% | Voice of America

NEW YORK – Resurgent pandemic concerns saw stocks plummet from Wall Street to Tokyo on Monday, fueled by fears that a faster-spreading variant of the virus could turn the strong economic rebound on its head.

The S&P 500 fell 68.67, or 1.6%, to 4,258.49 after breaking a record just a week earlier. Another sign of concern was that the 10-year Treasury yield hit its lowest level in five months as investors looked for safer places to put their money.

The Dow Jones Industrial Average slumped 725.81, or 2.1%, to 33,962.04, while the Nasdaq Composite fell 152.25, or 1.1%, to 14,274.98.

Airlines and other companies that would be hardest hit by possible COVID-19 restrictions suffered some of the worst losses, similar to the early days of the pandemic in February and March 2020. United Airlines lost 5.5%, the owner of the Mall Simon Property Group was down 5.9% and cruise operator Carnival was down 5.7%.

Sales also circled the world, with several European markets losing around 2.5% and Asian indices a little less. The price of US benchmark crude oil, meanwhile, fell more than 7% after OPEC and allied nations agreed on Sunday to finally allow higher oil production this year.

COVID numbers

Growing concern about the virus may seem strange to people in parts of the world where masks are being removed or already in place, thanks to COVID-19 vaccinations. But the World Health Organization says cases and deaths are rising globally after a period of decline spurred on by the highly contagious Delta variant. And in view of the close interlinking of the global economy, a hit can quickly hit the other end of the world anywhere.

Even in the United States, where vaccination rates are higher than many other countries, Los Angeles County’s people are forced to wear masks indoors again, regardless of whether they have been vaccinated after spikes in cases, hospitalizations, and deaths.

Across the country, the daily number of COVID-19 cases has increased by nearly 20,000 to around 32,000 in the past two weeks. The vaccination campaign has hit a wall, the average number of daily vaccinations has dropped to its lowest level since January, and cases are increasing in all 50 states.

Economic growth expected

It is for this reason that markets are concerned, even though the economy is reportedly still recovering at a fantastically fast pace and growth is generally expected to continue. Any deterioration in virus trends threatens the high prices stocks have reached based on expectations that the economy will meet those high projections.

Financial markets have shown signs of heightened concern for some time, but the US stock market has remained largely resilient. The S&P 500 has only had two weeks of decline in the past eight weeks, and the last time it was pulled back from a record high by as much as 5% was in October.

Several analysts pointed to this backdrop of high prices and very calm movements for weeks while analyzing Monday’s decline.

“It’s a bit overreacted, but when you have a market that is making record highs, it’s having the kind of run we’ve had, with virtually no pullback, it’s extremely prone to any kind of bad news,” said Randy Frederick, vice president for trading and derivatives at Charles Schwab. “It was all about what that turning point was and it seems we finally got there this morning” with concerns about the Delta variant.

He and other analysts are optimistic that stocks can rebound quickly. Investors have recently been trained to see any decline in stocks merely as an opportunity to buy at low prices.

Barry Bannister, chief equity strategist at Stifel, was more pessimistic. He said the stock market could be in the initial stages of declining as much as 10% after its big surge. The S&P 500 nearly doubled after hitting its bottom in March 2020.

“The reviews just got too frothy,” he said. “There was just so much optimism out there.”

The bond market was louder and more persistent in its warnings. The 10-year government bond yield tends to move in line with expectations for economic growth and inflation and has declined since late March when it was around 1.75%. It fell from 1.29% on Monday to 1.20% on late Friday.

Analysts and professional investors say that a long list of possible reasons is responsible for the sharp movements in the bond market, which is viewed as more rational and sober than the stock market. At the center, however, is the risk that the economy could slow down sharply from its current extremely high growth.

Risks to the economy

In addition to the new flavors of the coronavirus, other risks to the economy include the U.S. government’s waning pandemic relief efforts and a U.S. Federal Reserve that is expected to begin reducing support for the markets later this year.

The pressure to sell on Monday was widespread, with nearly 90% of the stocks in the S&P 500 lower. Even big tech stocks fell, with Apple losing 2.7% and Microsoft 1.3%. Such stocks seemed almost immune to viral fears during previous downturns and rose with expectations of continued growth almost regardless of the strength of the economy.

For the S&P 500, analysts are forecasting earnings growth of almost 70% year-on-year for the second quarter. That would be the strongest growth since 2009, when the economy emerged from the Great Recession.

But just as fears that economic growth has already peaked are mounting, analysts are trying to stifle growth rates for corporate earnings in the quarters and years ahead.

source https://thedailytradingnews.com/stocks-skid-as-virus-fears-shake-markets-dow-falls-2-1-voice-of-america/

Update On Planning For Bitcoin And Other Cryptocurrency

So who is going to watch you?

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Virtual currency guidance and advice issued on June 30, 2021 by the Treasury Department’s Anti-Money Laundering Unit (AML) cleared regulatory expectations, angered some cryptocurrency players, and signaled a potential new global standard for fighting financial crime.

The statement added that the guidelines “do not raise new regulatory expectations” and “consolidate current FinCEN regulations, guidelines and administrative decisions”. FinCEN has a broad international reach for any company that does significant business with US persons and therefore international companies need to be careful when purchasing cryptocurrencies from US exchanges or interacting with US consumers.

Every time FinCEN issues an advisory, compliance officers at both banks and virtual currency companies will spend a lot of time over the next few days reviewing the advisory in the context of their businesses and customers. Concerns include another round of bank account closures, not because customers engage in illegal activities, but because compliance officers and managers lack an understanding of the technology underlying cryptocurrencies as an easy way out rather than investing the time and effort to learn more about the area.

Although owners of blockchain-based investments are most likely to own cryptocurrencies, blockchain technology is expanding into non-currency areas. However, risks with both are mainly because 1) estate planners and family members are poorly informed about the existence and nature of blockchain assets, 2) customers fail to realize that wills and trusts need to be in a specific language in order to allow personal representatives and trustees to do so manage these assets after incapacity or death; and 3) the regulatory environment, taxation, reporting, application in case inheritance laws and other issues remain to be resolved.

Traditional planning companies also have a hard time owning cryptocurrencies, especially when beneficiaries have a fiduciary duty to carefully invest assets. Without a specific language, a trust or other entity cannot hold cryptocurrency, but if that language is too broad, the trustee can be harmed due to willful negligence. Also, cryptocurrency is treated as property rather than currency by the tax authorities for tax purposes, which means that the fair market value is converted to the tax authority’s current US dollar, i.e. US dollars for the IRS, at a “reasonable exchange rate” and Transactions is determined. Cryptocurrencies are subject to capital gains tax regulations. This can result in the cryptocurrency being taxed in one country with one value and in another country with another value.

In addition, care must be taken to ensure that the benefits of the cryptocurrency are preserved. Cryptocurrency is very secure, but this security is compromised if the private key or seed phrase is carelessly recorded. With the right private key or seed phrase anyone can access the cryptocurrency, so planning and procedures must include securing this information. Like cash, cryptocurrency is not traceable. There is no electronic or paper trail that connects the parties in a cryptocurrency transaction. To maintain this privacy, you need to plan that other documentation in the transaction does not reveal these identities, or at least that this information is privileged. Shorter transmission delay and lower cost. In contrast to hard currencies, the transfer of cryptocurrency only takes a few moments and there are few transfer costs, if at all.

So what to do First, let your estate planner and family know about any blockchain-based assets, especially cryptocurrencies, that you own. If the value of these assets is in excess of $ 10,000 and the assets are held with a trustee or an “offshore” institution, make sure you also report this investment annually and that the custodian holding the assets has the time the time and effort it takes to accommodate the myriad of changes as they occur.

source https://thedailytradingnews.com/update-on-planning-for-bitcoin-and-other-cryptocurrency/

Why did the Dow tumble Monday? Economic growth is now a bigger worry than inflation.

The stock market suffered its largest one-day decline since October on Monday as investors appeared to be looking to the bond market and worried about growth.

The question for traders is whether it’s creepy enough to trigger what many see as a long overdue sell-off, or whether it just gives the bulls one more dip-buying opportunity.

The rates market has “signaled growth concerns in recent months,” said Marvin Loh, senior global markets strategist at State Street, in a telephone interview.

The main culprit on Monday was the delta variant of the coronavirus, which is causing COVID-19 and is responsible for the increase in infections around the world, including the US and other countries that have introduced vaccines. Fears of renewed travel restrictions and the continued spread of the highly transferable variant, particularly among unvaccinated individuals, put pressure on travel-related stocks and other industries and sectors that had previously benefited from betting on cyclical companies, which are expected to be most likely to benefit from the Economy benefit from reopening.

In the end, the Dow Jones Industrial Average DJIA, -2.09%, fell 725.81 points, or 2.1%, to close at 33,962.04, the largest one-day percentage and point decline since October 28th. The S&P 500 SPX gave -1.59% rose 68.67 points, or 1.6% and ended at 4,258.49, while the Nasdaq Composite COMP, lost 152.25 points, or 1.1% and -1.06% ended at 14,274.98 – the worst day for either index since May 12th The Russell 2000 RUT, -1.51% index fell 1.5% to 2,130.68, closing in correction territory at or below 2,124 .15 has been avoided, a decrease of at least 10% from a recent high.

Distribute the blame

But it wasn’t just the Delta variant to blame. Loh noted that the prospect of additional fiscal stimulus from Washington has stalled for some time. An earlier push for trade reopening came after the Georgia Senate runoff in January, which gave the Democrats razor-thin control of the Upper Chamber and increased the prospect of President Joe Biden’s aggressive fiscal measures being passed.

Investors also cited US-China tensions after the Biden government blamed Beijing for a hack into Microsoft Exchange email server software that compromised tens of thousands of computers around the world earlier this year. The European Union and Great Britain also pointed their fingers at China.

But after an initial win on a major spending plan, efforts to get a large infrastructure spending bill and plans for additional measures stalled, leaving only monetary policy in focus.

And while the Federal Reserve is in no hurry to withdraw its bond purchases or raise interest rates, a withdrawal of monetary stimulus is on the horizon. And other major central banks, including the European Central Bank and the Bank of Canada, are also trying to reduce stimulus measures, Loh said.

The delta variant “makes things a lot more uncertain about regression,” Loh said, noting that “peak growth is something more that is talked about a lot more”.

Meanwhile, yields on long-dated US Treasuries and other developed market bonds have plummeted. In fact, the 10 year yield decline is TMUBMUSD10Y, 1.210%,
which had risen to almost 1.8% in March as growth expectations skyrocketed and inflation fears mounted, then collapsed again. On Monday it fell below 1.20% for the first time since mid-February. Returns and debt prices are moving in opposite directions.

Stagflation Redux?

For some investors, falling yields reflect waning inflation fears, with investors charging less premium to protect future coupon payments from inflation. However, others argued that Monday’s fall in yields and share price decline pointed to mounting fears of stagflation, a term often associated with the 1970s mix of rising inflation and unemployment.

See: Why a bond rally could lower 10-year government bond yields even further, even if inflation expectations are abandoned

“The global economy is barely surviving on life support, and another wave of infections could trigger lockdowns that could signal the death knell for the weak recovery,” Peter Essele, head of investment management for the Commonwealth Financial Network, said in an email.

“Fear of stagflation will be a major concern for investors if a resurgence of COVID infections causes the economy to slow while consumer prices continue to rise,” he said. “The recent strong performance of inflation-indexed bonds could be an indication that these fears are setting in, since the bus has already left the train station.”

Keep track of things

Others saw Monday’s sell-off long overdue, however, as major indices hit all-time highs last week.

Indeed, the fact that Monday’s declines were the largest in months may be more evidence of the lack of market volatility that accompanied the stock market rally. The S&P 500 has not retreated at least 5% from its recent high since late October, according to Dow Jones Market Data.

This is one of the longest stretches without such a retreat in the past decade, analysts at Truist Advisory Services wrote in a note. “Historically, we’ve seen two or three pullbacks of over 5% a year, all of which have negative headlines,” they noted.

Indeed, an increase in volatility accompanied rising concerns about COVID, and new variants have sparked an increase in volatility, with the Cboe volatility index VIX jumping + 21.95% in recent sessions and trading above 22 on late Monday after trading around 14 had traded around two weeks ago, below its long-term average near 20.

This helps add to the weakness in stocks, Mike Lewis, head of US stocks cash trading at Barclays, said in email comments.

The jump in volatility means that “systematic” traders, especially trend-following commodity trading advisors, “take profits on recent equity gains, creating a large supply on a stock market with low summer volumes and no great liquidity background”.

source https://thedailytradingnews.com/why-did-the-dow-tumble-monday-economic-growth-is-now-a-bigger-worry-than-inflation/

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Organize your information in neat spreadsheets in both Google Sheets and Excel

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