Forget the crypto chaos. Look at this underrated sector for stock gains, says the strategist.
The cryptocurrency chaos continued on Thursday, as investor sentiment for equities displayed similar nervousness, even though U.S. stocks performed solidly at noon.
But let’s block the noise about bitcoin, Elon Musk’s tweets, and concerns about inflation and tech stock valuations.
One of Felder’s mantras is to look for investment opportunities outside of the major indices. The rise of passive investing, with massive funds passively tracking stock indexes, is making these opportunities more widespread and attractive, he said.
Passive investing has recently become less popular, according to Felder, as investors increasingly embrace variations of ESG: environmental, social and governance investing, which measures social and environmental impact. This includes the more speculative side of the trend, such as Ørsted ORSTED green energy stocks,
and plug in the power plug,
and electric vehicle companies like Tesla TSLA,
and NIO NIO,
Felder said this resulted in portfolios more concentrated in popular sectors such as tech and underweight in the traditional energy sector.
“In this way, the ESG has simply served to amplify the momentum that passive index funds create when they allocate more new money to stocks and sectors of increasing value, like technology and communications services,” Felder said, with funds allocating less new money to sectors. with declining values, like energy.
“As a result, the opportunities that go against these trends have become even more attractive than they would otherwise be,” he said.
The dynamics are changing. Energy has started to outperform the rest of the stock market, including technology, and “many may be wondering if this trend is sustainable.” Felder thinks so.
Chart via the Felder Report blog.
Felder pointed out the chart above, which shows historical weights within the S&P 500 SPX,
index. Energy has a smaller share than it did two decades ago when its last major bull market began. Communications technology and services stocks are slightly below all-time highs recorded at the peak of the dot-com bubble.
“For my money, those alligator jaws seem more likely to close than open even more,” Felder said.
The buzz
Bitcoin BTCUSD,
rose Thursday, but remains below $ 40,000 after collapsing to nearly $ 32,000 on Wednesday. The main digital asset was trading above $ 51,000 less than a week ago. Other popular cryptos, like ethereum ETHUSD,
and dogecoin DOGEUSD,
stay depressed. Read why the crypto crashed and what the experts said about a recovery.
The CEO of ByteDance, the parent company of social media video platform Tik Tok, will resign. Zhang Yiming – co-founder of ByteDance – will step down from the high-level position by the end of 2021.
Economically, 444,000 Americans filed for unemployment last week, less than the 452,000 expected and down from 478,000 the week before. There were 3.75 million continuous jobless claims in the week of May 8, and the Philadelphia Federal Reserve’s manufacturing index for that month fell from 50.2 in April to 31.5 – less than the 40 , 5 expected. The leading economic indicators index rose 1.6% in April after gaining 1.3% in March, signaling near-term economic acceleration.
Plant-based food company Oatly is set to raise $ 1.43 billion in an initial public offering. Oatly, who makes a popular oat milk of the same name, has backers including talk show host Oprah Winfrey and rapper Jay-Z. Its IPO price is $ 17 per share, valued at $ 10 billion.
Ford F,
unveiled an electric option of the best-selling vehicle in the United States: the F-150 pickup truck. With a starting price close to $ 40,000, the big bet that consumers will abandon internal combustion engines represents “a turning point,” said the automaker’s chief executive.
The steps
Crypto assets rebound slightly after Wednesday’s sell-off, which was apparently sparked by China’s announcement that digital tokens cannot be used as payment. US DJIA equities,
SPX,
COMP,
were higher, reversing the price after futures remained negative for much of the pre-market.
Stocks in Europe SXXP,
UKX,
PX1,
DAX,
and Asia NIK,
HSI,
SHCOMP,
were more mixed, with some stock indexes rebounding, but not as much as they fell on Wednesday.
Table
Graphic via the Wolf Street Blog.
The Canadian housing market is no longer on its foundations. Our menu of the day, courtesy of Wolf Richter on the Wolf Street Financial Blog, illustrates the largest real estate and mortgage bubble in the country’s history. The Teranet-National Bank Home Price Index shows how home prices in the Toronto area in April climbed 3% month-over-month and 12.3% year-over-year. other, having almost tripled in the past 15 years.
The Canadian real estate market is so hot that even prosaic central bankers use fiery language. In March, the Bank of Canada used the term “moral hazard” when it began to unwind its liquidity facilities. In April, it became the first major central bank to cut back on bond purchases during the COVID-19 pandemic era amid “signs of extrapolative expectations and speculative behavior” in the real estate market.
Random readings
“Delicious Little Things”: Australia’s oldest man, over 111, has a secret to living a long life: eat chicken brains.
Gold wallpaper in British Prime Minister Boris Johnson’s apartment – already undergoing scrutiny for a costly renovation – costs nearly $ 1,200 per roll. And it won’t stick to the walls.
Need to Know starts early and is updated until the opening bell, but register here to have it delivered to your inbox. The emailed version will be sent at approximately 7:30 a.m. Eastern Time.
Want more for the day ahead? Subscribe to Barron’s Daily, a morning investor briefing, featuring exclusive commentary from the editors at Barron’s and MarketWatch.