September 12, 2021

Market Wrap and Week Ahead (13 Sep)

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“Hot” On The Plate

More alarm bells sounded on US stock market on valuation and growth concerns

US markets have been on a tear this year, with major US stock indexes up more than 10% YTD, and about doubled from the COVID-19 trough in March 2020. The fast run up had made this bull market the fastest bull market according to an analysis by CNBC (just 354 trading days vs on average of 1,000 trading days). While investors had attributed the rise to the easy money policy, with central banks flooding the market with unprecedented stimulus, the rise has still draw concerns by strategists in recent days amidst (i) Valuations at historical extremes (ii) Concerns of a slowing economic growth and (iii) Anticipation of a stimulus taper by the US FED

Valuations at historical extremes

Valuations on the S&P 500 remain elevated

Concerns of a slowing economy

According to the US latest Beige Book, the Fed noted a “deceleration in economic activity largely attributable to a pullback in dining out, travel and tourism in most districts, reflecting safety concerns due to rise of the Delta variant“. Concerns of US slowing growth were also voiced out by economists who lowered their economic growth forecasts for 3Q to 5% (from 6.8%) and 4Q estimate to 5.3% (from 5.6%) based on median forecasts from Bloomberg’s monthly survey. 

Apple falls on unfavorable court ruling for its app store

Pulling down the index is also Apple which was down more than 3% on Friday after a US court ruling in Epic Games’ antitrust lawsuit which would not allow Apple to force developers to use in-app purchases. (i.e. Apple can no longer prohibit developers from including links that drive users away from Apple’s store, where the company takes 15% to 30% of gross sales.) Apple forms about 11% of the overall Dow Index. OVer the last few weeks, Apple and Alphabet’s Google has been under pressure over their control over app stores, with analysts believing the US Congress may seek to force the app stores to open up their payment mechanisms as well as allow for other competing app stores. 

Week Ahead

12 Sep: On the crypto front, the 3rd largest cryptocurrency, Cardano, is targeted to roll out its alonzo upgrade, which will allow the crypto network to run a range of crypto applications from smart contracts to NFTs. (According to Cardano’s founder Charles Hoskinson, its equivalent to what Javascript brought to web browser- from static boring webpages to Facebook, Google and Youtube!)

14 Sep: On the economic data front, US will be reporting its inflation data on Tuesday, which will be closely watch, given it is a key metric/data point affecting US Fed’s decision of when to taper. Currently, the market is expecting US Fed to formerly announce its tapering of its bond-buying program in Nov/Dec 2021, after US reported a much weaker jobs report in August (just 235,000 jobs created, 500,000 less than expected)

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