Investor who scored big in coronavirus rout and now says stock-market ‘environment presents…largest set of tail risks we’ve seen’ in 15years
“We believe that the rally has now extended well beyond levels justified by the state of the economy, and with little regard for the myriad of risk factors looming on the horizon.” That is Jeffrey Talpins, the founder of Element Capital, in an Aug. 18 letter to his clients, cited by the Financial Times (paywall), explaining his decision to reposition his $16 billion hedge fund for a potential downturn in the market after an unprecedented rebound in equities in the U.S. and Europe since March.
Talpins wrote that “less aggressive fiscal and monetary support” will eventually help lead to a slump from the stratospheric moves that stock benchmarks have enjoyed thus far since March.
Bearish investors have pointed to a lack of political will for additional coronavirus relief for embattled American workers and a market that has gotten well ahead of its skis, in terms of equity valuations set against expectations for corporate earnings in the coming months and years.
On Thursday, U.S. initial weekly jobless benefit claims rose in mid-August and topped 1 million again, potentially pointing to an increase in layoffs after a summer surge in the coronavirus epidemic or perhaps to more people applying for benefits after President Trump temporarily added $300 in extra federal payouts through a controversial executive order.
Despite signs of weakness in the economy, the stock market has been primarily led higher by a handful of technology and e-commerce-related stocks that have enjoyed a boost from the COVID-19 pandemic, helping the broader market defy gravity.
Gold dips as dollar rebound outweighs recovery fears
Gold eased on Friday as the dollar edged higher, denting bullion’s appeal and setting it on track for a second weekly decline, while lingering concerns over the path to recovery from the coronavirus limited losses.
“We are going to be range-bound for the next number of days or weeks until something happens either on the U.S stimulus front or if the U.S.-China tensions take a very positive or negative turn,” said David Madden, market analyst at CMC Markets UK.
There are a lot more losing than winning stocks in the S&P 500, Jim Cramer says
The stock market does not appear as strong as the headline numbers in the benchmark index may portray after taking a look at the performances of its components, CNBC’s Jim Cramer said Thursday.
While the big tech stocks have made significant gains that carried the S&P 500 back to record levels, most of the stocks in the broad average are down this year, he said.
“When you get down into the weeds of this market, what you see is that there are a lot more losers than there are winners,” said the “Mad Money” host, likening the stock market to a patch of grass. “That’s the nature of the Covid economy, and now that there’s no one in Washington willing to play gardener, maybe it’s only a matter of time before the weeds overrun the entire patch.”
The major averages climbed in Thursday’s session, despite the negative news of 1.1 million new unemployment claims that were filed in the week ended Aug. 15. More than 1 million people applied for weekly jobless benefits in 22 of the last 23 weeks amid a global coronavirus pandemic.
The Dow Jones climbed almost 47 points for a 0.1% gain, breaking a three-day losing streak, to close at 27,739.73. The S&P 500 rose 0.3% to 3,385.51, a handful of points shy of its record close Tuesday, and the Nasdaq Composite rallied 1% to 11,264.95 for a new closing record.
“We have a bizarre situation where some companies are doing very well,” Cramer said, “but a lot of other companies are getting crushed.”