Tuesday, a market analyst informed customers that the trade in pandemic recovery has gone on and it is time to re-enter Big Tech.
“Following positive vaccine news in November 2020, as the path to a cyclical economic recovery in 2021 became clearer, there was a rotation that began away from stocks with positive COVID-19 exposure and into stocks with negative exposure,” Deshpande explained. “We believe this rotation is now finished.”
Growth stocks are shares of companies that are expected to grow faster than the market as a whole. Secular growth stocks, in particular, follow a longer-term trend and are less affected by the overall economy.
According to Barclays, technology names are particularly well-positioned at the moment due to the pandemic’s acceleration of digital transformation. According to the bank, the growth of e-commerce marketplaces, digital advertising, work-from-home technology, and cloud infrastructure will benefit tech stocks.
Barclays is bullish on FANMAG stocks, which include Facebook, Amazon, Netflix, Microsoft, Apple, and Google parent Alphabet. Furthermore, the bank believes that after lagging earlier this year, these Big Tech names are now relatively cheap.
“We prefer FANMAGs because their valuations have fallen to 2019 [year-end] levels,” said Deshpande.
Meanwhile, Barclays believes that software stock valuations are currently too high and prefers to stick with FANMAGs.
Barclays favors Alphabet, Microsoft, and Amazon in particular, expecting these companies to “hold on to their Covid market share gains and continue to benefit from the acceleration of digital transformation.”
As investors absorb the new economic forecasts of the Federal Reserve, one market analyst defends a particular set of companies.
Value stocks are those that are trading at prices that are perceived to be relatively low in relation to their returns. Defensive stocks are those that tend to be stable regardless of how the market performs overall.
Healthcare and real estate investment trusts, or REITs, are examples of sectors that meet the “defensive value” criteria, according to Emanuel.
Healthcare has been “overlooked for the better part of the rally,” he says, while REITs are “very well-positioned from here.”
Higher interest rates are associated with higher REIT prices. Rising interest rates typically indicate a strengthening economy, which raises the value of real estate assets, and thus REITs.
′′[REITs] actually tend to correlate less with the S&P 500, and people look at REITs as a potential inflation hedge,” Emanuel explained.
While Emanuel remains cautious and awaits comments from Fed Chair Jerome Powell later Tuesday, the BTIG strategist believes the economy will continue to grow.
“We believe the value theme is still intact,” he said. “This is a multi-year theme, not a multi-quarter theme, and we believe the economy will grow.”
The crypto influence
A stronger existing home sales report gave homebuilders a boost right at 10 a.m., but this is a group that was up huge before a stinging correction and is still 13 percent off its high. The same is true for Treasury yields and value versus growth: Longer-term uptrends remain intact, but they may be approaching a critical test of that upward-tilting pattern.
There is a lot of push-pull and some sensitivity around the notions of “peak liquidity/peak reopening/peak acceleration,” but no real stress or macro vulnerability. Corporate credit spreads are still quite tight (though flat since April), and the VIX and VIX futures curves are in a fairly comfortable position.
Lowering the crypto probe and bouncing it demonstrates a highly technical/psychological battle. I still believe it is acceptable to ignore it or to act solely as a speculator. Given the leverage and hot money under pressure here, I am open to the argument that this crash is a good litmus test for whether crypto is resilient or relevant to the broader financial system.
Today’s market breadth is unimpressive, with some of yesterday’s breadth spilling back. On the NYSE, upside volume is less than 40%. Because of the low volume and news flow, we may have to wait for Powell to speak and do Q&A before we have a quorum to make proper decisions.
Jim Cramer said he’d be ready to purchase bitcoin again on Tuesday if it was to truly plummet.
“I would go back in if I could get it at 10,000, 11,000, 12,000 — where I bought a lot [before],” Cramer said on “Squawk Box” Tuesday.
Technical analysts who follow the cryptocurrency market regarded the $30,000 mark as a critical bitcoin support level.
Galaxy Digital CEO Mike Novogratz, whose firm invests in a variety of cryptocurrencies, told “Squawk Box” earlier Tuesday that he is “less happy” about bitcoin than he was a few months ago. He acknowledged that $25,000 might be the next level of assistance. However, he stated that he is “not concerned” about bitcoin’s long-term prospects.
Later in the show, Cramer stated that he prefers ether, the world’s second largest cryptocurrency, to bitcoin. However, ether, which operates on the Ethereum blockchain, has not been immune to the market’s collapse. It was down 8% on Tuesday and down more than 50% from its all-time highs in May.
Cramer said last month that he ended up with “a lot” of ether after purchasing it to bid on nonfungible tokens, or NFTs, being auctioned off by Time magazine in March. He explained at the time, “I didn’t get it, so I just kept the ether.”
Cramer discussed his motivation for owning bitcoin in February, describing the cryptocurrency as a “alternative to a cash position, where you make absolutely nothing.”
Cramer has since softened his stance on bitcoin, saying on Monday that he is concerned about China’s efforts to crush it, as well as how the US government might regulate it due to its use in ransomware attacks.