Wall of worry
The US stock market as measured by the S & P 500 is I fell more than 3% yesterday, Drag it deep into the bear market territory. This morning, the futures market suggests there is a rebound, but S & P is still on track to record a decline in the 10th week of the last 11 weeks.
Bull markets are often said to climb the wall of worry and occasionally slip along the way. There are also regular breaks to hold your breath as the bear touts rappelling. It’s a recent theme, and investors are moving away from the reassurance that policy makers are taking positive action to curb inflation and fear the impact of those actions on economic growth.
One of the best things to do these days is volatility. The VIX Volatility Index, commonly referred to as the “Fear Index” because it tracks investor demand for the types of financial instruments that provide protection against market declines, has more than doubled to well over 30 over the past year. increase. It fell to around 15 in the second half of last year, the lowest level since a pandemic occurred.
The reason for the decline in the stock market is well established at this point.
Mixture of Supply chain issues And the hot economy has skyrocketed prices.
To fight inflation, the Fed Raise interest rates actively.
For investors, the Fed’s efforts will boost the economy recession..
It may be prolonged Pandemic,and War in europe..
The stock market itself can also be an economic concern. Overall, this year’s stock decline has lost about $ 12 trillion in value from the investor portfolio. This has already surpassed the $ 8 trillion decline in 2008 during the most severe financial crisis of the first century, but on a percentage basis the decline in 2008 was even greater. Over time, stock gains and losses can drive and drag the economy through what economists call asset effects.
Analysts say the market is unlikely to recover until there are signs that inflation is curbing... Lower inflation seems to be stalling, removing pressure from the Fed and other central banks, raising interest rates quickly, reversing the negative feedback loop in the market.
For now, investors are betting that volatility stays here. Generally, when VIX soars, bets on where the index trades months ahead are much lower than at current levels. That’s not the case now. Investors now expect VIX to reach the end of the year at just under 30, a slight decline from today and much higher than the long-term trend. VIX has averaged about 20 over the last five years.
Stock market conditions
The decline in the stock market this year was painful. And it is still difficult to predict what lies ahead for the future.
January 6 Commission Hearing Focuses on All Presidential Men..Former Vice President Mike Pence’s Supreme Attorney is Donald Trump and Attorney John Eastman Plans to overturn the 2020 elections It was illegal. With another twist, YouTube Deleted some of the uploaded hearings A lie-focused January 6 committee spread Donald Trump, saying the committee was disseminating false information.
Russia is putting financial pressure on the European leaders of Ukraine. Heads of State of Germany, France and Italy meet with President Volodymyr Zelensky of Ukraine and Russia Reduced flow to Europe’s most important natural gas pipeline..The decrease in supply Raise the priceAnd Russia hinted that supply would decline further in the future.
SpaceX will dismiss employees who helped create and distribute letters condemning Elon Musk. Gwynne Shotwell, President and Chief Operating Officer of SpaceX, Said in an email to an employee The behavior of the mask is “Distraction and embarrassment“” It made employees feel uncomfortable, intimidated, and bullied. ”
Regulators will investigate cryptocurrency lenders Celsius during the meltdown. The company faces questions from securities law enforcement agencies In 5 states While scrambling to maintain the solvent. Former supporters of Celsius reportedly told the company that had frozen the withdrawal: They can’t help..Growing Cryptographic crash It has caused great losses to individual and professional investors.
Former President of Lazard, Michelle David Weil, died at the age of 89. The company said.David Weil was responsible Unifying Lazard in the 1980s It combines three independent partnerships in London, New York and Paris. “Michel’s presence, leadership and vision defined Lazard today,” bank CEO Ken Jacobs told DealBook, calling David Weil “a good skeptic of traditional knowledge.”
Is Bankruptcy Stampede Coming?
Revlon, a cosmetics brand with a 90-year history known for its distinctive shades of lipstick File for bankruptcy yesterday. The company has had a hard time dealing with a huge debt of $ 3.8 billion. Some of the factors that led to bankruptcy were unique to Revlon, such as debt-fueled transactions led by corporate intruder Ron Perelman and brands that couldn’t compete with younger and hipper rivals. .. However, other advisors have told DealBook that it is a precursor to bankruptcy to follow. Bankers have heard that they are already preparing for what could be a busy fall for those who specialize in distressed bonds and training.
Many of the bankruptcies expected in 2020 did not occur. Many already upset retailers, such as JCPenney and Neiman Marcus, quickly went bankrupt.However, the Fed’s cash-maintaining infusions (and certain industries like airlines have been buffered by government bailouts) companies that many expected to submit to Chapter 11 have filed for bankruptcy. Is actually 5% down Almost as of 2020 34 percent 2021.Some experts warning The surge of zombie companies (those that make just enough money to survive) and the subsequent impediment to the economy as a whole. At the same time, these and other companies continued to build up their debt.Issuance of US corporate bonds By 2020, it was close to $ 2 trillion.
So far this year, US corporate bond defaults are 40 percent lower than last year. According to S & P Global. So far there are only 15. However, there are signs that this may change soon. The “pain rate,” a percentage of the junk bond market that S & P says is showing signs of stress, has almost doubled from last month, from 2.4%, the largest monthly rise since March 2020, to 4.3%. I did. Past average. And this week alone, investors withdrew $ 6.6 billion from a fund buying US high-yield bonds, Worst week Corporate bonds after March 2020.
High inflation, rising interest rates, and more cautious consumers can add to the pain. The same goes for the growl of the supply chain. This is especially difficult for financially inflexible companies to pay more for rare products and to increase or deplete inventories as needed. Retailers are particularly vulnerable given the large amount of debt many people are working on, such as Party City, a chain of decorations and festivals, and Belk, a department store. (And you have to wonder if it’s a recently proposed debt fuel Acquisition of Coles Department store chains are a really good idea. )
“You can definitely see the difference from the beginning of the year when everyone was still obsessed with the latest variants. This summer will jump off.”
— Jason Moore, General Manager of Everson Royce Bar in Los Angeles.Workers’ return to the office Tradition rebound after happy hour work..
What the Professional Golf Feud Says About Competition
Saudi Arabia’s generously funded golf series, LIV Golf, is a feud on the PGA Tour. The PGA Tour has stopped 17 players to join the emerging league. Neither adversary evokes much sympathy, Written by Peter Coy, a colleague of Times Opinion Who writes the newsletter for subscribers? However, this battle raises interesting financial issues. Have trade restrictions ever been good? We told Peter what the golf battle royale would teach us about the competition policy situation.
DealBook: Should the government intervene to prevent the PGA from banning golfers from participating in the LIV?
Peter Coy: I think it’s coming soon. This is a family feud and players need time to organize things between themselves. If there is a proceeding, I think it will be filed by a golfer or perhaps LIV Golf. Without knowing why they are proceeding, it is difficult to understand why the government wants to intervene.
Does the antitrust question that arises from the PGA-LIV clash apply to the debate about whether Facebook, Google, and other big tech companies need to be considered monopoly and split?
Obviously, there are big differences between golf and technology, but some of the basic principles are the same. Most antitrust proceedings are based on “rules of reason.” Organizations accused of anti-competitive behavior, whether on the PGA Tour or Google, can get out of the problem by showing that their behavior is rational and actually benefits consumers. increase.
The Biden administration has partially pointed to the recent rise in inflation as evidence that companies are too strong to raise prices. Does the golf industry support the paper?
Generally, I agree that competition will lower prices, but in this case the connection is confusing. I don’t think the two groups will compete by lowering the prices they charge to TV networks, tournament sponsors, etc. In fact, the competition between them is paying much more to golfers. I expect golfers to repel their newly found wealth in cars and boats. This may be a strange case where competition raises inflation.
Importers warn more Supply delay From the new forced labor law for China. (Politico)
Surprise treasury Tax plunge It can hinder plans to raise interest rates for the rich. (Politico)
3 environmental groups Sued the Biden administration For granting thousands of fossil fuel drilling permits. (Hill)
“In 49 states, we pre-ordered vaccine doses for very young children. Did not.. (NYT)
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