Government
JPM Sees Stock Surge In 2021 As Trillions In “Unlocked” Liquidity Flood Into The Market
JPM Sees Stock Surge In 2021 As Trillions In "Unlocked" Liquidity Flood Into The Market
Share this:
At the start of November, in a moment of brutal honesty, JPMorgan's quant strategist Nikolas Panigirtzoglou made a remarkable admission: there is nothing better for stocks than another economic catastrophe such as a new round of lockdowns. Why? Because more economic pain means even more Fed intervention (especially in a world where the Congress is hopelessly deadlocked on additional fiscal stimulus). Here is what Panigirtzoglou said:
Although it has had a negative impact in the short term, the reemergence of lockdowns and resultant growth weakness could bolster the above equity upside over the medium to longer term via inducing more QE and thus more liquidity creation.
This was a stunning admission because JPM effectively said what "tinfoil blogs" had been saying for over a decade: that the worse the economy gets, the better it is for risk assets as the Fed has no choice but to step in and keep bailing out bulls as the alternative - a full-blown market crash - is simply an inconceivable scenario for a country where private sector financial assets now represent a record 6.2x the GDP...
... and where household net worth which is mostly in financial assets, has never been larger.
The second, if just as important admission in the note was that we now (and over the past decade) live in a world where liquidity (and thus flows) is all that matters.
The reason we bring this is up is because in a follow-up note, the JPM strategist now predicts that the continued decline in uncertainty from the very high levels seen before the US election, facilitated by vaccine developments "which should enhance a trend of declining uncertainty into 2021, will amplify equity and risk markets going forward by reducing the need for precautionary savings over time."
This, Panigirtzoglou argues, "means that a greater portion of the liquidity that has been injected so far as a function of QE and credit creation, would be deployed into higher yielding non-cash assets such as equities into next year."
In short, while a substantial portion of the trillions in liquidity injected by the Fed in 2020 ended up being stuck in various inert cash-equivalents, most notably money-market funds which surged by over $ 1 trillion in the aftermath of the pandemic shutdowns...
... as conditions normalize and as more liquidity is diverted out of cash equivalents into risk assets, there will be an avalanche effect as the combination of excess liquidity and upside momentum combines to create a surge higher in stock prices.
Some more details
At the core of JPM's thesis is that returning confidence (and normalcy) will unlock savings, which is why Panigirtzoglou writing that he believes "that recent vaccine announcements would help overall equity and risk markets over the medium to longer term via another channel, i.e. via enhancing a trend of declining uncertainty following the US election. A gradual decline in uncertainty from the very high levels seen before the US election would amplify equity and risk markets going forward by reducing the need for precautionary savings over time."
Uncertainty is important as it makes economic agents holding more cash during periods of elevated risk perception, for precautionary reasons. We proxy uncertainty via the monthly uncertainty indices constructed by Baker, Bloom and Davis for the US. To a large extent, this uncertainty index quantifies newspaper coverage of policy-related economic uncertainty as well as disagreement among economic forecasters. This US uncertainty proxy is shown in Figure 1 along with its smoothed version. The uncertainty proxy has been rising into the third quarter of the year ahead of the US election. It appears to have declined modestly in recent months from the record high levels of last summer, but it stood at still very elevated levels in October ahead of the US election, implying that there is plenty of room for uncertainty to subside from here.
This means that a greater portion of the liquidity that has been injected so far as a function of QE and credit creation, would be deployed into non-cash assets in the future, in other words, much of the liquidity already injected will simply be retasked to chase risk assets instead of stay in cash. This is how the JPM strategist puts it:
The rise in the uncertainty proxy to record high levels into the summer months had induced a decline in the difference between actual money supply (global M2) vs. the medium-term money demand target in our model. Indeed. Figure 2 shows that following the spike in the policy uncertainty proxy to record high levels in July, the previous excess money supply estimate has been practically wiped out in our model, despite the big increase in money supply since March. Effectively money demand has mechanically increased by more than money supply up until July, due to the spike in the policy uncertainty proxy. After July, our uncertainty proxy has stopped increasing and if anything it has slightly subsided. This allowed money supply to reassert itself over demand in our model pushing the excess money supply estimate of Figure 2 to positive territory in recent months.
Going forward, further normalization in the uncertainty proxy would push the excess liquidity measure in Figure 2 to even higher levels. Assuming a full normalization by 2021, our excess liquidity measure would rise to levels that are even higher than the previous historical highs seen between the beginning of 2016 and the beginning of 2018. The implication, as mentioned above, would be that a greater portion of the liquidity that has been injected so far as a function of QE and credit creation, would be deployed into higher yielding assets such as equities in the future.
What does all of this mean for the market in practical terms? Putting it all together, JPM projects the fair value for stocks based on two scenarios, both shown in Figure 4. The first, in the red dotted line, assumes that markets looked through the near-term rise in macroeconomic volatility. The second, in the black dotted line, takes on board the sharp rise in real GDP volatility, and projects a gradual normalization to pre-virus outbreak levels by end-2021.
In the red line, "the initial gradual decline stems from the fact that the four-quarter sum of consensus earnings forecasts initially dominates up to 3Q20, after which a pickup in the 5y recursive growth estimate more than offsets it, just as the four quarter rolling sum begins to pick up again in 2021. The red line bottoms out at around 3150, while the sharp rise in the discount rate in the black line sees it bottom out at around 1990 before recovering, and both lines converge close to 4190 by end-2021.
As JPM concludes, with actual value of the S&P having risen to around 3600 at the time of writing compared to the red line suggesting an end-2020 fair value of just over 3172, "this effectively means that the market has looked through the short-term spike in uncertainty as well as much of the hit to 2020 earnings, but still has another 15% of upside by end-2021."
All of this ignores the likelihood of another major monetary stimulus which as we explained earlier is likely to take place in two steps: first with the Fed expanding the maturity of QE in its December FOMC, followed by expanding QE in early 2021 to counter the next covid "crisis" just so Powell has enough dry powder to monetize the roughly $3 trillion in net issuance on deck in 2021.
In short, JPM's estimate of a 4,190 year-end S&P target in 2021 could prove to be far too conservative if a few trillion more in liquidity are injected by the Federal Reserve.
Government
Low Iron Levels In Blood Could Trigger Long COVID: Study
Low Iron Levels In Blood Could Trigger Long COVID: Study
Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate…
Share this:
Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.
A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.
Long COVID Patients Have Low Iron Levels
Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.
In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.
According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.
But it can jeopardize a person’s recovery.
“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”
The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.
“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”
The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.
1 in 5 Still Affected by Long COVID
COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.
Government
Walmart joins Costco in sharing key pricing news
The massive retailers have both shared information that some retailers keep very close to the vest.
Share this:
As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters.
The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.
The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.
Related: Popular mall retailer shuts down abruptly after bankruptcy filing
It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.
You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.
Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.
However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.
Image source: Joe Raedle/Getty Images
Walmart sees lower prices
McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.
During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.
"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.
He was specific about where the chain has seen prices go down.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."
McMillon said that in other areas prices were still up but have been falling.
"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.
Costco sees almost no inflation impact
McMillon avoided the word inflation in his comments. Costco (COST) Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.
The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.
"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.
Galanti made clear that inflation (and even deflation) varied by category.
"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.
bankruptcy pandemic trumpGovernment
Walmart has really good news for shoppers (and Joe Biden)
The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.
Share this:
As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters.
The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.
The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.
Related: Popular mall retailer shuts down abruptly after bankruptcy filing
It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.
You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.
Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.
However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.
Image source: Joe Raedle/Getty Images
Walmart sees lower prices
McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.
During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.
"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.
He was specific about where the chain has seen prices go down.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."
McMillon said that in other areas prices were still up but have been falling.
"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.
Costco sees almost no inflation impact
McMillon avoided the word inflation in his comments. Costco (COST) Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.
The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.
"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.
Galanti made clear that inflation (and even deflation) varied by category.
"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.
bankruptcy pandemic trump
When Military Rule Supplants Democracy
Redefining Poverty: Towards a Transpartisan Approach
The Digest #187
Biden to call for first-time homebuyer tax credit, construction of 2 million homes
GBPINR: Analysis and Projections for 2024
Students lose out as cities and states give billions in property tax breaks to businesses − draining school budgets and especially hurting the poorest students
Biden defends immigration policy during State of the Union, blaming Republicans in Congress for refusing to act
Is the United States overestimating China’s power?
Jack Smith Says Trump Retention Of Documents “Starkly Different” From Biden
Analyst revamps Coke stock price target after strategic moves
-
Uncategorized2 weeks agoAll Of The Elements Are In Place For An Economic Crisis Of Staggering Proportions
-
Uncategorized1 month agoCathie Wood sells a major tech stock (again)
-
Uncategorized3 weeks agoCalifornia Counties Could Be Forced To Pay $300 Million To Cover COVID-Era Program
-
Uncategorized2 weeks agoApparel Retailer Express Moving Toward Bankruptcy
-
Uncategorized3 weeks agoIndustrial Production Decreased 0.1% in January
-
International1 day agoWalmart launches clever answer to Target’s new membership program
-
Uncategorized3 weeks agoRFK Jr: The Wuhan Cover-Up & The Rise Of The Biowarfare-Industrial Complex
-
Uncategorized3 weeks agoGOP Efforts To Shore Up Election Security In Swing States Face Challenges