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Some investors are already bullishly buying back into growth stocks again but is it too soon or will you regret being cautious?

After a period of recent gains, there is evidence investor sentiment is turning bullish on growth stocks again. But should you be or with economic data…

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After a period of recent gains, there is evidence investor sentiment is turning bullish on growth stocks again. But should you be or with economic data looking grim, were the last couple of months little more than a bear market rally before another drop?

Of course, nothing is set in stone and the relatively unique nature of current economic headwinds, which are not structural as is usually the case when stock markets crash, makes predictions dangerous. But as investors, we have to make some kind of attempt to keep likely scenarios in mind, even if it is simply to hedge against them.

Let’s examine the evidence around the question of whether it’s time for investors to get bullish again or not.

nasdaq composite

The first half of 2022 was a blood bath for growth stocks but has the storm broken?

It was an appalling first half of the year for equities investors, especially those most exposed to the kind of growth stocks that had powered the record bull market’s gains for over a decade. Inflation was already rising dangerously quickly as the global economy started to uncoiled itself out of pandemic conditions. It was then turbocharged by Russia’s invasion of Ukraine, which sent commodity prices, especially energy and food commodities, into a price spiral.

With inflation since hitting levels last seen in the 1970s, central banks were belatedly forced into responding with interest rate rises that many believe still have some way to go. Recent forecasts have suggested the BoE and Fed’s base rates could hit 4% next year with no obvious sign of inflation easing in the near term. The economic consensus is also for many of the world’s major economies, including the UK, USA and Europe, to slip into recession either towards the end of this year or next.

For now, a deep, prolonged recession is not expected. There are hopes that the geopolitical crisis in Ukraine might ease and if it doesn’t, the production of oil and gas increased elsewhere and supply lines adapted to get it where it needs to go in the world. Lower energy prices would take the edge off inflation even if grain prices remain high due to the disruption of exports out of Ukraine and Russia, which are both usually major suppliers to international markets.

Why are some investors bullish on growth stocks again?

This week it was reported that levels of bullishness among the subset of active, often shorter-term investors most focused on the growth-centric Nasdaq index canvassed by the Hulbert Nasdaq Newsletter Sentiment Index are high. Sentiment among the investor group tracked by the index, compiled by US analyst Mark Hulbert,  is not just bullish; it’s the most bullish it has ever been.

That particular group of adventurous investors are buying growth stocks again, confident the market has already turned a corner and is ready to head in a general upwards direction again.

Are bullish investors buying back into growth stocks jumping the gun?

However, the consensus view of mainstream analysts and investors, of the breed that usually has a 5-10 year investment horizon, is that the current bear market still has some distance to run. They are not yet ready to buy back into growth stocks with enthusiasm.

What can history tell us about if the recent rally can be sustained or is more likely to run out of steam and fall back into a bear trend?

The first obvious warning sign this 2022 summer bull market will prove a blip and give way to further declines is that rallies during a bear market are far from unusual. The last major stock market slump, in 2007-2009, featured seven major rallies. The dotcom crash of 2000-2003 featured six. Even a technical return to a bull market, defined as a gain of at least 20%, can be a temporary bear market rally.

In that context, it might well be optimistic to hope the second rally since the start of the 2022 bear market, with the first short-lived, marks a sustained return to a bull market environment. That’s especially the case when we consider how recently the market hit a long-term peak and that the evidence suggests inflation will not ease significantly in the near term or even this year.

Another indicator that it may well be too early for investors to fire up their bullish instincts is the history of valuation cycles, especially in the U.S. where most big growth stocks are listed. Over the last century or so, broad market cycles, referred to as secular cycles, have typically lasted around a decade or longer.

That’s put down to human psychology, which leads us into over-optimism when the going is good but equally means we can become overly pessimistic when things go wrong. The outcome for the stock market is long secular bull markets that drive prices to unsustainable levels followed by equally long bear markets when investors become overly cautious after being burnt.

In the early 1980s, at the start of the bull market that culminated in the dotcom crash of 2000, the average CAPE (cyclically adjusted price/earnings ratio) of S&P 500 consitituents was around 6. It peaked in 2000 at 43. Between 2009 and 2022, the longest bull market in history which recently ended, the average CAPE of S&P 500 companies rose from 12 to 38.

Right now the figure is around 28. If a similar pattern to previous bear markets plays out, the CAPE of growth stocks would be expected to fall by a good deal more before valuations become cheap enough to allow for a long-term upwards trend.

So should I wait before investing in growth stocks again?

Historical patterns offer investors invaluable information about how a current trend or cycle might play out. The stock market is famously cyclical. However, investing would be simple if it was as easy as spotting a cycle and playing it as an identical re-run of previous cycles.

There are always some differences between cycles and there are also always new patterns that haven’t been seen before or play out with variations in timing. And there are some unique factors influencing what is happening now.

The first is that we’ve seen a period of extended quantitative easing by central banks that stretches back two decades and has no obvious historical precedent. The second is that it’s difficult to tell how much the 2022 bear market is down to the hangover from the Covid-19 pandemic and a major war in Europe.

Inflation was already rising and may have become a serious problem anyway but we don’t know to what extent. It would have almost certainly been lower without a global pandemic followed by a war but guessing by how much is speculation.

We also don’t know exactly how long it will take for supply chains to be reset efficiently and for the war to stop driving up commodity prices.

Don’t try to time the market

All-in-all, investing with the assumption the worst of the 2022 bear market has already run its course seems a risky approach. But that doesn’t mean you shouldn’t be buying growth stocks at all. Even if stock markets fall further in the wake of recent gains, the smart money would be on them being considerably higher than current levels a few years from now.

That means that buying growth stocks now because you expect them to finish the year, or even next year, higher, would be a very risky bet. But buying them, or the growth stock-centric Nasdaq index for more diversified exposure, with the expectation that you will have realised a healthy return on investment several years from now, would be a perfectly reasonable approach.

Trying to time the market perfectly is usually an ill-advised approach. It is cyclical and patterns reoccur with impressive regularity but rarely with timing that is similar enough to bet on. Especially when this bear market has, as discussed, several unique qualities.

If your investment portfolio has a long-term horizon of around ten years or more, taking on exposure to growth stocks now may well work out even if they lose value in the short term. But with lower volatility a plus for long-term gains, it may not be a good idea to sell off defensive holdings just yet. And you don’t need to.

Dripping money into the growth sector rather than going all in on it offers a hedge against a faster return to a bull market than recent bear markets have managed. And if you have plenty of time to wait is relatively low risk. But doing so in anticipation of an imminent return to a sustained bull market would seem high risk.

The post Some investors are already bullishly buying back into growth stocks again but is it too soon or will you regret being cautious? first appeared on Trading and Investment News.

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Decrease in Japanese children’s ability to balance during movement related to COVID-19 activity restrictions

A team of researchers from Nagoya University in central Japan investigated how restrictions on children’s activities during the COVID-19 pandemic affected…

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A team of researchers from Nagoya University in central Japan investigated how restrictions on children’s activities during the COVID-19 pandemic affected their life habits and their abilities to perform physical activities. By comparing medical examination data before and after the onset of the pandemic, they found that physical functions among adolescents deteriorated, including their dynamic balance. They also found that the children had higher body fat levels and worse life habits. Rather than a lack of exercise time, this may have been because of a lack of quality exercise due to activity restrictions.  

Credit: Credit must be given when image is used

A team of researchers from Nagoya University in central Japan investigated how restrictions on children’s activities during the COVID-19 pandemic affected their life habits and their abilities to perform physical activities. By comparing medical examination data before and after the onset of the pandemic, they found that physical functions among adolescents deteriorated, including their dynamic balance. They also found that the children had higher body fat levels and worse life habits. Rather than a lack of exercise time, this may have been because of a lack of quality exercise due to activity restrictions.  

During the COVID-19 pandemic, in Japan, as in other countries, schools and sports clubs tried to prevent the spread of infection by reducing physical education and restricting outdoor physical activities, club activities, and sports. However, children who are denied opportunities for physical activity with social elements may develop bad habits. During the pandemic, children, like adults, increased the time they spent looking at television, smartphone, and computer screens, exercised less, and slept less. Such changes in lifestyle can harm adolescent bodies, leading to weight gain and health problems. 

Visiting Researcher Tadashi Ito and Professor Hideshi Sugiura from the Department of Biological Functional Science at the Nagoya University Graduate School of Medicine, together with Dr. Yuji Ito from the Department of Pediatrics at Nagoya University Hospital, and  Dr. Nobuhiko Ochi and Dr. Koji Noritake from Aichi Prefectural Mikawa Aoitori Medical and Rehabilitation Center for Developmental Disabilities, conducted a study of Japanese children and students in elementary and junior high schools, aged 9-15, by analyzing data from physical examinations before and during the COVID-19 pandemic. They evaluated the children’s muscle strength, dynamic balance functions, walking speed, body fat percentage, screen time, sleep time, quality of life, and physical activity time.  

The researchers found that after the onset of the pandemic, children were more likely to have decreased balance ability when moving, larger body fat percentage, report spending more time looking at TV, computers or smartphones, and sleep less. Since there were no changes in the time spent on physical activity or the number of meals eaten, Sugiura and his colleagues suggest that the worsening of physical functions was related to the quality of exercise of the children. The researchers reported their findings in the International Journal of Environmental Research and Public Health.  

“Since the outbreak of the novel coronavirus in Japan after April 2020, children have not been able to engage in sufficient physical education, sports activities, and outdoor play at school. It became clear that balance ability during movement was easily affected, lifestyle habits were disrupted, and the percentage of body fat was likely to increase,” explained Ito. “This may have been because of shorter outdoor playtime and club activities, which impeded children’s ability to learn the motor skills necessary to balance during movement.” 

“Limitations on children’s opportunities for physical activity because of the outbreak of the novel coronavirus have had a significant impact on the development of physical function and lifestyle and may cause physical deterioration and health problems in the future,” warned Ito. “Especially, the risk of injury to children may increase because of a reduced dynamic balance function.” 

The results suggest that even after the novel coronavirus becomes endemic, it is important to consider the effects of social restrictions on the body composition of adolescents. Since physical activities with a social element may be important for health, authorities should prioritize preventing the reduction of children’s physical inactivity and actively encourage them to play outdoors and exercise. The group has some recommendations for families worried about the effects of school closings and other coronavirus measures on their children. “It is important for children to practice dynamic balance ability, maintaining balance to avoid falling over while performing movements,” Ito advised. “To improve balance function in children, it is important to incorporate enhanced content, such as short-term exercise programs specifically designed to improve balance functions.” 


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Contradictions, Lies, And “I Don’t Recalls”: The Fauci Deposition

Contradictions, Lies, And "I Don’t Recalls": The Fauci Deposition

Authored by Techno Fog via The Reactionary,

Today, Missouri Attoney General…

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Contradictions, Lies, And "I Don't Recalls": The Fauci Deposition

Authored by Techno Fog via The Reactionary,

Today, Missouri Attoney General Eric Schmitt released the transcript of the testimony of Dr. Anthony Fauci. As you might recall, Fauci was deposed as part of an ongoing federal lawsuit challenging the Biden Administration’s violations of the First Amendment in targeting and suppressing the speech of Americans who challenged the government’s narrative on COVID-19.

Here is the Fauci deposition transcript.

And here are the highlights…

EcoHealth Alliance - the Peter Daszak group - is knee-deep in the Wuhan controversy, having been funded by the Fauci’s NIH for coronavirus and gain of function research in China (and having worked with the Chinese team in Wuhan). What does Fauci say about EcoHealth Alliance? Over two years after the COVID-19 pandemic began, and after millions dead worldwide, he’s “vaguely familiar” with their work.

In early 2020, Fauci was put on notice that his group - NIAID - had funded EcoHealth alliance on bat coronavirus research for the past five years.

This coincided with early reports - directly to Fauci, from Jeremy Ferrar and Christian Anderson - “of the possibility of there being a manipulation of the virus” based on the fact that “it was an unusual virus.”

Fauci conceded that he was specifically made aware by Anderson that “the unusual features of the virus” make it look “potentially engineered.”

Fauci couldn’t recall why he sent an article discussing gain of function research in China to his deputy, Hugh Auchincloss, telling him it was essential that they speak on the phone. He couldn’t recall speaking with Auchincloss via phone that day. But remarkably, Fauci did remember assigning research tasks to Auchincloss

Fauci was evasive on conversations with Francis Collins about whether NIAID may have funded coronavirus-related research in China, eventually stating “I don’t recall.”

The phrase “I don’t recall” was prominent in Fauci’s deposition. He said it a total of 174 times:

For example, Fauci couldn’t remember what anyone said on a call discussing whether the virus originated in a lab:

During that same call, Fauci couldn’t recall whether anyone expressed concern that the lab leak “might discredit scientific funding projects.” He also couldn’t recall whether there was a discussion about a lab leak distracting from the virus response. Fauci did remember, however, that they agreed there needed to be more time to investigate the virus origins - including the lab leak theory.

What else couldn’t Fauci remember? Whether, early into the pandemic, his confidants raised concerns about social media posts about the origins of COVID-19.

Yet Fauci did admit he was concerned about social media posts blaming China for the pandemic. He even admitted the accidental lab leak “certainly is a possibility,” contradicting his prior claims to National Geographic where he said the virus “could not have been artificially or deliberately manipulated.”

Fauci also couldn’t recall whether he had any conversations with Daszak about the origins of COVID-19 in February 2020, but admitted those conversations might have happened: “I told you before that I did not remember any direct conversations with him about the origin, and I said I very well might have had conversations but I don't specifically remember conversations.” And he couldn’t recall telling the media early on during the pandemic that the virus was consistent with a jump “from an animal to a human.”

Fauci said he was in the dark on social media actions to curb speech and suspend accounts that posted COVID-19 information that didn’t fit the mainstream narrative: “I’m not aware of suppression of speech on social media.” Yet it was Fauci’s proclamations of the truth, whether about the origins of COVID-19 to the effectiveness of hydroxychloroquine, that led to social media companies banning discussions of contrary information.

Regarding those removals of content, Fauci had no personal knowledge of a US Government/Social Media effort to curb “misinformation.” But he conceded the possibility numerous times.

Then there’s the issue of masks. In February 2020, Fauci informed an acquaintance that was traveling: “I do not recommend that you wear a mask.” Fauci would later become a vocal proponent of masks only two months later.

I’m near my Substack length limit - posting the excerpts does that - but you can see from Fauci’s testimony that his public statements about COVID-19 origins and the necessity to wear a mask didn’t match his private conversations. This has been known for some time, but it’s finally nice to get him on record.

Again, read it all and subscribe here.

Tyler Durden Mon, 12/05/2022 - 21:40

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Global Wages Take A Hit As Inflation Eats Into Paychecks

Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook…

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Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook clouded by uncertainties have led to a decline in real wages around the world, a new report published by the International Labour Organization (ILO) has found.

As Statista's Felix Richter reports, according to the 2022-23 Global Wage Report, global real monthly wages fell 0.9 percent this year on average, marking the first decline in real earnings at a global scale in the 21st century.

You will find more infographics at Statista

The multiple global crises we are facing have led to a decline in real wages.

"It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” ILO Director-General Gilbert F. Houngbo said in a statement, adding that “income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.”

While inflation rose faster in high-income countries, leading to above-average real wage declines in North America (minus 3.2 percent) and the European Union (minus 2.4 percent), the ILO finds that low-income earners are disproportionately affected by rising inflation. As lower-wage earners spend a larger share of their disposable income on essential goods and services, which generally see greater price increases than non-essential items, those who can least afford it suffer the biggest cost-of-living impact of rising prices.

“We must place particular attention to workers at the middle and lower end of the pay scale,” Rosalia Vazquez-Alvarez, one of the report’s authors said.

“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic. This can be an effective way to lessen the probability or depth of recessions in all countries and regions,” she said.

Tyler Durden Mon, 12/05/2022 - 20:00

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