This commentary was posted recently by fund managers, research firms and market newsletter writers and was edited by Barron’s.
Aden’s forecast: silver, metals, markets
November 12: Interest rates rebounded again this week. But it looks like a rebound. Interest rates are expected to stay low and with soaring inflation, the real interest rate is currently at a new high. For now, if the 30-year Treasury yield remains below 1.92%, the major trend will be downward.
Bond prices remain bullish and we continue to advise buying and holding long-term US government bonds. Our recommended bond funds are TLT [
iShares 20+ Year Treasury Bond
], SPTL [
SPDR Portfolio Long Term Treasury
], and ADVICE [
iShares TIPS Bond
]. They are about to increase even more. If you have UBT [
ProShares Ultra 20+ Year Treasury
], it’s good to keep it.
—Pam and Mary Anne Aden
J & J’s breakup looks smart
Johnson & johnson
organized a call this morning to discuss the planned separation of the Pharma / Device (NewCo) and Consumer Health (SpinCo) businesses. Our main takeaways from the call are: 1) the separation will allow each new entity to be more agile in investment and growth opportunities; 2) Pharmaceutical growth is expected to continue to overtake the market in the longer term; 3) management seemed confident to allay investor concerns about upcoming patent expirations during analyst day next week; 4) Medical device expected to grow at or above the markets where it competes; 5) dissynergies of up to $ 500 million to $ 1 billion, but JNJ expects to address this quickly and sees a potential opportunity to properly size NewCo. We expect the talc litigation to remain unresolved for the time being, as it is not clear whether this responsibility will fall on NewCo or SpinCo. Net-net, we believe the planned separation may reflect management’s confidence in the continued growth of the business despite the expiration of pharmaceutical patents.
—Larry Biegelsen and his team
Margin debt flashes yellow
Monthly market risk update: November 2021
November 11th : One indicator of potential problems is margin debt. Debt levels as a percentage of market capitalization have increased particularly at the start of the pandemic and throughout 2020. Since then, we have seen margin debt first decline, but more recently rebound as a percentage of capitalization. stock market. Margin debt increased in August and September, and the overall level of margin debt remains high on a historic basis. The high level of indebtedness associated with the market is a risk factor in itself but not necessarily immediate.
For immediate risk, changes in margin debt over a longer period of time are a better indicator than the level of that debt. If we look at developments over time, peaks in debt levels usually precede a withdrawal.
Margin debt as a percentage of market capitalization rose 5.2% in August after falling 1.2% in July. Despite this, the year-over-year growth rate remains well below the peak of 32.5% we saw in January.
While the year-over-year growth figure remains below the highs at the start of the year, the increase in margin debt as a percentage of market capitalization is worth watching, given the level historically. high margin debt. We have kept this indicator at a yellow light for now.
S&P 500 price target: 5050
The RBC Macroscope
RBC Capital Markets
November 11th : We presented our 2022 [
] September price target at 4,900. At the time, 4,900 was the average of the various valuation, earnings, and economics scenarios and backtests we looked at. We haven’t made any changes to our earnings per share forecast for 2022 or 2023 (at $ 222 our 2022 estimate is $ 1 above the upward sell side consensus and at $ 238 our 2023 estimate is $ 3 below the ascending consensus seller side consensus). But after refreshing these scenarios for the latest updates to our models and recent market prices (we used the November S&P 500 high as the assumed endpoint for 2021), we decided to raise our target very modestly. 2022 price, around 3%, to 5,050 ….
Our revised target of 5,050 for 2022 calls for a 7.3% gain beyond the S&P 500’s early November high and an 8.7% gain from Wednesday’s close. While our goal is determined quantitatively, it still sounds like the kind of story we want to tell about how 2022 is likely to play out – a year of solid gains but more subdued returns than we’ve seen in. 2021. As to why we feel constructive (beyond a strong economy), cash deployment trends are positive, foamy earnings revisions are no longer an overhang in the market, individual investor sentiment is turned so bearish recently that it briefly gave a contrarian buy signal for the stock market in October, and fiscal policy tilts favorably with corporate tax hikes less of a threat. The start of the reduction and the proximity of the Fed hikes made investors uncomfortable, but stocks normally show gains after take-off as long as the economy is strong enough to cope with them.
An alarming case for gold
Ahead of the herd
November 10: Excessive money printing not only in the United States, but also in Britain and the European Union continues to devalue currencies at an alarming rate (this is, by definition, inflation, because more is needed). ‘units of currency to buy the same amount of goods as before) – for which the precious metals, namely gold and silver, are the best defense.
Inflation erodes the purchasing power of fiat currencies and eventually they become worthless. The dollar has lost 90% of its purchasing power since 1950.
However, since 1972, gold has gone from $ 35 per ounce to $ 1,800.
The Fed can telegraph its intentions as much as it wants; The fact remains that at such high and much higher debt levels, interest payments will eventually cripple the federal government, businesses and the ultimate holder of the bag, the consumer.
The US government is addicted to spending, and Wall Street is addicted to the Fed’s easy money policies, including printing money to support government borrowing and ultra-low interest rates, both of which seem to be off limits. end.
In this environment of excessive debt and runaway inflation, there is only one way to protect your wealth, and that is to hold quality gold and silver or junior stocks in metals. precious.
Small caps are stylish
NDR Ned Davis Research
November 9: We are moving from a neutral stance towards a preference for small caps over large caps … Small caps have been cheap relative to large caps for years, but the recent combination of faster growth in corporate earnings small caps and the outperformance of large caps pushed small caps to their cheapest relative futures P / E ratio compared to large caps since August 2000.
Small-cap EPS growth is expected to outpace large-cap EPS growth over the next year. Washington’s most recent tax proposals could widen the gap. As detailed last week, the 15% minimum tax proposed by Democrats would apply to companies making more than $ 1 billion a year. By the second quarter of 2021, 137 companies in the S&P 500 had earned more than $ 1 billion. A single stock in the
S & P600
hit the threshold, and it was Genworth Financial at $ 1.03 billion. If the tax proposals become law, the impact on small caps could be less than on large caps.
—Ed Clissold, Thanh Nguyen
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