Market Watch —
A modest recovery looks to be under way after Monday’s pullback, as hope springs eternal for fresh stimulus from President-elect Joe Biden’s administration. And why should the market stop doing what it has been doing for a long time now? Bounce back again and again.
But is there trouble in paradise? “The equity market’s ability to rally decisively in the face of the tragic events at the Capitol on 1/6, the virus’ escalation, a poor employment report and rising yields confirm that a new, more speculative, more volatile phase of the bull market has begun,” BTIG’s chief equity and derivatives strategist Julian Emanuel and equity strategy associate Michael Chu, tell clients in a note.
“Such a phase lasted 6+ months in 1999-2000, as the S&P 500 advanced a further 25%, with multiple 15% selloffs in between. The depth of any such pullbacks in 2021 is largely dependent on yields,” they say. And if yields keep rising, as they did Monday, then high-multiple growth names could be in trouble, they say.
They also provide our call of the day, and zero in on one sector they say investors might want to sidestep going forward.
Last month, they warned that communications and media stocks face risks from higher rates, increased regulatory scrutiny, and “a world fatigued by years of media overconsumption.”
Emanuel and Chu update those thoughts on Tuesday: “President Trump’s leaving office is bound to naturally diminish appetite for media, as will the reopening of the economy and the eventual return of travel and ‘away from screen’ leisure activities.” That and recent moves to restrict access to content providers and platforms by Alphabet GOOGL, Apple AAPL, Facebook FB and Twitter TWTR may only inspire politicians to seek more oversight on them.
