Big Picture

Our overall Primary Trend Indicator remains Positive.   We have recently moved from Neutral to Positive related to the direction/trend of stocks and our data is showing continued momentum and money-flow, higher participation in advancing stocks versus decline stocks and continued soft money policies.  During U.S. presidential election years, stock markets have historically outperformed and we see this election as no different.  Investors should be watchful for Breaking News flows on COVID infection rates and the rate of virus transmission many G7 nations begin to enter fall and winter seasons.  Any sign of of the virus re-appearing could cause investors to sell and reorganize portfolios to work off overbought conditions.

Changing Fundamentals

U.S Lawmakers not close on deal for continued COVID Relief support to unemployed

Australia GDP (Y/Y) Q2 -6.3% (est -5.1%; prev 1.4%)

U.S. August Non-Farm Payrolls data out Friday September 3 with a +1.2Million estimate (+1.76 million reported for July)

 

 

Focus List

Stock Markets and the Federal Reserve

The seemingly unstoppable rise in the stock market of late has ripped the bandaid off of market bears.  Investors are cashing in on recent corporate earnings while at the same time pricing in excessive valuations on future prospects.  You can thank the Federal Reserve for that!

Consequently any company that can show a decent growth rate will get bid up on the expectations it can grow market share.  With interest rates at 0% investors of all skill and experience levels are flush with capital and searching for alpha.  Zoom Media had a strong earnings report and the stock advanced 45%!  The sheer momentum of cheap money searching for return seemingly betting that all companies can grow at 50-100% growth rates pushes up companies valuations.  0% interest rates has fuelled valuations beyond historical financial measures.  In fact, it has likely created a new set of measurements and calculations which are only recent and not yet fully understood.

The comparisons between this stock market cycle and ones of the past are not exactly relatable.  Never in history has there been such an expansion of global monetary policy and the access to capital markets.  Sebright Capital believes this next phase of the market cycle will run longer and higher than most want to believe.  In a recent edition of Market Insights we moved from Neutral to Positive in stock market trend analysis, what we call the Big Picture, and since then equities have hit new highs.  Economic data will continue to appear weaker than normal as countries open up again.  Below we have listed some of the recent companies we’ve mentioned in Market Insights which our data continues to show upside potential.  You can view the performance history versus the S&P500 by toggling between the date ranges.