European equities just enjoyed their largest inflow in eight weeks.
The $1.5 billion haul was emblematic of what BofA’s Michael Hartnett described as “a week of rotation back to ‘value.'”
Financials saw the biggest inflow in 10 weeks, for example, and materials the most in two months. Tech inflows, meanwhile, moderated.
I mention the inflows to European stocks on Friday because I needed an excuse to highlight the longest win streak in more than two decades. Note that the Stoxx 600 was on pace for a tenth consecutive record close (figure below).
Obviously, European shares would benefit if the reflation trade does, in fact, find its footing after stumbling during the June-July growth scare and attendant bond rally.
On Friday, Goldman raised their three-, six- and 12-month targets for the Stoxx 600 to 480 (that’s just marking to market), 500 and 520, respectively. The bank lifted their profit forecasts as well, even as Peter Oppenheimer expressed some caution around margins and growth in 2022.
In keeping with the idea that the “reversal of the reversal” (so to speak) has legs, Goldman reckoned there’s a “catch-up” trade in banks, basic resources and energy, after outperformance by defensives.
Meanwhile, BofA’s Sebastian Raedler said that while softer growth and higher reals might eventually dent European shares, it’s premature to be pessimistic. Any pullback would come in the fourth quarter, the bank said.
The Stoxx 50 on Thursday notched a ninth daily gain, cementing the second-longest winning streak in history (figure below).
The only longer stretch of gains for the large-cap gauge came in September of 2018, just prior to Jerome Powell’s “long way from neutral” misstep, which conspired with Donald Trump’s trade war to set US equities on course for a disastrous fourth quarter.
More broadly (and I’ll come back to this over the weekend), the bear case is in shambles. I realize some readers won’t take kindly to that assessment, but past a certain point, it’s incumbent upon honest people to acknowledge reality.
For example, I’ve been compelled (on any number of occasions) to plainly state that irrespective of my long-standing contention that Bitcoin is totally worthless, that view has been rendered irrelevant at various intervals when prices accelerated into the stratosphere. Indeed, there’s a (strong) argument to be made that as long as Bitcoin doesn’t actually go to zero, the contention that it has no value is meaningless.
The same general principle applies to equities more than halfway through 2021. The debate is over. Stocks have doubled from the pandemic lows. The gains since the financial crisis are Bitcoin-esque. When it comes to stocks, bears are right around once per decade. Does that really count as “right”? If Bitcoin does eventually go to zero, was I “right” all along? Or was I just perpetually wrong until that old adage about things which can’t go on forever finally caught up to crypto?
Of course, just as Bitcoin proponents need to lock in gains at some point if they want to truly secure bragging rights, so too does one need to eventually convert paper gains on stocks into dollars.
But then what are dollars? Just worthless pieces of paper. Ultimately, it’s all paper gains. None of it matters.
To the extent we’re compelled to pretend that it does, though, dour pronouncements about asset prices delivered time and again over the past dozen years have proven disastrously wrong. Even as many equally dire predictions about humanity have been chillingly correct.
Reading ‘Childhood’s End’.
Frighteningly on point, even though it was written in 1953. I don’t think I am going to like the ending.
You will.
Yup
Gains are ultimately not the point… I mean unless this is some sort of game with a high score we’re all competing for and even if we go extinct in a century it’ll all be worth it because someone “WON”. The entire point of economics in some hopelessly naïve sense was to make us better at doing the things we needed to do to survive. Whatever it is today it isn’t that or is some shadow of that. I’m not sure what the proper wakeup call is but I’m pretty certain the day before the last human dies they could be sitting around their pile of crypto, gold and stocks all at all time highs enjoying the finest luxury goods and services from automatons. So what does being right or wrong about any specific investment call matter if we can’t… survive?
“ Gains are ultimately not the point “
The market is not the economy. The markets are, at best, a roiling dogpile of manic, fearful, confused and conflicting bets on what millions of other players will expect to hear the 500 or 3,000 most successful companies in the economy, the ones that eat the other 100,000s of companies for lunch, say about what they in turn expect to see from their business in a year or thereabouts from today.
You don’t – this is my personal opinion, only, not some commandment I’m trying to impose on anyone – you don’t participate in the market because you’re trying to make anything better for humanity in any bigger sense. You do it because it is one of the most interesting and entertaining circuses on earth, and because there are gains to be sought, that if realized will feed and clothe you better than most other occupations for which you’re suited.
Without the gains, the entertainment part becomes too expensive to bear. So the gains are most definitely the point. Of this game. Not of one’s life, whether one is a single human or a society of humans – or else it is an empty and worthless life indeed. Just of this game.
Video game sales were up 14%, ytd over 2020. We are going to entertain ourselves into oblivion.