Meme trading is ‘an incremental positive’ to the S&P 500
Brian Sozzi, Julie Hyman and Myles Udland from Yahoo Finance, together with Julian Emanuel, Managing Director of BTIG, summarize today's market activities.
MYLES UDLAND: All right. Welcome back to Yahoo Finance Live this Thursday morning. We're just two minutes from the opening bell on a busy Thursday morning - of course, the markets are rising after this inflation data. We're seeing Dow futures down about half the 1%. Julian Emanuel is coming to us now to talk about this and everything else on the market. He is the managing director at BTIG.
Julian, let's start with this inflation data. Let's start with what the bond market has been doing over the past few months. Really, this week everyone seems to be realizing that the 10-year figure was 150, even with today's data anticipated. How did you think about this dynamic in the market?
JULIAN EMANUEL: Well, you know, the bond market, like the stock market, has done practically absolutely nothing over the past few months - within a relatively narrow range. And I think you know since the volatility is so low on all of these things outside of meme stocks, people focused on that downward move, say, from 1.65% of the yield to below 1.50% for now.
We'd attribute it to a couple of things. First of all, we need to remember that the virus is still a problem outside of the US. Europe is getting better, we know that. But emerging markets - apparently there is news of new lockdowns in China, no matter how small. And we have to remember that. And this kind of psychology makes international investors especially headed for fixed income securities.
The other thing, however, is that I think what we've figured out in the last three or four days about what the bond market discounted a few weeks ago is that the Biden government's ambitious spending plans won't be anywhere near as easy to implement as that Market believed it was, you know, when that range started.
JULIE HYMAN: And Julian, we're going to hear that opening bell in a moment, Zeta here this morning ringing the bell very enthusiastically. You know, the narrative you're talking about, I mean, I think there is some tension in DC about the size of the expense package. But otherwise, on a macro basis, there seems to be remarkably little tension in the market right now, right?
We know inflation is running hot. We know that the economy, at least in the US, is opening up and recovering. And do you know where will the surprises come from? So where do the opportunities to make money in this market come from?
JULIAN EMANUEL: In the long term, we think the market will move up. The average bull market lasts 51 months and rises over 150%. We are 14 months old. We are up 90 percent from March - the low point. We think there is more to be done. But honestly, what the markets are telling you right now is that whole notion of ephemeral or non-inflationary is the single-minded obsession.
And the fact that we're going sideways means the market doesn't know, really doesn't know, and may not know until later this summer when we see number one what the employment data looks like, particularly from those states that have been suspended or in Process of suspension of unemployment insurance and then actually in September, when the labor market congestion in general should essentially go away, especially since the children can go back to school and the parents can go - you know, leave the house and go back to work.
BRIAN SOZZI: Julian, despite all the uncertainties in the market, hot inflationary pressures today, mixed to mediocre jobs last week, really, the S&P 500's broader markets were up. Do you think we're witnessing this excitement about these meme stocks and retailers - which is finally spreading to the wider market?
JULIAN EMANUEL: I wouldn't go that far yet. But it's certainly, if anything, an incremental plus and part of what keeps the S&P at the high end of the range. Again, we wouldn't be surprised if this kind of enthusiasm spilled over into the broader market at some point, because when you look at that, the combination of incredibly simple monetary policy, intense liquidity, margin debt with the high and speculative fever and actual money making, if you look at meme stocks over the past few weeks, that kind of explosive move higher could and could well be part of the endgame of this bull market. But we don't necessarily see this type of activity until maybe 2022.
MYLES UDLAND: And, you know, Julian, as you know, I mean, things are so different this time. If you just look at the VIX, it's essentially halfway through the January and February levels. But meme trading also makes me think about what's happening to crypto. And that's at an interesting turning point, where there is of course always speculative enthusiasm.
But the story was supposedly about big financial institutions, the kind of people you work with and use crypto for. What did your clients say in this regard, given that bitcoin like the S&P and the bond market has kind of gone nowhere in the past few months?
JULIAN EMANUEL: So the institutional clients continue to believe in history for the long term, you know that it's all about blockchain technology and its potential transformative power when it starts to be adopted. And again, I want to remind people that adoption stats basically 2% of the world's population has interacted with cryptocurrencies in one form or another. That number on the internet, 2% adoption interaction, was 1996. So that tells you about the size of the runway.
In our view, the institutions we speak to have all added to their positions as Bitcoin in particular has drifted towards $ 30,000. Could we go a little lower when we finally get some U.S. government ordinances regulating it? Absolutely. But we think this would be a buying opportunity. The long-term picture remains very interesting for us.
MYLES UDLAND: All right. Julian Emanuel, chief strategist for stocks and derivatives at BTIG. Julian, it's always nice to have some time with you. Hopefully we'll talk soon. Hopefully we'll see each other in person in not too many months.
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