Forget stocks—all the action is in crypto

Good morning.

Shhhh. The markets are sleeping…🤫🤫🤫. Okay, they are awake, but playing very, very quietly. Even with the S&P 500 hitting all-time highs in recent weeks, share volumes have been fairly lackluster. In fact, yesterday, the number of shares that traded hands on the benchmark exchange was a relative trickle—as meager as what we saw in the week between the Christmas and New Year holidays.

Where is everybody?

Maybe they’re on the sidelines, waiting on a new batch of inflation data. That comes later today—at 8:30 a.m.

Or, maybe they’re putting their spare cash in crypto. Bitcoin hit a new all-time high this morning, cresting to $62,575. Coinbase bulls are no doubt getting excited. That IPO pops tomorrow.

Let’s see what else is moving markets.

Markets update

Asia

• The major Asia indexes are mixed in afternoon trading with the Hang Seng up 0.2%.
• Alibaba had a knockout start to the week with shares rallying yesterday in New York and Hong Kong (it’s up 1% today in HK) on news the company would be hit with a mere$2.8 billion fine from Beijing. Founder Jack Ma’s net worthbumped up a cool $2.3 billion yesterday. Not a bad Monday.

Europe

• The European bourses were flat, with the Stoxx Europe 600 up 0.1% at the open, before climbing. Tech, chemicals and retail lead the way higher.
• Volvo tapped Nvidia as its supplier for high-powered chips to enable autonomous driving. The chipmaker’s share price has been booming as it pushes further into the microprocessor market, including CPUs.

U.S.

• U.S. Futures  are flat, but off their lows ahead of today’s CPI data. That’s after the DJIA, S&P 500 and Nasdaq edged lower on Monday.
• Treasury yields have ticked upwards overnight, but the 10-year note remains below 1.70%.
• There’s trouble in SPAC land. The SEC is mulling a new definition on the warrants given to SPAC insiders, a move that could weigh on the bottom line of these blank-check IPOs. Bloomberg has the scoop.

Elsewhere

• Gold is down, trading below $1,730/ounce.
• The dollar is up.
• Crude is up a touch with Brent trading above $63/barrel.
• Bitcoin jumped more than 3% this morning to trade in record territory, above $62,000.

***

Five tips for your portfolio

Tech is making a comeback. Small caps are on the back foot. A massive infrastructure bill is looming, as is inflation.

What does all this mean for your portfolio?

Tom Mantione, managing director of UBS Private Wealth Management, has some thoughts on the topic. He and his team sent me this note yesterday, which I thought was worth sharing with Bull Sheet readers.

Mantione offers five tips on how to view the markets as we move into a new investment cycle—or, at least, a series of mini cycles.

Here’s what he has to say:

(1) Even with stocks at record highs, we expect further upside thanks to supportive fiscal and monetary policy, improving economic data and faster COVID-19 vaccination rates.

(2) We are telling clients to stay invested and buy the dips in sectors of the market that have long-term staying power, such as greentech, healthtech, 5G and cybersecurity.

(3) In the short-term, we remain bullish on specific cyclical sectors, which are likely to see the largest upside surprise to earnings over the coming quarters. The consumer discretionary, industrials, financials and energy sectors are set to benefit from the continued reopening of the economy.

(4) The main risk for the stock market is any sign of the Federal Reserve altering its message of accommodative monetary policy, which has been such an excellent tailwind for global markets. If the Fed were to signal a desire to raise interest rates earlier, that could spark a moment of weakness for markets.

(5) How Congress handles tax policy and infrastructure spending over the coming months will be key to understanding what bipartisanship, if any, may occur. An inability of Congress to pass legislation could also spark volatility for the stock market.  

***

Bernhard Warner
@BernhardWarner
[email protected]

As always, you can write to [email protected] or reply to this email with suggestions and feedback.

Today's reads

Best Companies.Coins2Day yesterday published its annual list of the 100 Best Companies to Work For. It's partly based on employee surveys. Making the list was no small feat this past year as work-from-home and Zoom meetings became the norm. The top names really showed what it means to be a highly regarded employer. Top of the list are Cisco, Salesforce and Hilton.

Sweet spot. Big Chocolate has a child-labor problem. It's hardly a secret by now. That's where Tony Chocolonely comes in. For the past two decades, it's been pushing something called "ethical chocolate." Coins2Day's Vivienne Walt has a lovely profile of the firm, and its newest challenge: growth.

IPO of the year.  Mark your calendars. Tomorrow, shares in Coinbase start trading, the first major cryptocurrency exchange to go public. There's growing talk Coinbase will fetch a $100 billion valuation. "To justify that number, the math shows, Coinbase would need to mushroom into the biggest financial exchange in the world," Coins2Day's Shawn Tully writes. Zany, or perfectly reasonable? We'll find out tomorrow.

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Market candy

16%

With all eyes on inflation data today, let's look at another data point in the meantime: house prices. Mortgages are climbing. Lumber and copper shortages are messing with the price of new-builds. And those factors are impacting the wider market. "Over the past 12 months," Coins2Day's Lance Lambert reports, "the median sales price of existing homes has climbed 16% from $270,400 to $313,000." This dynamic could be with us for years to come, he adds. Here's why.