On Monday, the Nasdaq index had its best day since April. The rising odds of a clear victory for Joe Biden and a Democratic blue wave (see cover story) have raised hopes of a post-election stimulus binge.
The new mood is especially evident in the Vix index, the “so-called stock market fear gauge”, says Randall Forsyth in Barron’s. It has retreated below 25 from almost 30 earlier this month. That comes despite the fact that Biden is proposing a rise in capital-gains tax. JPMorgan strategist Nikolaos Panigirtzoglou notes that previous hikes in 1986 and 2012 delivered a roughly 5% hit to American stocks.
Perhaps even more surprising, tech stocks are once again leading the rally in the face of intensifying antitrust pressure, says John Authers on Bloomberg. Apple shares were up by 6.35% on Monday. The tech stock surge in August was accompanied by rising demand for call options, a sign that investors are making big leveraged bets on the sector. That period was followed by a sharp pullback in tech the following month. Now, once again, options activity is on the rise.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
US investors also have the start of the third quarter earnings season to keep an eye on, says Russ Mould of AJ Bell. The expectation is that the second quarter was the bottom for corporate earnings. Analysts are forecasting an 18% quarter-on-quarter rise in earnings per share.
That would still leave S&P 500 earnings 21% lower than this time last year but would suggest that things are going in the right direction. Yet on a cyclically adjusted price/earnings (Cape) ratio of more than 30, S&P 500 shares are very expensive, so the long-term outlook is uninspiring.
-
Small UK industrial stocks are hidden gemsOpinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
Small UK industrial stocks are hidden gems
Opinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?
Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
The City's big bet on green finance fails to pay outOpinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocksLiquidity constraints mean investment trusts are best placed to seize the juiciest opportunities
