23 Oct ARE THE VAST MAJORITY OF MARKET PARTICIPANTS JANUSIAN THINKERS?
Value trounced growth yesterday, partially the result of earnings. OK, growth has decimated value since at least 2008 and depending upon the source value is trading at the sharpest discount to growth since at least 2000. Some data points go as far back to 1986 or even 1957.
Considerable attention was given to the several days of over performance of value over growth that occurred in September and the four hours of several days ago but such action was fleeting at best.
I do not think I am embellishing to write that passive/indexing is the most crowded trade in history, an environment that has permitted many today to call a trillion dollar capitalized company a growth company. Is this not an oxymoron?
Bloomberg writes for the third consecutive quarter, value earnings will grow at a greater pace than value earnings. I ask how does this support current rational that growth will dominate forever?
Many years ago I heard the phrase “The most obvious conclusions are those which are ignored, partially under the guise of Janusian Thinking.”
Are we there today, especially as it relates to negative bond yields?
Speaking of yields, the yield curve continued to steepen partially under the guise the Fed will lower rates again next week.
What will happen today?
Last night the foreign markets were mixed. London was up 0.12%, Paris down 0.62% and Frankfurt down 0.03%. China was down 0.43%, Japan up 0.34% and Hang Sang down 0.82%.
The Dow should open nominally lower on mixed earnings.
Many times I have commented that technology has the greatest risk to the trade war. Bloomberg quantified this view as it stated that tech companies that have exposure to China make up 38.6% of the sector’s market cap.
Moreover this cohort is expected to face a year over year revenue decline of 6.0% in 3Q and a 7.5% drop in fourth. Bloomberg report nets income has been in a free fall since 4Q18 averaging a 16.9% quarterly decline year on year and a 18.2% drop for 3Q19 and a an expected drop of over 20% in 4Q19.
Wow! News now emanates now on the West Coast. Against the above backdrop is a reason why the recessionary narrative is so pervasive. It is not what one writes but rather why one writes it. Main Street America however is robust, a robustness that is not captured in the popular narrative but is imperative to psychology of society.
The 10-year is up 6/32 to yield 1.74%.