Opposing forces hit stocks on Thursday.
Key averages rose sharply after a recent spike, ending a mixed trading session that faced an increase in coronavirus cases in newly discovered states such as Texas, which said it would suspend its efforts to try to stop the spread.
US stocks initially rose after banking regulators said they would ease some restrictions imposed after the financial crisis of 2007-2009, which led to an increase in bank stocks that continued in the afternoon.
Here’s what five market observers had to say about Thursday’s actions:
The danger of deregulation
Former chairman of the Federal Deposit Insurance Corporation, Sheila Bair, said the bank’s regulators were “reckless”:
“I think they are significantly in the direction of deregulation. This is a kind of sliding path that we have been following for several years, and I believe that this is the wrong path, and now we are paying for it in terms of what we could have: a greater ability of banks to cope with the current pandemic. These two specific proposals, in my opinion, are reckless, especially as the former chairman of the FDIC. You will not be surprised to hear me say that the 40 billion dollars that will no longer be in banks to protect them from the risks of derivatives that their affiliates impose on them no longer exists. I think this puts at risk, increases the risk for deposit insurance funds. So I think it is reckless. The rule of Walker, they weaken it for many years. It was constantly attacked. This, as I understand it, a rule change mainly depends on banks to decide what is owned or not. We went this way with risk-based capital. If you remember, we were basically the banks that decide what capital they should have before the great financial crisis. So, was there, done it in a different context. This is not a good idea. So I think it’s very disappointing, but that’s what it is. I’m getting used to it with the present – I respect them all, but I think they are directed, so that everything is not going as it should. ”
Charlie McElligott, managing director and head of cross-asset strategy at Nomura, said historical trading models support this week, being volatile for stocks:
“Without a doubt, a very pronounced seasonality in the June S & P auction. And this has been over the past 25 years, more or less, since volatility has become a class of assets, since volatility has become an input for determining the exposure of institutional investors. And since this correlated with this kind of resumption of trading with a good economic trajectory over the last month, what this phenomenon really does turn around is the June expiration of the option, which is … one of the four expiration dates of the option during the course of the year. This is quarterly. And, of course, in the light of the chaotic trading environment of the last quarter, it was very large. And what you will eventually see over the past 25-year period, especially in trading on expiration of options in June, is a really well-documented phenomenon when the week and, in fact, the two-week period after it – after the expiration of the option, which for VIX … was last Wednesday [and] for ETF, index and singles … was last Friday – trading declined. And we are talking about the last 27 years, 26 years. When S & P increased by more than a month before the expiration of the options, next week, that is, this week, S & P increased in only 12% of cases, and there are a number of entries. ”
Tina Byles Williams, founder and CEO of Xponance, believed that the chances of another full-blown worldwide block were low:
“I think that we will continue to see as if you, localized by W, in the economy, continued to see how this happens. I will note that some of the most serious cases of growth occur in emerging markets such as Brazil, India and Mexico. But I will also say that if you look at Sweden and Iran, [they] imagine an interesting example in which they clearly begin to see the second wave of cases, but the mortality rate does not actually increase at the same level as the first wave. And I think this is partly because we have learned to better isolate vulnerable people, improve response times, and have introduced more effective therapeutic measures. So, the likelihood of another global blockage, I think, is low, but it challenges the idea of a V-shaped recovery. “
Bob Doll, Nuveen’s chief stock strategist, said the market is “still a bit ahead of itself”:
“I think … that Covid data remains the most important set of data points. When you start to worry about outbreaks, as we saw in the last 48 hours, the market turns red. And a couple of days, when it’s quite quiet, and maybe there are rumors about progress in the field of therapy or vaccines, the market is developing. This is the main story, and behind it, of course, is economic history, which is almost as important. But this is not going to be careful. Turning off the economy, we saw a lot of good news, as many of the data moved from a very low level to a lower level, but the growth was impressive, and the markets liked it. a straight line, and we will have bumps along the way. I would buy bumps, but in my opinion, the market is still a little ahead of myself. “
Main Street Market
Elizabeth Burton, chief investment officer for the Hawaii employee retirement system, wondered if the shares should be where they are given absolute uncertainty:
“When I was … originally asked to come to this show, I said that the stock markets and the credit markets seem to tell two different stories. At least from yesterday, it looks a bit like stock markets Get on the same page. But what is interesting is that the market is actually as strong as the one that is given where the economy is located … In fact, if you think about where the levels are, I understand that the project of justice directed towards the future, but do we say that the world is now as good as in February? I dont know. The data that appears on this subject is rather mixed, so time will tell, but I think that we are definitely deploying of course between Main Street and the markets. “