Cover story: The bull market recently hit 10 years, and it could rally for another 10—in general, bearishness rests on the fact the it has lasted for so long; “The yield curve briefly inverted, but even some investors who remain cautious on the U.S. market warn against reading too much into it”; Barron’s spoke to three strategists—Thomas Lee of Fundstrat Global Advisors, Binky Chadha of Deutsche Bank, and Dubravko Lakos-Bujas of JPMorgan—each of whom makes a case for continued bullishness.
Features: 1) After interest rate increases, the one-year Treasury bill yields 2.4%, prompting the question of whether ultra-short funds, which buy high-quality bonds with durations of less than one year, can keep up—the average ultra-short fund has only a 1.2% five-year annualized return, according to Morningstar; 2) The current market is testing the resolve of even the most dedicated value investors, who haven’t lost money, but have watched growth managers steadily gain ground; over the course of this market cycle, however, the gap between value stocks and growth stocks has gotten so large, and been so persistent, that some wonder if value will ever catch up; 3) Positive on BLK, Vanguard Group, STT: Firms each offer a comprehensive line of exchange-traded funds at hard-to-beat prices, and they essentially dominate the industry, holding 80% of ETF assets in about 600 products—raising questions about whether that concentration of power is stifling competition; 4) Treasury yields have been falling, typically an indicator of a weakening economy, yet bonds issued by risky companies have been rising sharply, which usually happens when the economic outlook is bright; the confusion creates opportunity for investors who know where to look; 5) Positive on FL: The shoe chain has gotten past the problems it faced two years ago, and last year began to expand in Asia, with stores in Singapore, Hong Kong, and Malaysia—earnings per share growth could rise by 13-16% through 2023; 6) Cautious on CGC, ACB, TLRY: There are currently no bargains among hemp or marijuana stocks these days, though eventually CBD—the hemp extract cannabidiol—will be big as it joins other wellness additives in products ranging from skin cream to pet food.
Tech Trader: Barron’s tested AT&T’s first-ever 5G smartphone feed—a live, commercial mobile network based on Release 15, an industry standard agreed upon in June—and found the service impressive, but limited; rival VZ’s 5G service is only available in select neighborhoods in Chicago and Minneapolis, and can be used only on a specific Motorola phone.
MFQ: Mutual fund managers are the new breed of activist investors—they’re taking a larger role in challenging companies to do better, but they’re doing so quietly to help the company, and its stock, over the long term; related story says that in the past, fund managers simply sold a stock if they didn’t like what a company was doing, but today they are increasingly nudging companies whose shares are trading for far less than they should be to make changes that will close the valuation gap.
Interview: Ruchir Sharma, chief global strategist and head of emerging markets at Morgan Stanley Investment Management, sees global markets at an inflection point: U.S. tech stocks and global multinationals could struggle, while emerging markets are poised for a revival
European Trader: Cautious on Just Eat: A recent spike in shares follows agitation from an activist investor, but the firm is without a leader after Peter Plumb stepped down in January, and it faces a raft of challenges that could hurt growth.
Emerging Markets: At least eight Chinese unicorns raised more than $1B through initial public offerings in Hong Kong or the U.S. last year, offering a smorgasbord of access to the country’s burgeoning economy—but “nearly all the issues have been dogs.”
Commodities: A new deluge of rain in the Midwest looks set to hit already waterlogged soil, possibly sending wheat prices soaring; to play the strong market, investors could buy WEAT, which tracks the price of futures, or shares of FMC, which sells crop-protection products.
Streetwise: “Interest rates are falling, growth is scarce, and there is a glut of investment dollars. That means Wall Street is setting up perfectly for a flight to nonsense,” says columnist Jack Hough in a piece about LYFT, Uber, and other money-losing startups that are going public.