#37 Daily Financial News Round Up - Dec 7,2021
Market Snapshot
Dow Jones is up by 1.87%, S&P500 is up by 1.17%, and Nasdaq Composite is up by 0.93%.
How’s crypto-market?
Bitcoin bounced back up over $50,000s by 5.31%. Polygon, BitTorrent and XRP are the top three traded cryptocurrencies in the last 24 hours. The top 3 gainers are Loopring, Bitcoin SV and Polygon. The top 3 losers are Paxos Standard, PAX Gold and Singular DTV.
What news caught my attention?
Investors pulled out about $6 billion from the high-yield mutual funds and ETFs and invested them in stock mutual funds and ETFs in the two weeks ended December 1, 2021. Stocks and junk bonds are traditionally not very sensitive to interest rate changes. However, during the early months of 2021, investors saw the prices of all assets increasing in a rally which lifted the major indices, stocks, cryptocurrencies, and meme stocks. This rally spilt over to the junk bond market and raised the junk bond prices making the junk bonds highly susceptible to Fed’s policies. The forces affecting prices and relationships between variables are dynamic and ever-changing.
In contrast to “breaking up businesses into multiple independent units”, Samsung merged its mobile and consumer electronics businesses. It also replaced its CEO.
With looming concerns over the omicron variant and rising interest rates, bank stocks seemed to have taken the investor’s attention. During the early months of the pandemic, investors dumped bank stocks for fears of loan defaults. That seemed to have changed as consumers saved money in the banks; businesses borrowed money at lower rates due to the low-interest-rate environment. With rising interest rates, the rate at which banks borrow will increase, reflected in the higher cost of borrowing for their consumers. Investors continue to bet on bank stocks.
My Takeaways:
With the introduction of retail trading apps, the fundamentals of the stock market seemed to have changed. Anecdotally, I have heard that there is increased volatility in stocks, which appeared to have spilt over into other markets like the junk bond markets.
Companies like GlaxoSmithKline and Air say their antibody drug works against the new omicron variant. Stock futures and oil prices increase with this newfound optimism.
A low-interest-rate environment saw the investors venture out, seeking high yield. With concrete evidence of increasing interest rates, investors pull their money back from the high yield markets.