U.S. junk stocks soared 29percent in June. Institutions: is water really useful?

category:Finance
 U.S. junk stocks soared 29percent in June. Institutions: is water really useful?


Specifically, 507 of the 656 small market value equity rose monthly, 98 of which rose by more than 50% (including 50%), accounting for 14.94%, and 32 of which rose by more than 100%. Among them, urbanone-a rose the most, up 2670.99% this month.

Small cap stocks with the largest increase in US stocks since this month

In terms of valuation, TTM of 10 small cap stocks with an increase of more than 200% is negative, indicating that they are in a state of loss. In fact, 484 out of 656 small cap stocks have a negative price earnings ratio (TTM), accounting for 73.78%.

The boom in junk stocks did not start this month. Judging from the rebound since April, the growth of these small market value stocks is also amazing. According to wind data, excluding one outlier, 655 stocks have gained 54.27% on average since April, compared with 18.04%, 19.85% and 29.17% of Dow, S & P 500 and Nasdaq over the same period.

Fund manager cant understand!

In the face of the sharp rise in US stocks since April, many investors cant understand it, including perhaps Warren Buffett. Buffett said at the shareholders meeting in early May that he had cut his position in the airline stocks he bought earlier this year. In addition, Berkshire Hathaways cash and equivalents at the end of the first quarter are still more than $130 billion, which is likely to be short this round of US stock rally.

American stocks cant understand it! Can the logic of ample liquidity support the rise of the stock market? Can water alone solve all problems? They are skeptical. A private fund manager said, in such a big crisis, the Federal Reserve has directly used up several years of interest rate space. Can the impact on the market in a month or two be over?? They tend to think the market is too optimistic. The fund manager further pointed out that the epidemic is a simultaneous impact on the supply side and the demand side, and the high probability of liquidity can only save the crisis, but it is difficult to create prosperity.

Shicheng investment pointed out that from the perspective of the current situation of epidemic control in the United States and the trend of continued economic downturn, the task of the Federal Reserve is quite arduous. While the Federal Reserve directly purchases single enterprise bonds and strives to raise the bond market, the US stock market (NASDAQ) is also setting a new high fearlessly. Including the share prices of companies that have already gone bankrupt or are on the verge of bankruptcy, which are also driven by retail investors. A number of senior fund managers (such as RayDalio, LeonCooperman, etc.) have issued a warning of US stock bubbles and concerns about the valuation of US stocks.

According to the Federal Reserve, the share of equity investment (including funds) in US households net assets has increased from 31% in 2009 to nearly 40% in 2019. If U.S. stocks fall in a similar way in the first quarter, it will be a major blow to the wealth effect, consumer confidence and the stability of the financial system.

We believe that while supporting the market liquidity, the Fed is also consciously trying to avoid bubbles in the stock market. For example, the Federal Reserve has adopted more cautious language and guidance in economic forecasting. On quantitative easing, the Fed has taken more active measures than ever before to ensure that capital flows into the real economy rather than the stock market bubble. Looking forward, the tone of US monetary policy easing will not change (the Fed has confirmed that it will maintain zero interest rate until 2022). The poor expectation in the future will mainly come from the markets understanding of existing policies. For example, investors views on the fact that the Federal Reserve firmly maintains zero interest rate until 2022 can be positive or negative. The Fed had no intention of increasing market volatility, but its controversial policies will always affect investor confidence, resulting in greater market volatility. Source: Yang Bin, editor in charge of China Securities News_ NF4368

We believe that while supporting the market liquidity, the Fed is also consciously trying to avoid bubbles in the stock market. For example, the Federal Reserve has adopted more cautious language and guidance in economic forecasting. On quantitative easing, the Fed has taken more active measures than ever before to ensure that capital flows into the real economy rather than the stock market bubble. Looking forward, the tone of US monetary policy easing will not change (the Fed has confirmed that it will maintain zero interest rate until 2022). The poor expectation in the future will mainly come from the markets understanding of existing policies. For example, investors views on the fact that the Federal Reserve firmly maintains zero interest rate until 2022 can be positive or negative. The Fed had no intention of increasing market volatility, but its controversial policies will always affect investor confidence, resulting in greater market volatility.