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Good morning. Politics is front and center today with the Democratic Party staging its virtual convention, followed by the GOP next week. Meanwhile, U.S. futures are trading higher after Goldman Sachs raised its year-end price target on the S&P.

Here’s what’s moving markets.

Markets update

Asia

  • The major Asia indexes are mixed in afternoon trade with the Shanghai Composite leading the way higher, up 2.3%.
  • Japan’s Nikkei is slumping 0.8% after the country reported a record 27.8% Q2 GDP drop on an annualized basis. If you calculate it on a fairer QOQ basis, it contracted by 7.8%, one of the better showings among G7 economies.
  • U.S.-China relations continue to deteriorate. A weekend video call to discuss the Phase 1 trade deal was “rescheduled indefinitely.” Perhaps it had something to do with the sale of F-16 military jets to Taiwan.

Europe

  • The European bourses were mixed, with the Europe Stoxx 600 up 0.5% 30 minutes into the trading session, before falling.
  • Sanofi shares climbed 0.2% at the open after announcing an all-cash $3.4 billion acquisition of U.S. biotech company Principia Biopharma.
  • While other countries dither over wage supports for its pandemic-stricken labor force, Germany is thinking big. German Finance Minister Olaf Scholz proposed extending to 24 months wage-subsidies at an additional price tag of €10 billion.

U.S.

  • Last week, the major indexes scored a third consecutive week of weekly gains, with the Dow the best of the bunch, up 1.8%. The U.S. futures are solidly higher, as I type.
  • Warren Buffett‘s Berkshire Hathaway is losing faith in Big Finance. The famous investor dumped his bank stocks, closing his position in Goldman Sachs completely.
  • Speaking of Goldman Sachs… Goldman is the latest Wall Street firm to increase its end-of-year price target on the S&P 500 to 3,600, up from 3,000.
  • What’s on the calendar this week? It’s a somewhat quiet week for corporate results, but we do have the DNC convention kicking off today. The Republicans hold theirs next week.

Elsewhere

  • Gold is climbing, up above $1,960/ounce, even though it is (or perhaps, because it is) getting harder to mine the stuff.
  • The dollar is down.
  • Crude is higher with Brent up 0.8%.

***

100 days

On Friday, I touched briefly on the fact that the S&P 500’s bull run is on an historic run. How historic? Some are calling it the best 100-day run since the 1930s. Others are saying it’s the best stretch ever for the benchmark index.

LPL Research is in the latter camp. According to its researchers, the S&P gained 50.8% in the 100-day period that closed on Thursday, Aug. 13, besting the previous record by an impressive 4.9 percentage points, as today’s chart shows:

It’s a startling bull run, particularly when you consider that during this same period the economy crashed into a devastating recession, millions of jobs were lost and tens of thousands of Americans died of a virus we still don’t have a vaccine for.

What do the next 100 days (and beyond) have in store for the markets? LPL ran the numbers and found that, after such rallies, most of the time the momentum continues into the months ahead, “with stocks higher a year later 17 out of 18 times.”

The last time the markets weren’t higher a full year later was 1987, one of the most volatile years on record.

There’s a lot of optimism the current markets rally has yet to run its course. Much of that optimism is fueled by the hopes for further fiscal stimulus, continued loose monetary policy and record amounts of cash looking for big returns (equities) when traditional safe-havens (Treasurys) are yielding a pittance. This goes a long way towards explaining why Goldman over the weekend upped its end-of-year price target on the S&P 500.

If Goldman is correct, the S&P will climb a further 10% this year.

So much for all the talk of haywire markets amid a brewing political crisis.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
[email protected]

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