⏰Markets in Rotation

Equity markets were mixed as the Dow rose on Monday together with the bond yield. Oil prices also climbed to the highest level last seen in 3 years.

The S&P 500 fell by 0.3%, while the Nasdaq dropped by 0.5%. But, again, the rising treasury yields can explain the divergence in performance. The 10-year yield had moved up to 1.48% as the Fed signal its readiness to taper, and market participants are convinced that it will not disrupt the economic recovery in place.

💡Value and Cyclical Stocks

Value stocks that tend to be more economically sensitive compared to many fast-growing stocks in the technology sector had an outsize gain on Monday that is reflected in the better performance of Dow.

Bank stocks, Pika World’s favourite as hedge on the rising interest rate, soared as the KBE ETF rose sharply by 3.5%. Essentially, when the long-term yield (10 year) rises faster than short-term yield (2 or 5 years), banks can borrow at low rates and lend at higher rates, which boosts their profitability.

As yield moves higher, Pika World sees this as the epicentre of a rotation that we have laid in our mid-cycle transition narrative since early April and May. However, we remain convinced that the cycle remains intact, and we could have a good run towards the last quarter of the year.

💎Tesla: Pika World Evergreen Star

2021 has been a less spectacular year for the EV giant, but this could change as there appears to have some life. There are three main catalysts for our optimism.

First, the most advanced self-autonomous driving software by Tesla has arrived. Investors hope that this will attract many buyers to Tesla’s cars.

Second, we will welcome Tesla’s 2021 Annual Meeting at the new Gigafactory in Austin. This is the second-largest US manufacturing facility for Tesla and is the site where the Cybertruck will be produced in early 2022. New products always excite investors.

Third, which is Pika World’s most anticipated event, Tesla’s third-quarter earnings. We are eyeing $1.38 per share in earnings and $13 billion in sales. Again, these figures are comparable to their prior period.

While the stock has underperformed compared to S&P 500, its growth potential can receive a significant boost if all three factors above are aligned for a full MOON!

📮What’s on the Menu Today?

At 10 pm, we will receive the CB Consumer Confidence, which is expected to climb to 114.9 from 113.8 in the prior period.

Simultaneously, we will have Uncle Powell testify and hunt for further clues on the state of the economy.

It is 28 September, Tuesday, at 7.35 am in Singapore and 7.35 pm in New York. It has been a volatile month, and Pika World hopes all friends can have an excellent close for the rest of the week.