Barron’s Weekend Summary: -In the bond market, yields in many cases have doubled, to around 8%, after one of the sharpest selloffs in history.
Cover Story:
-In the bond market, yields in many cases have doubled, to around 8%, after one of the sharpest selloffs in history. This enhances the diversifying power of bonds in equity-heavy portfolios, and should revive interest in the traditional 60/40 mix of stocks and bonds. It’s quite a change from the start of this year, when Barron’s last surveyed the fixed-income market. Back then, bond yields were near historic lows and stocks were at record levels.
Interview:
-Amy Falls became chief investment officer of Northwestern University’s $15B endowment in May 2021, the first woman to hold the position. The portfolio helps fund university operations, including financial aid, faculty salaries, and research and athletics. In a recent interview, Falls discussed her outlook for the market, why it’s important to include private equity and venture capital in the portfolio, and her mission for the endowment. An edited version of the conversation follows.
Tech Trader:
-The risk level is lower than it was. The Nasdaq Composite is down about 28% in the year’s first six months—that’s a lot of derisking. And yes, some of the individual losses are just breathtaking. Apple, Alphabet and Microsoft are all down more than 22%. Amazon.com is off 36%, and Facebook parent Meta Platforms is 51% lower. Nvidia is down 47%, while Advanced Micro Devices is 46% lower. So, yes, stocks are cheaper. But not necessarily cheap.
The Trader:
-China’s decision to ease its entry requirements for international travelers is a step toward a fuller reopening and away from a zero-Covid strategy. It also signals an eventual reopening of its Macau casinos. It may be the right time to bet on Las Vegas Sands. The thesis is simple: Las Vegas Sands gets a little over two-thirds of its business from Macau, with the remainder coming from its Marina Bay Sands property in Singapore. The latter is an underappreciated asset that provides earnings visibility, while the former could see profits jump when Macau more fully reopens, following in the footsteps of Las Vegas and other U.S. cities, where gross gaming revenue has exploded above pre-pandemic levels. (The company sold its namesake U.S. properties in 2021.)
-Despite its late June rally, the S&P 500 index dropped 20.6%, marking its worst first six months of a year since 1970. The Dow Jones Industrial Average’s 15.3% first-half decline was its worst since 1962, while plunges of 29.5% by the NASDAQ Composite and 23.9% by the Russell 2000 produced each index’s worst first half on record. The Bloomberg U.S. Agg, a broad index of fixed-income securities, fell 10.7%. That’s also its worst first half, based on data going back to 1975. In contrast, the price of oil jumped more than 40% in the U.S. during the same stretch, while many metals and agricultural commodities saw sizable gains.
Features:
“I’m a Bitcoiner who believes Bitcoin is transforming the world,” says Klippsten, 44. “I’m so sick of having my name and business associated with the crypto industry. It’s exhausting.” There’s no small irony in a Bitcoin purist taking shots at the rest of crypto. Bitcoin is no paragon of virtue; mining the stuff is energy-intensive and environmentally costly. And it’s failing miserably as a store of value or an inflation hedge—two heavily promoted uses. Down 70% in seven months with $900B in lost market value, the king of crypto looks more naked than ever.
-Production and demand for electric vehicles in China rebounded in June after a Covid-19-induced lull. Deliveries in June at NIO, Li Auto, and XPeng looked strong. That had the American depositary receipts of the Chinese electric-vehicle makers rising initially to start the third quarter, although they closed in the red. Tesla stock rose Friday, however.
European Trader:
-Danish vaccine maker Bavarian Nordic is still in the trials stage with its Covid shot, making it a latecomer and dragging down its stock price. But its smallpox vaccine, alone in having been approved for use against monkeypox, gives the Copenhagen-listed firm a virtual monopoly. This could make the shares a buying opportunity. The stock has tumbled from its March 2021 peak of 356 Danish kroner ($50.41) to a recent DKK243.
Emerging Markets:
President Vladimir Putin is escalating his attack on Ukraine’s European allies. His weapon: Russian natural gas, which accounted for 40% of European Union supply prewar. Russia has constricted flows for most of June through the critical Nord Stream 1 pipeline. (Not to be confused with Nord Stream 2, which Germany killed as Putin invaded Ukraine in February.) Russian supplies to the European Union are down more than 40% from last year, estimates Jacob Mandel, a gas analyst at Aurora Energy Research. European gas prices have jumped 70% in the past three weeks.
Commodities:
-Prices of commodities like oil, wheat, and copper are sliding as recession concerns grow. In theory, a weaker economy reduces demand. Construction slows—copper is used in wiring and plumbing—as do sales of anything electrical. Experts differ on what this means. “Fears of a global recession have come front and center, eclipsing inflationary concerns,” says Helima Croft, head of global commodity strategy at RBC Capital Markets. Softness in commodity prices shows “real concerns about a hard landing and what that would mean for demand.” Ryan Grabinski, investment strategist at Strategas, expects demand for some metals to “end up being a little softer,” especially if building activity in China falls. But “agricultural and energy commodity demand is still there.”
Streetwise:
-Don’t confuse Bath & Body Works with Bed Bath & Beyond BBBY –5.23% (BBBY). That’s the one where you go up a quarter-mile escalator holding a 20% off coupon the size of a shoebox in order to buy a shower curtain for more or less what Amazon.com. Bath & Body Works, a mall seller of creams and scrubs, like Rainbow Cereal Gentle Foaming Hand Soap, marked down this past week to $3 from $7.50. My recent field work on the name confirms that the stores are still too perfumy for me to walk into. J.P. Morgan Securities has done a more thorough examination, and sees sales slipping this year. It downgraded shares to Neutral from Overweight and slashed its price target by more than half. The stock lost 9%.