How to play the risk rally in stocks, a shift in market leadership, and an exclusive chat with the head of iShares
Dear Readers,
My what a difference a week makes.
The last time we spoke, market observers were scratching their heads over the stock market's seemingly unstoppable march higher. With the US mired in recession and grappling with nationwide protests, it simply didn't make sense to many that equities would continue to climb.
Then the May jobs report happened. Turns out maybe the stock market was right all along.
Not only did US employers not cut millions of jobs as expected, they actually added them, to the tune of 2.5 million. The unemployment rate — which was expected to surge to near-record levels — actually fell. Experts called it the "greatest miss in forecasting history."
If you aren't yet a subscriber to Investing Insider, you can sign up here.
Fast-forward to this week, where marketwide sentiment has suddenly shifted to outright bullishness. Bank of America boosted its S&P 500 forecast — and then the index erased all losses for 2020. Billionaire investor Stanley Druckenmiller called himself "humbled" by the stock rally and lamented missing out, mere weeks after calling for another sharp leg down. And all that comes on the heels of two straight weeks of torrid gains.
As always the Investing team at Business Insider has been hot on the case of what investors can do to thrive during such tumultuous times. That involves a wide array of recommendations, strategies, and tips for navigating uncertainty. To that end, see below for our best stories of the week.
Thanks for reading!
-- Joe
Coming Thursday: Live webinar with 3 top market strategists
Akin Oyedele, Business Insider's investing editor and correspondent, will speak with three titans of Wall Street strategy:
- Lori Calvasina, managing director and head of US Equity Strategy for RBC Capital Markets
- Thomas Lee, managing partner and head of research for Fundstrat Global Advisors, LLC
- Jeff Kleintop, chief global investment strategist for Charles Schwab.
Join us on June 11 at 12pm ET / 11AM PT for the live conversation. You can register here.
Exclusive interview with the head of iShares
ETFs helped investors navigate the recent period of volatility, particularly in parts of fixed income where liquidity dried up.
In an exclusive interview, Salim Ramji, the global head of iShares and index investments for BlackRock, shared the growth opportunity this period showcased — and more he sees unfolding for investors' benefit.
Read the full story here:
The head of BlackRock's $2 trillion ETF-investing business told us the 3 biggest growth opportunities on his radar — and explained how to start taking advantage of them now
Momentum stocks on notice
Momentum stocks — which are popular because of their persistent price gains — are trading with their highest volatility since the 2008 financial crisis, according to Morgan Stanley. This development signals that a new breed of stocks is taking over as the market leaders for the next period of economic expansion.
Strategists at the firm highlighted two pairs trades that have been performing well since the stock market hit rock bottom in March.
Read the full story here:
MORGAN STANLEY: The market's hottest stocks are in danger of being disrupted to a degree not seen since the Great Recession. Here's how to adjust your portfolio for the coming shift.
A long-short strategy that's returned 26% this year
Mitch Rubin's mutual fund is up 26% this year thanks to a mix of bets on the right high-growth companies and short positions on vulnerable stocks. Investors want to get in on what he's doing, and the assets invested in his fund have more than doubled since March.
He told Business Insider about the two must-have qualities for companies he believes in, and the characteristic that will get him to short a stock.
Read the full story here:
Mitch Rubin's fund has used a unique approach to reap 26% returns and double client assets this year. He breaks down his 3-part process for deciding which stocks to buy — and what to bet against.
Investing in economic recovery now that stocks have surged
Glenmede — a firm that manages $40 billion in client assets — says the US economy has recovered only a fraction of the business and consumer activity that was lost because of the pandemic and social distancing.
Michael Reynolds, the firm's investment-strategy officer, said Glenmede reduced its allocation to stocks to neutral, is underweighting bonds in its portfolios, and is turning to alternative strategies.
Read the full story here:
A $40 billion wealth-management firm says the US economy is only 19% recovered from the pandemic — and lays out a winning investing strategy in the wake of a massive stock-market rally
Stock pick central
Looking for experts who are willing to name names? Look no further:
- Baillie Gifford cashed in on Amazon and Tesla before the vast majority of investors. A 33-year partner at the firm breaks down a risk that scares him more than the pandemic — and details 3 stocks he's buying for the new era.
- MORGAN STANLEY: Buy these 11 stocks right now to reap the strongest possible market-beating returns over the next 3 months
- A portfolio manager at a $4.6 billion shop breaks down his Warren Buffett-inspired approach to investing — and shares 3 stocks he loaded up on in a 'really attractive' market upended by the coronavirus
- GOLDMAN SACHS: Buy these 15 stocks for powerful profit growth after a historic rally leaves the market with little room for error
Chart of the week
The blue line in the above chart shows that momentum stocks — defined as those that have led recent market gains — are experiencing the highest volatility in decades. Morgan Stanley says this has historically indicated a change in the group's leadership.
That precedent is shown by the inflection points circled in the bottom chart. And it's the type of shift an investor can profit from if positioned accordingly.
Click here for specific recommendations.
Quote of the week
"I've been humbled many times in my career, and I'm sure I'll be many times in the future. And the last three weeks certainly fits that category ... I underestimated how many red lines, and how far, the Fed would go."