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Happy Veterans Day. Thanks for making time for Axios Markets.
(Today's Smart Brevity count: 1,153 words, ~ 4 minutes.)
Illustration: Sarah Grillo/Axios
Investors put their recession umbrellas back in the closet last week and broke out their party hats, as all three major U.S. stock indexes hit fresh record highs.
What's happening: Investors are moving back into risky assets like stocks in a big way and selling out of traditionally safe ones.
Background: Prior to November, market participants had shunned stocks, preferring to sock money away in safe-haven investment grade and municipal bonds (on pace for their largest inflows ever) and money market funds, effectively savings accounts, which have attracted the most funds since 2009.
Why it matters: The stock market's gains this year — up 23% year to date — have largely been driven by low volume and company share buybacks, rather than old-fashioned stock buying.
The big picture: “You could be contrarian and say [the money market flow is] positive, because if the market actually steadies itself and there’s a detente [in the trade war], that money’s going to go back into the equity market,” Quincy Krosby, chief market strategist at Prudential Financial, told CNBC last month.
Yes, but: Overall, the economy remains in much the same shape it was when investors were selling risk and buying safety.
The bottom line: The potential for a trade war detente has gotten investors bullish, but the fundamentals have not caught up yet.
The stock market may not have economic fundamentals on its side yet, but it has the Fed and a growing number of companies ready to buy back shares of their own stock.
Kaiser Permanente CEO Bernard Tyson, a champion of workforce diversity and the company's first black CEO, died in his sleep Sunday at age 60. (CNN)
Chinese consumers spent more than $30 billion in sales on more than a billion orders, breaking the previous record of Alibaba’s Singles’ Day shopping event. (SCMP)
The number of S&P 500 companies that note “wildfire” as a potential risk factor in their annual reports has risen from 9 in all of 2010 to 37 so far in 2019. (CNBC)
Bolivian President Evo Morales announced he would resign after 14 years following growing unrest and violence in the country following a disputed election. (Reuters)
Former New York Mayor Michael Bloomberg dipped his toe into the 2020 election water last week, and some investors are already salivating.
What it means: Analysts at investment bank Cowen and Co. argue in a recent whitepaper that Bloomberg's policies would provide the market a big boost, even though they argue the billionaire is "unlikely to substantially ease regulatory policies" and " is actually likely to toughen some capital and consumer protection rules."
The big picture: Fed Chair Jerome Powell's term expires in early 2021, and a new president is likely to replace him.
Bloomberg also would be expected to "open the door for infrastructure legislation and other policies that would spur the economy and thus benefit housing and the banks."
The intrigue: While wide-ranging deregulation is not expected, Bloomberg has previously criticized some aspects of the Dodd-Frank financial reform law as too complex and complicated and "argued instead for recruiting people from inside regulated industries to craft rules" for them.
By the numbers: A new poll from Morning Consult/Politico shows Bloomberg leads President Trump by 6 percentage points in a hypothetical 2020 matchup, with 43% of likely voters saying they would back Bloomberg to Trump's 37% if the election were held today.
While all eyes will be on Fed Chair Jerome Powell's testimony before Congress this week, investors would be wise to keep an eye on the October CPI report for the latest on U.S. inflation.
What's happening: The Fed's favored measure of inflation, core personal consumption expenditures, has consistently fallen short of the central bank's 2% target this year, the BLS' inflation metric — the core consumer price index — has been at or above that number every month this year and solidly above 2% since July.
Why it matters: The Fed's three interest rate cuts this year have buoyed investor enthusiasm for stocks and other risky assets. If inflation begins moving meaningfully higher in the CPI report, the Fed may need to reverse course on those rate cuts to fend off inflation.
Investors got their first look at the prospectus for Saudi Aramco on Saturday for what will likely be the largest IPO ever, and the response from investors has been lukewarm.
What happened: The 658-page prospectus showed Aramco's quarterly revenue declined with oil prices and net profit dropped at a faster rate as the result of higher costs associated with attacks on its facility in September.
The big picture: As Axios' Ben Geman notes, the mammoth oil producer reported $111 billion in net income last year and holds massive reserves. It provides roughly 10% of the world's crude oil supply.
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