Posted July 19, 2021
By Aaron Gentzler
The Dominoes Fall
On the topic of Wells Fargo’s “canary in a coal mine,” a reader comments: “If the end of personal lines of credit spreads, things could get ugly.
“How many landlords are in over their heads and have been using their lines of credit to pay their mortgages because tenants have not been making rent payments (thanks to the government)?
“If these landlords are in financial trouble, they won’t qualify for a regular loan and their line of credit will be due immediately.
“Might this then spread to the housing market too? Remember that rental properties are not protected like a residence during bankruptcy. Banks will be able to foreclose without having to hold these properties for very long in this red-hot real estate market. We are looking at gobs of profit for banks in this turn around.
“Can you tell I don’t trust bankers? Especially Wells Fargo with their track record.”
Thanks to our reader for his astute analysis… Our next reader comments on compatibility with her state: “My husband and I are both seniors. He is 82 and I am 74. We retired 20 years ago to Oregon, and were very happy here.
“Now the state is becoming nearly uninhabitable as far as we are concerned. Moving is not an option for us at our ages, so we are hunkering down in one of the most habitable parts of the state.
“If we knew then what we know now we would have moved to Wyoming or South Dakota!”
We’ll share more of your feedback later this week…
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Your Rundown for Monday, July 19, 2021...
Look Out Below…
We learn this morning that the stock market’s hit the skids. In particular, the Dow’s dropped 1.7% or 600 points at the time of writing.
Also worth noting, the 10-year Treasury yield has sunk to a five-month low of 1.2%. And oil’s dropped more than 4% on the news OPEC+ will halt oil production limits in September.
Reasons for the market’s slide are multiple, ranging from concerns about the rising number of delta-variant COVID cases all the way to overseas market action.
“Stocks [fell] in Hong Kong as U.S. Treasury Secretary Janet Yellen criticized the effectiveness of Trump administration tariffs against China,” says Investor’s Business Daily.
“[And] tech stock investors worried over rising regulation in Hong Kong, as well as oversight limiting registration of Chinese stocks on U.S. markets.” As a result, the Hong Kong Hang Seng Index lost 1.8%, and Japan’s Nikkei 225 closed 1.25% lower.
In Europe’s afternoon trading, “the Frankfurt's DAX, the CAC-40 in Paris and London's FTSE 100 were all down more than 2%,” IBD says.
Then there’s the “i” word: “Inflation fears weighed on stocks last week, with a U.S. consumer sentiment index from the University of Michigan released on Friday showing that consumers believe prices will jump 4.8% over the next year,” says CNBC. “This is the steepest climb since August 2008.
“Earlier in the week, the June Consumer Price Index showed that inflation jumped 5.4% year-over-year, spooking investors.”
Morgan Stanley’s chief U.S. Equity Strategist Mike Wilson writes: “The market appears ready to take on a more defensive character as we experience a meaningful deceleration in earnings and economic growth.
“Market breadth has been deteriorating for months and is just another confirmation of the mid-cycle transition… It usually ends with a material (10-20%) index level correction.”
How to position your portfolio? We expect a rotation out of growth and into value stocks: Get defensive with consumer staples…
Market Rundown for Monday, July 19, 2021
The S&P 500 is down 1.2% to 4,325.
Oil is down 3.65% to $69.32 for a barrel of West Texas Intermediate.
Gold’s down $4.70 per ounce to $1,810.
Bitcoin is down 3% at the time of writing to $30,712.
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We hope your week’s off to a great start! We’ll have more Wednesday…
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Editor, The Rundown