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Square, Inc. Announces 2020 Fourth Quarter and Full Year Results



Bloomberg

Beating the bull points out that interest rates are rising for “the right reason”

Bloomberg-Tesla once again offset the kinetic energy darling driven by rising bond yields, some investors worry that this means that the 11-month bull market is in trouble. The surge in yields over the past week has undoubtedly strained assets. On the fringe of the stock market, signs of excess have become obvious, and investors are escorting. After dropping 8.6% on Monday, Tesla was down more than 1

0% as of 10 am New York time. Bitcoin plummeted by 18%, but from a broader perspective, interest rates are still relatively low. Compared with the return-to-income measure, the stock premium is still nearly four times higher than the historical average. If anything, as economists on Wall Street raise their economic growth forecasts to their highest levels in decades, earnings could explode. This will justify the seemingly long-term stock valuation through some traditional measures. During periods of rising interest rates, the bulls’ view of stocks is that bond sell-offs are caused by signals from economic data such as commodity markets and retail sales. The Biden administration is preparing to pass a huge spending bill, and Fed Chairman Jerome Powell, who testified in Congress on Tuesday, is committed to fixing short-term interest rates near zero. The right reason,” said Peter Mallouk, CEO of Creative Planning. He said that although some people think that the market is already at the upper limit of valuation and therefore the market must fall, he said: “The reality is that it can stay high and the return will be. increase. “The stocks under the most pressure this week are on a downward trend. As Treasury yields soar, high valuations have become increasingly unreasonable. Compared with bond interest rates, this approach has begun to disadvantage the bulls. Currently, the S&P 500 index yield (how much profit you make relative to the stock price) is about 1.79 percentage points higher than the 10-year U.S. Treasury yield This is the smallest gain since September 2018. Dim. The current premium is still much higher than Bloomberg’s average of 48 basis points dating back to 1962. This means that when all other conditions are equal, when 10 When the yield on the annual Treasury bond remains below 2.67%, the stock can still be considered attractive relative to history. The recent yield is close to 1.36%. In a report released earlier this month, Ryan Hammond and Goldman Sachs strategists including David Kostin said that stocks can usually absorb the gradual rise in interest rates, especially driven by growth rather than Fed policy. The factor that causes stock market volatility is a sharp increase. When interest rates rise by two or more standard deviations At the time, stocks usually fell on average in a given month, which is 36 basis points at today’s prices. Yields rose by 30 basis points this month, reaching the highest level in 12 months. Kay Kay, Chief Investment Officer, Northern Trust Wealth Management Katie Nixon said: “Although interest rates may rise due to upward corrections in growth and inflation, Nixon said: “Both variables are also beneficial to the stock market.” “Only when interest rates are in disorder The risky asset market will react negatively when the approach rises.” However, anyone who is concerned that stock prices exceed fundamentals can be comforted by the recent rise in yields. In August, when the Standard & Poor’s 500 Index fully recovered from the 2020 bear market losses, the 10-year Treasury bond yield sent an ominous signal and fell to a record low. In a sense, the increase in yields indicates that the bond market has finally recognized the bullish economic information that stocks have been flashing since March last year. 12 months including pandemic recession. As far as this indicator is concerned, the P/E ratio of the Standard & Poor’s 500 Index is 32, which exceeds the peak level of the Internet bubble era. Compared with this year’s earnings, the value case is even more encouraging. Analysts expect the company’s profits to jump 23% to $171 per share, and the price-to-earnings ratio will drop to 23. If the company continues to greatly exceed expectations, the situation will get better. The fourth-quarter profit was 16% higher than expected. If it continues, it will bring earnings per share to $198 in 2021, which is surprising. That will be a multiple of 20. “If (and only if) earnings rebound strongly in the second half of the year, then the seemingly high valuations of US stocks make sense,” wrote Nicholas Colas, co-founder of DataTrek Research. In recent notes. “There must be a small bubble (some SPACs, IPOs), but there are also good reasons that stocks can and will enter high valuations as a whole.” This is not to say that current yields are not important to stocks. Funds were quickly withdrawn from high-value stocks such as Tesla (Tesla), and the Nasdaq 100 fell for the sixth day, the longest decline since August 2019. At the same time, the company has benefited from the economic recovery and brought better returns. It is not positioned in areas that really benefit from finance and energy, such as income and rising commodity prices. Lori Calvasina, head of US equity strategy at RBC Capital Markets, said in an interview on Bloomberg TV that I think this is a bit of a dispute. “This is more a story about repositioning U.S. stocks rather than exiting U.S. stocks.” (Tuesday price update for the second week and the penultimate paragraph) For more similar articles, please visit Bloomberg.com to visit us, and subscribe now The most trusted source of business news. ©2021 Bloomberg LP


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