Global Overview
Strong Earnings Season
America is undergoing a season of strong reporting. Major US stock indexes are showing positive momentum, recovering slightly from their worst drop in weeks in response to reports of impending tax hikes for the wealthy. Quotes are also growing thanks to positive macroeconomic statistics published on Friday.
In response to the publication of strong statistics, investment strategist ClearBridge Investments noted that the US economy continues to move in the direction of growth.
New Tax Law to Limit Market Growth
Goldman says the proposed US capital gains tax hike will limit S&P 500 upside. Estimates $1+ trillion in unrealized cap gains for wealthiest US households, equal to 3% of US market cap & roughly 30% of average monthly S&P 500 trading volume. Past tax hikes have been associated with declines in prices.
Goldman’s analysts forecast that any hit to stock prices from a capital-gains tax hike would be brief, and stocks would likely resume their upward trajectory afterwards.
Capital Markets
Equities
| PX Last | 1W | YTD | |
|---|---|---|---|
| United States | |||
| S&P | 4 180.17 | -0.13% | 11.29% |
| NASDAQ | 14 014.32 | -0.27% | 8.74% |
| Europe | |||
| Euro Stoxx 50 | 4 013.05 | -0.49% | 12.97% |
| FTSE 100 | 6 935.66 | -1.15% | 7.40% |
| DAX | 15 272.03 | -1.17% | 11.22% |
Biden Plans to Hit Tobacco Companies.
British American Tobacco predicted a 3% drop in the global tobacco industry in 2021 in its annual report when the Biden administration flew in at the beginning of the week as politicians are considering the possibility of legislative reduction of nicotine content in cigarettes.
British American Tobacco fell 7% thereafter, Altria Group dropped 10%, and Philip Morris did not react. The last case seems amazing. But it is worth remembering that 25% of Philip Morris’s revenue comes from IQOS, which is positioned as a “less harmful alternative to cigarettes.”
Vaccination Campaign by Mercedes
Daimler AG has pushed forward its goal of making profits from its Mercedes-Benz division, thanks to the rollout of vaccination campaigns, which is gaining momentum. The streak of victories for German automakers and their investors appears to continue, with Daimler raising its margin forecast for its core business unit Mercedes-Benz Cars & Vans.
However, Daimler warned that the continued shortage of microchips affected shipments in the first quarter. The Stuttgart-based automaker is up 28% this year, up from 19% in Bavarian rival BMW and 52% in Volkswagen, which in March drew investors to plans to compete with Tesla in the electric vehicle market.
Private Equity & Venture Capital
Bain Capital Aims at Toshiba
US private equity firm Bain Capital could take the Japanese conglomerate Toshiba private, sources told Reuters on Wednesday. Bain Capital has started talks with Japanese banks that could help finance the deal, according to Reuters. The US financial firm may collaborate with peers for a co-investment into the struggling Japanese company.
Earlier this month, private equity and advisory firm CVC Capital Partners had made a $20 billion offer to take the firm private, which sparked controversy amongst Toshiba executives. Toshiba’s chief executive Nobuaki Kurumatani stepped down shortly afterwards and has been replaced with the former chairman of the company, Satoshi Tsunakawa.
Blackstone Tops $1 Billion in Q1
Blackstone’s recent bets in growth investing and the freewheeling SPAC market took centre stage in the first quarter of the year, pushing the firm to its biggest quarterly profit to date according to PitchBook.
The private equity giant said it swung to an operating profit of $1.75 billion in Q1, compared to a loss of $1.07 billion during last year’s first quarter when COVID-19 battered the global economy. The surge in earnings was driven in large part by the cash bumps Blackstone received when portfolio companies Bumble and Paysafe went public at roughly $8 billion and $9 billion valuations, respectively.
Commodities & Digital Assets
| PX Last | 1 Week | YTD | |
|---|---|---|---|
| Brent Crude | 66.11 | -0.99% | 27.63% |
| Gold | 1 774.80 | -0.01% | -6.87% |
| BTC/USD | 52 652.14 | -17.97% | 71.91% |
$10 Billion Crypto Futures Wipe Out
The crypto futures market saw the highest number of liquidations in history on Sunday as the sudden bitcoin price pullback caught overleveraged traders off guard. Exchanges offering crypto futures liquidated $10 billion worth of positions on Sunday, toppling the previous market-wide record of $5.77 billion registered on Feb. 23, according to data provider Bybt.
Forced closure of long positions or bullish trades accounted for $9.26 billion, or over 90% of total liquidations, which shows the leverage was excessively skewed bullish across the board. Bitcoin futures accounted for more than 50% of total market-wide liquidations on Sunday. Liquidations happen when trades cannot fulfil margin requirements for holding long/short positions and often exacerbate bullish/bearish moves.
