Imagine a Bitcoin ETF With No Underlying Bitcoin Assets

 

What if investors finally get the opportunity to own a Bitcoin ETF or an overall cryptocurrency fund, and there is no actual cryptocurrency held within the fund?  This may be the case with the first incarnation of any crypto ETFs. The SEC Chair, Gary Gensler, has been open to the idea of allowing crypto exposure in funds, however this may come with strings attached. Back in August, Gensler said that crypto ETFs that comply with the SEC’s strict laws on mutual funds and other federal securities laws could provide investors significant protections. With this, crypto ETF offerings appear to be on the horizon; what might their structure be, and how might they be better than investing in crypto coins?

 

Portfolio Position

As with other asset classes, an ETF pegged to the price of Bitcoin or other cryptocurrencies would be one way for brokerage account owners to transact easily. As an added benefit, customer broker statements could be consolidated. The positions can be held as part of an overall portfolio, including retirement savings without the need for a separate digital wallet. This would take some of the “difficulty” level out of owning a crypto asset, and it is likely that investor adoption would be as quick as other new ETF classes.

 

What Would be in the ETF?

Following the path of other non-equity ETFs such as gold, a Bitcoin/crypto ETF could be created in two different ways. The first is with the underlying coins owned directly by the trust (or corporation) that underly the ETF. The other is the ETF mimicking the exposure and price movements of the assets by holding futures contracts that are impacted by price expectations and demand, (similar to many commodity ETFs). The SEC has been cautious thus far in regulating the crypto world. The new SEC head has been clear that digital assets are now in the process of being defined and categorized. 

 

Chairman Gensler’s Crypto History

Gensler was appointed when Biden took office. Prior to becoming the Chair of the SEC, he taught cryptocurrency and blockchain technology at MIT. He also ran the Commodities Future Trading Commission (CFTC), which maintains general anti-fraud and manipulation enforcement authority over virtual currency cash markets, it is looked at as a commodity in interstate commerce. He understands crypto and realizes it has a place going forward.

 

Strengths Weaknesses of What’s Held

Like most ETFs and Mutual funds using futures, a Bitcoin futures-based  ETF would need to register under the 1940 Investment Company Act. This congressional act regulates the formation of investment companies and their activities. It would require fund managers to disclose more information and comply with stricter rules. From an investor’s standpoint, this can be seen as more eyes watching and protecting them against fraud or extra oversight that adds to management costs. Also, the Bitcoin futures derived ETF could offer additional protection because trading them requires investors, in this case, the fund, to put down cash on margin as collateral.

Futures prices generally track the underlying assets, but there’s always slippage, this slippage is usually greater for more volatile assets (like cryptocurrencies). A futures-based ETF also needs to regularly roll into the next contract. When the longer contract is trading at a higher price, this can be a drag on fund performance.  Another drawback is ETFs can’t close to new money if they become burdensomely large (mutual funds can). If Bitcoin behaves in a way that causes a stampede of investors to want out at the same time, there could be liquidity issues. As with other traded securities, there could also be a trading halt on some exchanges.

Despite some of the above concerns, expectations are that if a Bitcoin or cryptocurrency ETF is approved, it is likely to be of the futures variety. SEC Chair Gensler has described the physical market this way, the “Wild West” that’s rife with “fraud, scams and abuse.” This categorization of physical crypto trading, from a person who knows enough to have taught crypto at the highest level, and previous head of the CFTC, says a lot. The extra level of scrutiny the CFTC provides along with margin to maintain the funds may push him to prefer the non-coin holdings. At least initially, while the market is in his mind prone to scams and abuse.

 

Take-Away

Cryptocurrency ETFs are expected to one day exist. While many stock market investors look toward blockchain stocks to gain exposure to digital assets, others would like to more directly gain exposure to the asset class with a  Bitcoin fund or other cryptocurrency fund as a holding in their securities brokerage accounts.

The new SEC Chair is no stranger to cryptocurrency and seems amenable to finding a way to allow crypto funds. He is, however, well aware of his regulator’s role in protecting investors. There are two options, and many asset classes have funds comprised of both. Holding the coins, or creating the behavior of the coins using futures/options contracts. Based on the SEC Chairs’ own words, he doesn’t sound ready to allow outright purchases of coins in ETFs just yet.

Suggested Reading:

The Wells Notice to Coinbase May Be the Tip of the Regulatory Iceberg

What’s in the Surprise Cryptocurrency Bill?

SEC Investigates Digital Engagement Practices in Broker Apps

Contango, ETFs , and Alligators

 

Sources:

Funds & ETFs

https://www.wsj.com/articles/sec-will-police-cryptocurrencies-to-maximum-possible-extent-chair-gary-gensler-says-11628007567

https://www.barrons.com/articles/sec-signals-a-pathway-for-bitcoin-etfs-this-firm-is-ready-to-pounce-51628176703?mod=article_inline

https://www.barrons.com/articles/a-bitcoin-etf-is-still-in-the-works-here-are-your-options-in-the-meantime-51618014033?mod=article_inline

https://en.wikipedia.org/wiki/Exchange-traded_fund

https://www.cftc.gov/sites/default/files/2020/06/2020-11827a.pdf

https://www.barrons.com/articles/sec-gensler-bitcoin-etfs-51631305928

https://www.investopedia.com/articles/mutualfund/07/etf_downside.asp

 

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Helius Medical Technologies, Inc. Appoints Paul Buckman to its Board of Directors Helius Medical Technologies announced the appointment of Paul Buckman to its Board of Directors, effective September 10, 2021 Research, News & Market Data on Helius Medical Watch recent presentation from Helius Medical

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Investors Have Added Money to the Markets a Record 71.4% After Dips

 

If there is one thing we have learned from the markets this year and last, it is there is still a lot to learn.  Last week’s holiday-shortened trading saw stocks fall, with the S&P 500 declining 1.36%. This is the eighth such one-week dip in 2021; the last seven have proved to be buying opportunities. If 2021 maintains its current pattern, this decline will soon be replaced by higher price levels and new records.

 

 

In the past, money flow from investors into markets often demonstrated a propensity to chase momentum – buying when stocks are rising, selling when falling. Cash would flow into stocks and equity funds, at times with a frenzy, at a market peak. Conversely, sell-offs were met with further selling until the move exhausted itself. The overall market behavior has been different over the past 12- 18 months and is worth understanding, especially that which has been happening since the beginning of this year.

 

 

In a research report put out by Alliance Bernstein last month, they demonstrated that the trend to “buy the dip” is double its seven-year average and at a record.

Of the seven one-week periods so far in 2021 during which equities closed in negative territory, investors then bought at above-average levels during five of them. This was calculated using flows into the 100 largest exchange-traded funds (ETF). The below chart is as of July 31, 2021, in addition to showing the pattern of dips and bounce-back, it shows the level of flows into the market via ETFs which coincide with those dips. 

 

Flows for the 100 largest ETFs by Assets Under Management versus market return for the prior week.

Source: MSCI World Index and Alliance Bernstein

 

With 5 out of 7 dips or 71.4% experiencing higher than average ETF inflows, this year is running well ahead of last year’s 11% increase in flows during dips. The average since 2014 has been 35%. Investors are more comfortable than they were last year that the market would continue to rise, and they seem to have ample dry powder to put to work each time.

One Driving Force

In their report, Alliance Bernstein asked Why is “buy the dip” so prevalent…and why now?  They suspect it is from a number of areas that all lead to an abundance of investible cash. One source of this cash is an unprecedented level of sidelined money. Savings since the start of the pandemic began changing behavior as it was at the fastest pace on record. By March 2021, the personal savings rate (after taxes and spending) was 27%, according to the Bureau of Economic Analysis. It is still well above average at 10%.

A few waves of stimulus money during the pandemic along with many paying down their more expensive debt, were contributors to the additional ability to save.  The causes that created these high household cash positions may only be as long-lived as the current abnormal economy. And, the pace toward normalization will depend on how quickly work-life normalizes, and monetary and fiscal policies allow the economy to carry its own weight.

Until then, with aggressive amounts of cash in the system and employment levels increasing, consumer balance sheets should allow for the part of this trend that has been driven by cash on the sidelines to continue.

 

Take-Away

The “buy the dip” phenomenon has paid off this year. However, other factors that impact markets need to be minded as well. For now, investors have been paid by injecting more cash into their positions each time there is a one-week price drop. Interestingly, all of the openings have been at higher and higher averages. This could mean that investors are cautious in addition to their confidence.

The market, as measured by the S&P 500, dropped last week. We will soon know whether the trend continues and 6 out of 8 dips attract new money to flow in and the market rise, or if this will become a deviation from the trend.

Paul
Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

Is it Wise to Buy on Dips?

Money Supply is Like Caffeine for Stocks

Four Inflation Growth Possibilities and Their Impact on Stocks

Yield Curve Control

 

Sources:

https://www.alliancebernstein.com/corporate/en/insights/investment-insights/should-todays-buy-the-dip-equity-trend-guide-a-multi-asset-strategy.html

https://www.barrons.com/articles/2-reasons-to-buy-stocks-after-the-dip-51631202176

www.Koyfin.com

https://www.bea.gov/data/income-saving/personal-saving-rate

 

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Brokerage App Coercion? The SEC Wants You to Share Your Experiences

 

Stockbrokers, as part of their basic description, do not provide investment advice or portfolio management. The SEC is acting to determine whether the practices of brokerage apps such as eToro or Robinhood Cross that line. As important they are also seeking advice from professionals and retail customers to help identify where the lines should be drawn.

Background

Over 20 million new accounts have been opened at U.S. brokerages since January of last year. A substantial number of these account owners had never transacted in the securities markets before. New investors are more likely to rely on tools on the app, consult social media forums, and YouTube channels for advice – and otherwise learn through trial and error.

The Securities and Exchange Commission has as its top two priorities to protect investors and maintain fair, orderly, and efficient markets. The rapid pace of technological change, coupled with an industry that flourished as people stayed home from work while receiving stimulus checks, has the SEC playing catch-up on designing rules and standards to protect investors and to ensure fairness.

Keeping in mind that brokers are not advisors; that is, they are there to execute with your best interest in mind, but not to give advice, the SEC opened a comment period on the bells, whistles, pop-ups, and other rewards and inducements on these brokerage sites. For example, eToro allows the ability to copy portfolios of other traders. Does this cross the line into giving investment advice? Robinhood had a digital “scratch-off” where account owners could get a free stock share. The SEC is moving to determine if some digital engagement practices (DEP) are actually investment advice.

 

Source:  SEC Press release dated 8/27/21

 

SEC Policing Digital Cues

An SEC panel met Thursday (September 9) to discuss digital cues from online brokers to determine if they may potentially harm investors by coaxing them to make decisions that end up costing money. Also, to address the rise of new ways to buy stocks, options, and other public market securities.

There were two major conclusions from the panel meeting. First is that an in-depth analysis could put the SEC in a unique position to review the technology used by brokerage firms and investment advisors to reach customers and track their actions. The other conclusion was that policing digital cues is complicated, and perhaps impossible.

Before New Rules are Set

The SEC is entering into a public comment period to hear the broader open discussion before proposing any new regulatory guardrails for online trading and advisory apps. The reach of any new rules could also impact the so-called robo-advisors like Wealthfront and Betterment and more traditional online brokers that have adopted some of the newer business practices.

 

Take-Away

The impact of digital engagement such as alerts, prompts and prizes that many new stock traders encounter online is not easy to determine. If clearer guidelines are not set, we may see legal cases deciding this using Regulation Best Interest which says that brokers and advisors have to do what is in their client’s best interest.

Some prompts on platforms are there to help increase transactions; does that make it a recommendation? Can these be considered manipulative? The comment period to the SEC ends October 1^st, 2021. They have asked retail investors with experience with online investment platforms to share those experiences using
this questionnaire.

 

Suggested Reading:

Will Robinhood Be Fined on Charges of Gamification?

Coinbase Receives an Enforcement Letter from the SEC

New Jersey Issues Cease and Desist Order on Crypto Payments

Can You Invest in Uranium Directly?

 

Sources:

https://www.sec.gov/news/press-release/2021-167

https://www.sec.gov/rules/other/2021/34-92766.pdf

https://www.barrons.com/articles/brokers-bells-and-whistles-can-harm-investors-sec-panel-finds-51631222273?mod=hp_LEAD_2_B_2

https://www.barrons.com/articles/secs-gamification-review-will-examine-stock-app-designs-51630101406?mod=article_inline

 

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China’s New Rules on Some Public Companies has Cathie Wood and Others Adjusting Portfolios

 

One of the recent themes that has been successful for investors in U.S. equities is to own what the government is supporting and rid your portfolio of what it does not. Cathie Wood is applying this policy to other countries as ARK Invest is openly using this strategy on ADRs she holds in her ARK funds. Specifically with Chinese video game companies that put capitalism in a positive light, among other attributes.

Background:

Video game stocks from China continue their downward trend as executives from several Chinese companies are required to meet with government officials about restricting video games.  One restriction that took effect September 1st is that citizens under the age of 18 are only allowed to play from 8 p.m. to 9 p.m. Friday, Saturday, Sunday, and public holidays. The rules come with enforcement measures. The reason given for the limited exposure of children is that they liken video play to substance abuse. Another change being discussed impacts games that have a “solitary focus of pursuing profit.” Companies that have been summoned included Tencent that owns 40% of Epic Games (Fortnite) and Riot Games (League of Legends) where there is full ownership.

Further downward pressure on these ADRs may be coming from an imposed hiatus. In a news story this morning (sept. 9) the South China Morning Post reported that the country has temporarily suspended approval of all online games.

 

Investor Impact

Cathie Wood the founder and CIO of Ark Invest and a closely followed and intentionally transparent investor, has said her funds had significantly reduced exposure to China. She said they only hold companies that are “currying favor” with Beijing. Her concern is that Chinese authorities are focused on social engineering and that anything deemed too profitable by Beijing was at risk of being shut down.

The Ark CIO cited a single weekend in July when the government of China set rules for the online education industry that sets a course toward achieving “common prosperity,” which is seemingly at odds with individual or company profit. These education directives ban for-profit companies from teaching school subjects. The crackdown is much broader than just gaming and seems to take aim at the very reason one invests in a company.

 

Take -Away

Political priorities are important for investors to note and then use to decide if they should set investment strategy around. This includes policy as well as budget priorities. Changes in one of the world’s largest economies has one of the world’s most followed investors adjusting her position.  This may be short-lived and soon represent a buying opportunity, or may spread to other industries or other countries and markets.

Register to get free market information like this and company research in your inbox at no cost from Channelchek by following this link. 

 

Suggested Reading:

China Fighting Cost Push Inflation with Metals Reserves

The Advantages of Microcap Equities for Investors

Michael Burry vs Cathie Wood is Not a Fair Competition

The Index Bubble Michael Burry Warned Us About is Still Looming

 

Sources:

https://www.barrons.com/articles/videogame-stocks-china-new-rules-51631123896?mod=article_inline

https://www.scmp.com/tech/big-tech/article/3148128/china-said-suspend-approval-new-online-games-heating-beijings?nocache=153024_c509d812-1129-11ec-aa5f-4ba6b5f6c41c&action=preview&module=inline_pop_up&pgtype=article

https://www.ft.com/content/4ddf4b5b-3267-41b2-ad04-8f4e77783a5c

 

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	Image Credit: Marco Verch (Flickr)

The Wells Notice to Coinbase May be the Tip of the Regulatory Iceberg

 

Shares of Coinbase Global fell sharply on Wednesday after the SEC filed a Wells notice naming the company. A Wells notice is a letter from the regulator to firms when it’s planning on bringing an enforcement action against them. The letter is issued after an investigation to notify the firm that they have concluded they should be charged.

The message from the SEC is they would sue the cryptocurrency exchange if it moved forward with a plan to provide users interest on crypto assets. Coinbase has been advertising and was weeks away from launching an interest-bearing product. The SEC’s move, which questions whether popular, fast-growing practices offered by crypto platforms are legal, places the value of Coinbase and others in question. Coinbase went public in mid-April with a valuation of $86 billion and a closing price of $328 per share. By midday on the day of the announcement (Sept. 8), shares were trading at $260.8 and a valuation of $68.3 billion.

The concern by the SEC is not new. Paying interest on asset lending is traditionally the place of the highly regulated banking industry. Today’s Wells notice represents a more diligent intent to reel in activities in the crypto space. Part of the confusion is A number of different agencies oversee cryptocurrency.  The Commodity Futures Trading Commission (CFTC) has in the past regulated digital currencies as commodities. The Securities and Exchange Commission (SEC) requires registration of any digital currency traded in the U.S. if it is classified as a security and of any trading platform that meets the Commission’s definition of an exchange. The Internal Revenue Service (IRS) also involves itself in tax matters. Regulatory oversight could also include the Financial Crimes Enforcement Network (FINCEN).

 

Tweet by Brian Armstrong co-Founder & CEO Coinbase

 

SEC Chairman Gary Gensler, has followed his predecessor’s logic in thinking that cryptocurrencies are securities.  In an interview with Barron’s last week, Gensler noted that the SEC has already taken action against 75 or 80 crypto coins. When asked why the rules aren’t solidified across the board, the SEC head said, “Every case has facts and circumstances, every case has to be very carefully put together, and so forth,” Gensler said. “Our laws are clear. And yet, it still takes the time, month after month to put them together.” This lack of overall guidance adds to the risk of launching a crypto coin with good intent. Gensler also urged the trading platforms to speak with the SEC about products.

 

Tweet by Brian Armstrong co-Founder & CEO Coinbase

 

Coinbase CEO Brian Armstrong wrote on Twitter that he tried to meet with the SEC in May but was rebuffed. When the company did tell the SEC about its plan to offer interest-bearing accounts, the agency said the product was a security and then “refuse[d] to tell us why they think it’s a security,” Armstrong wrote, calling the episode “sketchy behavior.”

Because of the Wells notice from the SEC, Coinbase is now expected to delay the launch of its interest-bearing product “until at least October,” wrote the company’s chief legal officer, Paul Grewal, in a blog post.  

Cryptocurrencies are still new, and regulators are engaged in a tug-of-war of sorts with companies as well as other officiating entities. As matters like this resolve, it will open the door for others that at least know what the ground rules are. The greater risks/reward belongs to the pioneers. 

 

Suggested Reading:

Is Interest Paid on Crypto Holdings an SEC Violation?

What’s in the Surprise Cryptocurrency Bill?

The Coinbase Nasdaq Listing Could be a Gamechanger

When was the Shortest Recession in Your Lifetime?

 

Sources:

https://medium.com/global-id/gid-report-170-a-bombshell-in-the-battle-for-the-future-of-crypto-2eb78259300b

https://www.cnn.com/2021/04/14/investing/coinbase-stock-direct-listing/index.html

https://www.sec.gov/news/public-statement/peirce-roisman-coinschedule

https://twitter.com/brian_armstrong/status/1435439291715358721

https://www.barrons.com/articles/coinbase-stock-price-sec-wells-notice-51631106089?mod=hp_LEAD_1

 

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Irrational Pessimism – Why Value Investors Should Research Individual SPACs

 

Stock market participants are made up of investors with various needs and styles. They consist primarily of those with short-term time horizons, those investing longer-term, momentum traders, and others who look for value in out-of-favor sectors. By some measures, the mismatch in demand for SPAC IPOs and viable targets earlier this year has led to some loss of enthusiasm by investors. But, for one group of investors that may have not considered them before, many of the current outstanding SPAC issues offer real value.

Many current SPACs are trading at a discount to the overall balance within their escrow account. This provides a rare level of protection and potential. Let me explain. When any currently trading SPAC first went public the promise to investors was using the proceeds from the SPAC IPO to shop for the perfect company to merge with. The proceeds from the offering, usually $10 per share, were placed in an escrow account and held in trust for this purpose. The trust account earns interest and is used to pay bills associated with the SPAC, in most cases, it remains largely intact. Information on the state of any SPAC trust account assets can be found on their most recent Edgar 10-Q filing. The data is a snapshot as of the date on the filing but should allow investors to, along with the stock price and shares outstanding, determine if the entire unmerged “blank check” company is worth more or less than where it is currently trading. Edgar filings are available at SEC.gov and through the SPAC companies’ website.

There Are No Bad Investments
(at the right price)

Many SPACs are now trading at a discount to their liquidation value. The market for this structure has had difficulty finding its balance since late last year. Enthusiasm, beginning a year ago, brought a great amount of demand for new SPAC IPOs. This level of investor demand outpaced the supply of great targets available. This realization, in large part, has soured investor’s appetite for this structure. This “souring” is good for value investors. As for the momentum investors that were excited about SPACs in January won’t find a stampede in these IPOs for a while.

When any investment category falls out of favor, prices drop and value may be found. Mathematically, value can be assessed with outstanding SPACs. The balance sheets on the Edgar filings provide data such as “Investments Held in Trust Account” “Accumulated Deficit” and “Total Shareholder’s Equity.” Remember, Shareholders’ Equity
= Total Assets? Total Liabilities. If one divides this total by shares outstanding, then the liquidation value per share (as of the date of the filing) is largely known. Is a SPAC trading at a discount to its value? If yes, by how much?

SPACs also have an end date, usually two years from the initial offering date. This allows a rough yield calculation using the discount. Even if the management company finds an acceptable merger, the stockholder has the option of liquidation at the pro-rata trust value. Or, they can decide to take part in the merger and part of it. If they liquidate the period of capturing the discount is likely to be shorter which mathematically increases the yield as the same income is earned over a shorter period of time.

A Floor on Risk and Choices

Then there is optionality. The discounted SPAC owner may find that their share prices jump if other investors want “in” on owning the merged entity. Shareholders themselves may decide the return from continuing to own the deSPAC shares is the best use of their investment capital and continue to hold.

Take-Away

Many SPACs are trading near their 52-week lows. Meanwhile, stock market valuations are hitting new highs. The weakness in price is reflective of the appetite investor had relative to how many successful SPAC mergers could actually be accomplished in a short period.

Outstanding pre-deal SPACs, most with a vintage of late 2020 or early 2021 can be compared to short-duration convertible bonds. That is to say, there is an underlying expected yield that could be realized in the next 18 months, along with the return on discount, there is also an opportunity to realize outsized returns if a great merger candidate is identified.

Paul Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

The Different Ownership Paths Before the De-SPAC Period

Analysis of a Special Purpose Acquisition Company

The Final Phase of a Special Purpose Acquisition Company

Regulation of a Special Purpose Acquisition Company

 

Sources:

SEC.gov

https://www.barrons.com/articles/spac-stocks-opportunities-51630111867?mod=hp_columnists

https://www.scmp.com/business/banking-finance/article/3146978/slowdown-spac-issuance-healthy-markets-sponsor-behind

 

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Energy Fuels Issues Reminder Regarding Expiration of Warrants Energy Fuels announced that Warrants will expire at 5:00 p.m. Toronto time on Monday, September 20, 2021 Research, News & Market Data on Energy Fuels Watch recent presentation from Energy Fuels

Sabre Gold and Golden Predator Announce Anticipated Plan of Arrangement Closing; Attendance at Precious Metals Summit Golden Predator Mining announced that all conditions to closing have now been satisfied in respect of the previously announced business combination Research, News & Market Data on Golden Predator Mining Watch recent presentation from Golden Predator Mining

Esports Entertainment Group Partnering with Real Cricket 20 to Provide Software Integration for First Global Tournament Esports Entertainment Group announced it is partnering with Real Cricket 20, the world’s top mobile cricket game, and Sports in Esports Ltd, to provide software integration services for the dafaNEWS Ecricket World Series Tampa Bay Buccaneers Name Esports Entertainment Group as Its Official Esports Tournament Platform in Multi-Year Deal Esports Entertainment Group announced it has signed a partnership agreement with the Tampa Bay Buccaneers to be the NFL franchise’s official esports tournament platform provider Research, News & Market Data on EEG Watch recent presentation from EEG

Salem Podcast Network Launches Daybreak Insider Daily Podcast Salem Media announced that the Salem Podcast Network will launch the Daybreak Insider Daily Podcast beginning on Tuesday, September 7th Research, News & Market Data on Salem Media Watch recent presentation from Salem Media

 

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Entravision Continues Digital and International Expansion with Full Acquisition of the Remaining Interest in Cisneros Interactive Entravision Communications announced that the Company has acquired the remaining 49% interest in Cisneros Interactive See today’s research report from Michael Kupinski, Director of Research at Noble Capital Markets Research, News & Market Data on Entravision Watch recent presentation from Entravision

Endeavour Silver Completes Acquisition Of Bruner Gold Project In Nye County, Nevada Endeavour Silver announced that it has completed the acquisition of the Bruner Property, located in Nye County, Nevada Research, News & Market Data on Endeavour Silver Watch recent presentation from Endeavour Silver

Lineage Announces Appointment of General Counsel Lineage Cell Therapeutics announced that it has appointed George A. Samuel III as Lineage’s General Counsel and Corporate Secretary Research, News & Market Data on Lineage Cell Therapeutics Watch recent presentation from Lineage Cell Therapeutics

Capstone Green Energy Announces the Appointment of Ping Fu, Former CEO of Geomagic, to the Board of Directors Capstone Green Energy announced that Ping Fu was elected to its Board of Directors at the Annual Meeting of Stockholders on August 27, 2021 Research, News & Market Data on Capstone Green Energy Watch recent presentation from Capstone Green Energy

ProMIS Neurosciences appoints accomplished biotechnology executive, Josh Mandel-Brehm, to its Board of Directors ProMIS Neurosciences announced the appointment of Josh Mandel-Brehm to its Board of Directors with immediate effect Research, News & Market Data on ProMIS Neurosciences Watch recent presentation from ProMIS Neurosciences

 

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August was Great for Most Sectors, Will September Follow Through?

 

Dating back to 1928, the average September return on the S&P 500 has been a loss of 0.99%. The U.S. government fiscal year ends September 30th  which brings its own set of complications to cause markets to retreat. However, after an August where four major U.S. indices show gains from 1.28% to 4.76%, the momentum heading into September remains strong.

The one thing investors in past years have found causes volatility as the calendar approaches October is the debates surrounding the debt ceiling and whether the government will have enough money available to pay its bills and keep its employees working. The debt ceiling or limit on government borrowing was suspended last year. That limit was reinstated on August 1st of this year, causing U.S.Treasury Secretary Janet Yellen to become more of a spendthrift until the new budget, effective October 1^st, passes.

The stock and bond markets continue to trust Federal Reserve Chairman Powell on his assessment that the inflation we are now experiencing is transitory. With that belief, the bond markets have behaved well while the stock market reaches for the sky.

 

 

Index Performance August 2021

The tech-heavy Nasdaq 100 led the way during the tail end of August and outperformed the S&P 500, Russell 2000, and Dow 30 by wide margins. Ending the month 4.76% ahead of where it began, places the Nasdaq 1.59% ahead of the S&P index, which finished 3.76% ahead of July’s close. The small-cap Russell 2000 heads into September strong after having rallied the last week of August finishing the month 3.05% above where it began. The Dow 30 industrials put in a performance that would have been respectable at any other time in history, but it pales in comparison to its rivals. 

 

 

Sector Performance

Performance of the S&P sectors shows the energy sector is having a difficult time during July. Although the priorities of moving away from fossil
fuels were put to the test during the month President Biden asking OPEC for more output and California adding five
gas-fired plants, the future of traditional energy has very little support. All other sectors measured in this recap were positive during September. The Utility sector, turned in the overall best performance with a month over month of up 5.53%. Also worth noting are the Financials, up 4.67%. Many companies within this sector would benefit from a more positively sloped yield curve. The zero-interest rate overnight policy coupled with a Fed tapering would tend to steepen the curve for these institutions.

Take-Away

There is a massive amount of money in the economy which is looking for the best return. This is driving asset
prices including currencies, crypto assets, and real estate. The trend in the various stock indices has continued upward without much pause since April of 2020.

The sectors doing the best are those that benefit from support from the policies coming out of Washington, a steepened yield curve, and high demand as an aftermath of pandemic-related reduced activity.

Suggested Reading:

Debt Ceiling Season and U.S. Credit Ratings

Will Fed Taper Kill Strength of Stocks and Commodities?

Fed Chairman Addresses Tapering and Employment

California to Add Five Natural Gas Power Plants

 

Sources:

https://www.barrons.com/quote/index/spx

https://www.barrons.com/articles/stock-market-september-history-51630442637?tesla=y

https://www.barrons.com/quote/index/spx

 

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