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London (CNN Business)This spring, investors could have bought almost any asset class and reaped incredible returns.
See here: Every market, with the exception of emerging market currencies and agricultural products, has recouped at least 50% of its Covid-19 losses, JPMorgan strategist John Normand observed in a recent note to clients. Some markets, like investment-grade credit, have regained at least 80%.”When the business cycle is turning higher, policy hyper-stimulative and downside risks manageable, the obvious investment strategy might be to own anything but cash,” Normand wrote. “This indiscriminate approach would not have damaged absolute returns over the past few months.”
But Normand thinks it may be time to rethink the “everything wins” playbook, making the case for greater selectivity heading into the second half of the year.
As the pace of bond-buying by central banks slows, country- and industry-specific characteristics will become relevant again, according to the bank.Read MoreWhat it means: JPMorgan is now urging clients to favor top-rated corporate bonds over those with higher yields due to concerns about rising defaults, and to focus on those issued in developed instead of emerging markets. For stocks, the bank thinks investors should stick with Covid-19 “endgame winners” from the tech, communications and health care sectors.”Liquidity cannot paper over specific weaknesses indefinitely,” Normand said.The backdrop: Markets have continued to push higher despite concerns about rising coronavirus cases in Latin America and nearly half of US states, and new clusters of infections in Germany and China.The S&P 500 ended last week up nearly 1.9%, its fourth week of gains in the past five, while Europe’s Stoxx 600 rose more than 3%.But there are signs investors are getting pickier about what they scoop up.Evercore ISI strategist Dennis DeBusschere noted Monday that health care and tech were the best-performing sectors last week, indicating that investors are starting to make less risky choices.That doesn’t mean Wall Street is panicking about regional surges in coronavirus cases. The mood can be best described as cautiously optimistic, with traders prepared to act swiftly if the outlook changes.Watch this space: JPMorgan acknowledged it is not “properly hedged” against a second wave of infections that triggers lockdowns, noting preparedness has improved.”We think there is sufficient hospital capacity to accommodate the inevitable rise in infections as mobility increases,” the bank said.
Germany’s Wirecard is in crisis over missing $2 billion
One of Europe’s top tech companies is imploding after more than $2 billion went missing, sending shares plunging and threatening its future.
Wirecard says missing $2 billion never existed. Its stock is down 85% in 3 daysThe latest: Germany’s Wirecard acknowledged Monday that $2.1 billion that its auditors were unable to locate probably never existed, triggering another stock dive and upping the stakes of a brewing fight with creditors, my CNN Business colleague Charles Riley reports.Shares have lost more than 85% of their value over three trading sessions since EY refused to sign off the tech company’s accounting, wiping away $12.5 billion in market value.Founded in 1999, Wirecard — which processes payments for consumers and businesses, and sells data analytics services — has nearly 6,000 employees in 26 countries around the world. Investors recognized its potential: Shares reached an all-time high above €190 ($213) in September 2018, the same month it replaced Commerzbank in Germany’s list of top 30 companies. At a low point on Monday, they hit €13 ($14.56), valuing Wirecard at less than €2 billion ($2.2 billion).Fallout builds: CEO Markus Braun resigned Friday. And on Monday, the company withdrew its preliminary results for the 2019 financial year, the first quarter of 2020 and its profit forecast for the 2020 financial year.Wirecard is now scrambling to find the money to keep creditors at bay. The company said late Friday that it had hired investment bank Houlihan Lokey to come up with a new financing strategy.
US faces avalanche of evictions as rent protections lapse
Since the Covid-19 shutdowns began, renters in 42 states and Washington, D.C. have received protection from eviction thanks to statewide moratoriums.But more than a third of those protections have since lapsed, and more are set to expire soon — leaving renters to come up with months of back pay or face losing their homes, my CNN Business colleague Vanessa Yurkevich reports.”We’ve never seen anything like this,” said Dave Giffen, executive director of the Coalition for the Homeless. “We know that this isn’t the end. It’s not even the middle. This is only the beginning of the crisis.”This will help: Federal foreclosure and eviction moratoriums are being extended for two more months, Freddie Mac and Fannie Mae announced last week. That covers about a quarter of the nation’s rental units, according to the Urban Institute. The majority of renters, however, need to find help elsewhere. Some governors have been able to funnel federal dollars from the $2 trillion CARES Act into rent relief funds as moratoriums expire. But more assistance may be needed.The $3 trillion HEROES Act passed by the House would provide $100 billion in rental relief, but the legislation has stalled in the Senate. The White House and Senate Republicans are working to come up with their own plan.
Up next
Apple’s Worldwide Developers Conference kicks off via livestream from Cupertino. Also today:
- US existing home sales for May post at 10 a.m. ET.
- The EU-China summit takes place over videoconference.
Coming tomorrow: Flash readings of IHS Markit’s closely-watched Purchasing Managers’ Indexes will provide a read on the health of global manufacturing and services.
Source: edition.cnn.com