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Morning Commentary

Summer Slowdown

By Charles Payne, CEO & Principal Analyst
8/30/2021 9:56 AM

Strong market breadth, but the rally is still spotty with rotation continuing to dominate. There are still a fair number of losers, even when market breadth improves.

Market Breadth

NYSE

NASDAQ

Advancing

2,731

3,365

Declining

568

994

52 Week High

165

206

52 Week Low

32

55

Up Volume

2.81B

3.11B

Down Volume

477.59M

874.25M

The stock market zoomed past its pre-pandemic highs a long time ago, but the fear index has not – that could change soon and would mean a higher market as well.

I want to say thank you to everyone that attended my State of the Market call Friday afternoon.  It was a long week and I’m sure everyone had lots of options for a late summer Friday evening.   There were so many great questions, I could not get to them all.   This week I will answer some on the market commentary.

Question

What is the importance/significance of “cash on the sidelines”? If a trade requires a buyer and a seller, then isn’t it a zero-sum equation…meaning the cash just moves from one investor to another?

Jason A.

Answer

I’ve read lots of smart work about the “myth” of cash on the sidelines.  But global acquisitions alone can take $500 billion in equities out of the market in exchange cash.  That cash initially moves to the sidelines.

Then there are money market funds.   Right now, there is $4.5 trillion invested in money market funds with very little yield.  That’s considered cash on the sidelines and retail investors have been moving that cash out.  In the most recent week, retail investors took $2.06 billion out of money market funds.

Money Market

Flow

Total

Retail

-$2.06 billion

$1.45 trillion

Institutional

+6.31 billion

$3.1 trillion

Portfolio Approach

We are fully vested in our Hotline Model Portfolio, and there are no changes since Friday’s weekly Portfolio Approach.

Today’s Session

Buy Now Pay Later or BNPL was already a global juggernaut in the fin-tech space, but it got another boost with news late Friday that Amazon (AMZN) will use Affirm (AFRM) to allow customers the option to split the total cost of purchases of $50.00 or more into monthly payments.  There will be no late fee charges.

At a time when Congress is looking into overdraft fees and credit card charges, this latest development points to major disruption ahead.

We could see a summer slowdown until we get to the jobs report on  Friday.


 

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