The Fearless Girl statue in front of the New York Stock Exchange. Parts of the equity market that were set to benefit hugely from the reopening of economies are now under-performing the broader market. Photo: AP
The Fearless Girl statue in front of the New York Stock Exchange. Parts of the equity market that were set to benefit hugely from the reopening of economies are now under-performing the broader market. Photo: AP
The Fearless Girl statue in front of the New York Stock Exchange. Parts of the equity market that were set to benefit hugely from the reopening of economies are now under-performing the broader market. Photo: AP
The Fearless Girl statue in front of the New York Stock Exchange. Parts of the equity market that were set to benefit hugely from the reopening of economies are now under-performing the broader market

Why the reopening of economies could be difficult for cyclical stocks


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It’s a slightly odd feeling. When you have experienced such an intense period of living differently from what you are used to, any consequent change, although hugely positive, can be slightly unsettling.

The easing of restrictions in many parts of the world brings with it differing opinions. Will we simply go back to our normal way of life, commuting to an office and spending more as many have boosted their savings during the global lockdowns? Or will we still be fearful to re-enter the post-lockdown world, tiptoeing carefully, wary of new Covid-19 variants and more pandemic waves?

Judging by events in some countries, people are excited to be re-engaging in social activity, which is heart-warming after the historic period we have all lived through.

Over the past few weeks, stock markets have been similarly buoyant, hitting new highs across the world. The broadest measure of stocks in the world’s premier economy, the S&P500 seems to hit fresh records every week or so, while the more volatile technology-heavy Nasdaq index is once more closing in on its highs.

Even in Europe, where lockdowns are still ever-present and the vaccine rollout has been slower, Germany’s major stock market churned out an impressive 9 per cent gain in the first quarter of this year. This has been primarily driven by bank stocks, which investors have been hungry for as bond yields rise and potentially lift banks’ profits in the process.

It seems that the only thing that matters to asset prices is central bank largesse. This bounty, from people not normally associated with bearing gifts, is not a new feature, of course, but it has certainly been magnified by the pandemic.

Yet, it is the job of stock markets to be discounting machines as they are still one of the leading indicators of company performance and economic activity. So, are we now getting closer to the time when the reflation and re-opening trade are fully priced into markets?

Last month, we wrote about the continued bullishness of some of the smartest guys in the investing world. About 90 per cent of respondents in a widely watched survey of fund managers expected company profits to grow. That figure is more than in the dot-com boom in the early 2000s and the final quarter of 2009 when the global economy was coming out of the financial crisis.

A heads-up on price pressures and the potential for pass-through will be closely scrutinised

But small changes in the performance of US stock markets, in particular, are worth noting as the world moves into the next stage of its recovery.

Parts of the equity market that were set to benefit hugely from the reopening of economies are now under-performing the broader market. These cyclical leaders, typically technology stocks and smaller companies, have enjoyed their extended period in the sun and were due for a pullback.

Their strong performance duly raises the bar for future returns, while leaving sentiment exposed to more negative developments. Some strategists are highlighting the possible warning sign that comes with a change in stock leadership, cautioning that the actual reopening of the economy may be harder than thought.

This is why the current earnings season will be a focus for many investors. Forward guidance from companies that informs the expected future path of growth will probably be more important than actual results themselves.

A heads-up on price pressures and the potential for pass-through will also be closely scrutinised, in tune with the higher inflation narrative currently being discussed across trading desks. Indeed, one of the challenges now on the horizon is whether corporate profits can exceed current estimates to drive further market gains.

One other external factor to consider is the matter of higher taxes that are coming soon for global companies. Whether that comes in the form of the global minimum corporate tax proposed by the new Biden administration or a domestic levy is a topic for debate.

But rising input costs and taxes to offset the stimulus that governments have released to ease the pandemic will certainly not boost corporate margins.

Hussein Sayed is the chief market strategist at FXTM.

The specs

Engine: 2.0-litre 4-cylinder turbo hybrid

Transmission: eight-speed automatic

Power: 390bhp

Torque: 400Nm

Price: Dh340,000 ($92,579

RESULTS

Men – semi-finals

57kg – Tak Chuen Suen (MAC) beat Phuong Xuan Nguyen (VIE) 29-28; Almaz Sarsembekov (KAZ) beat Zakaria Eljamari (UAE) by points 30-27.

67kg – Mohammed Mardi (UAE) beat Huong The Nguyen (VIE) by points 30-27; Narin Wonglakhon (THA) v Mojtaba Taravati Aram (IRI) by points 29-28.

60kg – Yerkanat Ospan (KAZ) beat Amir Hosein Kaviani (IRI) 30-27; Long Doan Nguyen (VIE) beat Ibrahim Bilal (UAE) 29-28

63.5kg – Abil Galiyev (KAZ) beat Truong Cao Phat (VIE) 30-27; Nouredine Samir (UAE) beat Norapat Khundam (THA) RSC round 3.

71kg​​​​​​​ – Shaker Al Tekreeti (IRQ) beat Fawzi Baltagi (LBN) 30-27; Amine El Moatassime (UAE) beat Man Kongsib (THA) 29-28

81kg – Ilyass Hbibali (UAE) beat Alexandr Tsarikov (KAZ) 29-28; Khaled Tarraf (LBN) beat Mustafa Al Tekreeti (IRQ) 30-27

86kg​​​​​​​ – Ali Takaloo (IRI) beat Mohammed Al Qahtani (KSA) RSC round 1; Emil Umayev (KAZ) beat Ahmad Bahman (UAE) TKO round

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Part three: an affection for classic cars lives on

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

Key figures in the life of the fort

Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.

Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.

Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.

Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.

Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.

Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.

Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.

Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.

Sources: Jayanti Maitra, www.adach.ae

UAE currency: the story behind the money in your pockets

Turkish Ladies

Various artists, Sony Music Turkey 

Tell-tale signs of burnout

- loss of confidence and appetite

- irritability and emotional outbursts

- sadness

- persistent physical ailments such as headaches, frequent infections and fatigue

- substance abuse, such as smoking or drinking more

- impaired judgement

- excessive and continuous worrying

- irregular sleep patterns

 

Tips to help overcome burnout

Acknowledge how you are feeling by listening to your warning signs. Set boundaries and learn to say ‘no’

Do activities that you want to do as well as things you have to do

Undertake at least 30 minutes of exercise per day. It releases an abundance of feel-good hormones

Find your form of relaxation and make time for it each day e.g. soothing music, reading or mindful meditation

Sleep and wake at the same time every day, even if your sleep pattern was disrupted. Without enough sleep condition such as stress, anxiety and depression can thrive.

Glossary of a stock market revolution

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Redditor

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Robinhood

A smartphone app for buying and selling shares

Short seller

Selling a stock today in the belief its price will fall in the future

Short squeeze

Traders forced to buy a stock they are shorting 

Naked short

An illegal practice  

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SCHEDULE

Saturday, April 20: 11am to 7pm - Abu Dhabi World Jiu-Jitsu Festival and Para jiu-jitsu.

Sunday, April 21: 11am to 6pm - Abu Dhabi World Youth (female) Jiu-Jitsu Championship.

Monday, April 22: 11am to 6pm - Abu Dhabi World Youth (male) Jiu-Jitsu Championship.

Tuesday, April 23: 11am-6pm Abu Dhabi World Masters Jiu-Jitsu Championship.

Wednesday, April 24: 11am-6pm Abu Dhabi World Professional Jiu-Jitsu Championship.

Thursday, April 25: 11am-5pm Abu Dhabi World Professional Jiu-Jitsu Championship.

Friday, April 26: 3pm to 6pm Finals of the Abu Dhabi World Professional Jiu-Jitsu Championship.

Saturday, April 27: 4pm and 8pm awards ceremony.

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Abdul Jabar Qahraman was meeting supporters in his campaign office in the southern Afghan province of Helmand when a bomb hidden under a sofa exploded on Wednesday.

The blast in the provincial capital Lashkar Gah killed the Afghan election candidate and at least another three people, Interior Minister Wais Ahmad Barmak told reporters. Another three were wounded, while three suspects were detained, he said.

The Taliban – which controls much of Helmand and has vowed to disrupt the October 20 parliamentary elections – claimed responsibility for the attack.

Mr Qahraman was at least the 10th candidate killed so far during the campaign season, and the second from Lashkar Gah this month. Another candidate, Saleh Mohammad Asikzai, was among eight people killed in a suicide attack last week. Most of the slain candidates were murdered in targeted assassinations, including Avtar Singh Khalsa, the first Afghan Sikh to run for the lower house of the parliament.

The same week the Taliban warned candidates to withdraw from the elections. On Wednesday the group issued fresh warnings, calling on educational workers to stop schools from being used as polling centres.