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Pre-market actions: when a market bubble is not the end of the story

What’s happening: The S&P 500 remains just below its all-time high, while the Ethereum cryptocurrency broke a new all-time high on Tuesday, surpassing $ 3,400.

This may seem like a good reason for investors to consider taking money off the table, avoiding high exposure to a potential crash. But in new research, JPMorgan is exploring a different approach: What if investors choose to invest in bubbles, and not around them?

To support this argument, strategist John Normand makes a few key points. First, he notes that extreme valuations are quite common – although more for stocks and commodities than for bonds – and can sometimes last “for many years”. Second, he writes that “80% of expensive markets that crash dramatically end up hitting new all-time highs.”

This could allow some investors to argue that they are not looking for a series of “irrational bubbles”. Instead, some price jumps could simply be the result of over-excited investors who see very real prospects for growth, but are getting a bit ahead of themselves.

“Markets are always forward looking and sometimes look too far ahead. This phenomenon creates vulnerability in one economic cycle, but likely justification in the next,” said Normand.

An example: I immediately thought of my recent story on investing in clean energy, which suffered a huge collapse around the Great Recession in 2008, but is rebounding again. While investors with shorter time horizons have undoubtedly been burnt out, those who have continued to pump money into the industry seem increasingly well positioned, as countries, businesses and Wall Street put a strain on the industry. new emphasis on tackling the climate crisis.

This does not mean, of course, that dangerous bubbles do not form in the financial markets and that everything that falls has to bounce again.

Normand recommends that investors remain selective.

A solid approach, he said, is to prioritize assets with the backing of central banks, which have shown a willingness to step in when markets are volatile.

The Federal Reserve has on several occasions provided rapid support to the US economy, boosting stocks and bonds and limiting Wall Street risks. The central bank is unlikely to do the same for cryptocurrencies.

Overview: If, for example, Ethereum prices are ultimately a bubble, it could lead to a more difficult hangover.

Bill and Melinda Gates divorce

Bill and Melinda Gates end their marriage after 27 years, a move that has big implications for philanthropy and global health.

The couple, who are among the richest people in the world, together founded their philanthropic organization, the Bill and Melinda Gates Foundation in 2000. Since then, the organization has spent tens of billions of dollars on initiatives to improve public health and reduce poverty. . The foundation has also been at the center of efforts to fight the Covid-19 pandemic, spending huge sums of money on tests, treatments and vaccines.

Why it matters: The news of the divorce has raised questions about the foundation’s future – and the couple’s enormous fortunes – even as the couple pledged to maintain a professional relationship.

“We have raised three amazing children and built a foundation that works around the world to enable everyone to lead healthy and productive lives,” the couple said in a statement on their verified Twitter accounts. “We continue to share our conviction in this mission and we will continue our work together at the foundation, but we no longer believe that we can grow together as a couple in this next phase of our life.

Why is divorce a big deal? Take a look at these numbers:

  • $ 146 billion: Bill Gates net worth. The Microsoft co-founder is the fourth richest person in the world, according to the Bloomberg Billionaires Index.
  • $ 54 billion: how much the Bill and Melinda Gates Foundation has contributed in two decades.
  • $ 1.75 billion: the foundation’s commitment to the pandemic response, starting in December.

Watch this space: Melinda Gates filed for divorce in King County, Washington. She asked a judge to dissolve the marriage based on the couple’s separation contract. No financial details have been included in the documents available to the public.

World’s largest jewelry brand abandons mined diamonds

Based in Copenhagen Pandora (PANDY) produces more jewelry than any other company in the world. And on Tuesday, he announced a major change: he will no longer use mined diamonds in his products.

The details: The company has said it is shifting its focus instead to using lab-created diamonds, which it says have the same “optical, chemical, thermal and physical characteristics.” Shares are up 6%.

Laboratory stones have been touted as the ethical and traceable alternative to mined diamonds. They are increasingly attractive among consumers looking to purchase products from sustainable supply chains. Pandora previously announced that it will only use recycled gold and silver in its products by 2025.

Last year, Tiffany & Co. announced a tracing initiative that allows customers to discover the exact country where stones are cut, polished and set.

Pandora targets traditional buyers, which means diamond sales were only 50,000 pieces of jewelry sold last year out of a total of 85 million. However, it is still an important gesture on the part of a major player.

Watch this space: Pandora is trying to stay ahead of the game, noting huge growth in demand for lab-made stones.

“In the United States, and particularly in China and India, young consumers are saying that sustainability is part of their decision-making process and could influence the purchase of diamond jewelry,” Bain & Company noted in a commentary. report released earlier this year.

following

Corsair Games, CVS (CVS), Ferrari (RACE) and Pfizer (PFE) report the results before the US markets open. Activision Blizzard (Mountain biking), Caesars Entertainment (CZR), Hyatt (H), Lyft (LYFT) and Zillow (Z) follow after the close.

Coming tomorrow: The ADP private payroll report will serve as an important snapshot of the April jobs report due on Friday.

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