Stocks yawned a bit, but Wall Street rose to within a whisker of the all-time high in another sub-1% daily move. Crowding into the tech trade showed no signs of letting up as the Nasdaq jumped 1% to a fresh record peak even as the White House announced new curbs on Huawei to restrict access to chips.

Asian shares drifted a bit as the US pressure on Huawei again highlighted the risks to manufacturing and trade, while European stocks were weaker at the open after ticking up a bit on Monday.

Stocks calm, but trouble could be brewing

August remains calm but there may be trouble ahead. Market indicators are sounding a couple of alarm bells – not necessarily to retest lows of March but for a short and sharp pullback. The US stock market is only at all-time highs because of the Fed and huge fiscal stimulus; it does not reflect reality – so what you say, it never has. But forward earnings multiples of ~25x for the S&P 500 are less likely to survive for long than 20x. Put-call ratios are moving in a direction that often correlates to a reversal.

Moreover, Vix futures point to greater anticipated market volatility into the autumn as the US presidential race inevitably tightens. Uncertainty over the result will create angst and volatility. The market is way too confident that Biden will win, although if Trump pulls it off the market could rip higher.

A fresh stimulus package would be a major tailwind for stocks, but it’s going to be hard to get it done with the election looming. The market will have to pay attention to the real economy again. A sharp rise in US mortgage delinquencies to a 9-year high at 8.2% even as house prices and homebuilder confidence rise on record low interest rates should be a cause for concern. Consumer-driven businesses, about 70% of the US economy, will be in for a shock as stimulus cheques have ended.

European shares have underperformed since the March low but would be swept up by any US-led selling. Rising coronavirus cases on the continent is a worry for reopening and could nip the nascent recovery in the bud.

M&S announces fresh job cuts

There is more carnage on the British high street as Mark & Spencer announced 7,000 job cuts in the coming months as it speeds up its ‘streamlining’ process, by which it means slashing jobs, costs and the store footprint and catching up with the modern world of retail. Covid-19 has accelerated a lot of consumer trends and as observed before, it may be the catalyst required to make M&S finally wake up. Food sales rose well, while clothing & home was down severely but is improving.

It’s very hard to gauge exactly how well M&S is doing against the unique backdrop of the pandemic, but we can say that investors should welcome accelerated change given the starting point pre-pandemic. M&S has promised renaissance before and failed, but this time it could be different.

M&S food sales ought to be higher though – Kantar figures this morning show we’re spending a lot more on groceries and all the supermarkets are gaining. However, food price inflation of 2.9% again raises the stagflation alarm bells and underpins the sense that inflation, at least on a range of basic commodities, will rise.

Warren Buffett bets on gold

Gold got a lift from Warren Buffett’s bet on the metal and a weaker dollar this morning has sent prices racing back to $2,000 after clearing the 23.6% retracement resistance around $1980. Gold has further to go longer term but there is yet still a risk of a second corrective move lower within the bull market.