"We cannot direct the wind, but we can adjust the sails" – Thomas S. Monson
This past week marked the end of the month, the quarter and the end of the first half. We have reached the halfway point and it would not have been half a year. The beef market roared in January, continued in February, when COVID-19 entered the scene. The economy was placed in an induced coma and a bear market followed. The debates are raging over whether the ensuing bounce has now eliminated the bear and opened a new beef market.
Suffice it to say that those who remained on the stock scene have easily surpassed the army of people who decided that the market's lowest levels were not yet established in March. If you avoided playing the guessing game by securing each rally, the performance difference is even greater. These gains since the March recession have been enhanced by concentrating on the sectors of this "new" COVID economy. With emotions running amok and negativity about the virus situation being highlighted again, it is easy to see how the majority of pundits and far too many stock investors have not yet discovered the new macro trends being forged because of this health scare.
Some people think that they are fad horses with stock valuations that get foamy. Once again bringing comparisons to the technology era 1999-2000. I disagree. The focus always seems to be to find the way to the new startup that is sold at 20 times sales to make its case. Clearly they exist in this market. Newsflash, they're always there. Although it can fluctuate to different levels over time, greed rarely disappears completely.
Most if not all of these trends will not be a passer-by. As we begin to look under the hood of some of these companies, we find a strong technical foundation with robust earnings that all sell at reasonable PE multiples. While the majority continues to concentrate on the sectors of the economy that will have a tough road ahead, many companies offer solid views amid the dubious economic backdrop. The focus should be on those who have already gone out and highlighted direction. No doubt we need to see our basic consumer industries return to normal, but dismissing the "change" that is happening and measuring the stock market of these core industries is a big mistake.
Despite a very bumpy start to the "reopening" of the economy, COVID fears ramped up and civil unrest added to the picture, one might think the stock market was ready to go back and try again or maybe race new low levels. Now we see that many analysts and understanders had the story wrong again.
The month of June was over, and so did the second quarter of 2020 in the history books. For the month, S&P increased 1.8%, leaving S&P with a gain of 19.9% in the second quarter. After witnessing one of the worst stock market quarters in history, S&P rebounds with the best quarter since 1998.
The stock market slipped into last weekend which was beaten by COVID news and ready to turn since June and sailed until July. Like last week, news of the weekend about the country's health scare was negative. HHS Secretary Alex Azar warned last Sunday that the "window is closing" for states to control this latest spike in matters.
Despite that, there was a "risk-on" mentality across the globe in the stock markets at the start of the week. Some of this could be attributed to more window coverage in the quarters, or perhaps investors noticed that some states decided to "dump" back-dated "probable" COVID deaths into the system. It only asks questions about the data reported during this global health scare. Market participants may also have noticed that many other countries have seen their reopens go quite well.
Add strong data from China, the big improvement in Dallas Fed production activity, and the blowout of home sales, the S&P 500 climbed 1.47% on Monday. That move erased what was a small loss for June. The highlights of Industrials, namely Boeing (BA), and Communication Services shares were the highlights. The breadth was strong, with only 50 S&P 500 shares falling on the day.
There was no turning operation this Tuesday when buyers remained in charge. COVID news here in the United States put less emphasis as the focus seemed to draw on the EU proclamation that it opened the borders for 14 countries again. It kept the rally going as S&P increased its profits up to 4 +% for the week. Nasdaq kicked off the second half with fresh record highs both Wednesday and Thursday, making it 23 new highlights all the time in 2020.
For the year, Nasdaq leads the flock with a gain of 13%, investors say. where the revenue growth will be. S&P is down 3% for the year, reaching 7.5% from the all-time high, in what can only be described as an outstanding six months ever seen in the stock market.
With almost half of the year now, the biggest winners in the world markets have been US stocks, especially growth and technology stocks, along with gold and bonds. On the other hand, the biggest moves higher since the March 23 low target for US stock markets have been energy names, which have increased more than 50% over the past three months.
Some international stocks have also outperformed the lowest S&P 500, with an exposed commodity index in Australia and Canada, and industrial power plants Germany and the emerging market India.
Chinese equities rose to close trading week with Shanghai Composite which gained 2.1%. At today's levels, the Shanghai Composite is just 0.80% off its peak COVID peak that was made in early January. But with big gains in June, countries like Brazil (EWZ) -38%, France (EWQ) -15%, Italy (EWI) -17%, Spain (EWP) -21%. and Mexico (EWW) -28% are still large by 2020.
As the economy reopens, consumers maintain their focus on necessities and online shopping.
Data from the Department of Commerce Graphics provided by Federated research.
When retail began to open in June, and not surprisingly, car parts, food and online shopping showed robust spending versus restaurants and clothing.
Data from the Department of Commerce graphics provided by Federated Research.
More evidence suggesting that investors must be selective in their approach to equities. There are "winners" who will continue to exploit these trends. The current "losers" will continue to struggle in a weakened economy.
The seasonally adjusted IHS Markit final. The US Manufacturing Purchasing Managers' Index, rose 49.8 in June, up 10 points from 39.8 in May, to signal a marked relief in the overall decline in production. The last figure was also slightly higher than the previously released "flash" reading of 49.6.
Chris Williamson, Chief Business Economist at IHS Markit:
"US manufacturers have reported a significant turnaround in business relationships through the second quarter, with collapsing production and demand in April at the height of the COVID-19 shutdown and quickly turned to stabilization by June PMI achieved a record 10-point increase in June amid outstanding gains in the survey's production, employment and order book meters. "
" The record increase in the new orders index, combined with low inventory levels, suggests well for further improvement The production momentum in July. A record rise in business sentiment for the year ahead also suggests that business expenses and employment will begin to revive. "
" Although PMI is currently pointing to strong V-shaped recovery, concerns have increased that momentum could be lost if growing the number of viral infections leads to the use of restrictions and caused the demand to weaken s again. "
The US ISM rose 9.5 points higher than expected to 52.6 in June from 43.1 in May and an 11-year low of 41.5 in April, leaving the highest level since April in 2019 , and the biggest gain since August 1980. June increases were broadly based across components, the ISM survey revealed greater resilience to closures than the other sentiment surveys through April, as the April bottom for ISM never broke the previous recession low of 34, 5 in December 2008, or the low time of 30.3 in June in 1980, and the subsequent fallback has generally surpassed the rejection in other surveys as well. ”Overall, sentiment surveys document a rapid rise as analysts recover after the huge hits in April with mandatory closures.
Construction reports for construction constituted heavily underestimated estimates, with a fall of -2.1% in May, after a fall of -3.5% in April and -0.3% (was flat) in March. revisions back to 2004 as power ig raised levels in all major construction utility units, but with a minor boost in recent months that left a weak growth trajectory for the new home and non-residential construction in Q2. Construction costs appear to be a contraction rate of -18% in Q2, following growth rates of 11.2% (was 15.3%) in Q1 and 6.4% (was 10.4%) in Q4. quarter.
The Dallas Fed's production index climbed another 43.1 points to -6.1 in June after rebounding 24.8 points to -49.2 in May. It's a fourth straight month of contraction and is up from record lows of -74.0 in April as the region has been hit by the double whammy of COVID-19 and weakness of the oil industry collapse
Chicago Fed production PMI rose 4, 3 points to 36.6 in June, weaker than expected, after falling -3.1 points to 32.3 in May (a 38-year low) and tumbling -12.4 points to 35.4 in April. And it breaks a string with three straight monthly rebates. It is the highest since the 47.8 pressure in March. The three-month moving average dipped to 34.8, however, from 38.5, and is down from 46.6 in March. But that is far from the relative 67.3 peaks from the relative October 2017.
Consumer confidence rose 12.2 points to 98.1 in June, much better than expected, after rising 0.2 points to 85.9 in May. The 33.1-point target to 85.7 in April was the steepest fall since 1973 and was the lowest since May 2014. This compares with the 18-year high of 137.9 from October 2018, and the recession of 25.3 in February 2009. Both components improved measurably as well. The current situation index rose to 86.2 from 68.4 in May, although it was at 173.9 in January. The expectation index jumped to 106.0 from 97.6. It is back close to 108.1 in February, which was the best since November 2018.
Initial unemployment requirements dropped -55k to 1,427,000 in the week ended June 27 after -58k fall to 1,482k in the week of June 20th. There is a 13th straight weekly decline following the wave to a record high of 6,867k during March 27th week. The 201k January 31st was the lowest since 197,000 on November 14, 1969. The four-week moving average was 1,503.75k from 1,621.25k.
Non-farm payrolls increased 4,800,000 in June, better than expected, following the revised up 2,699k ($ 2,509,000) rejection in May following a -20,787k (was -20,687k) collapse in April. Unemployment slipped to 11.1% versus 13.3% (was 13.3%) earlier, and April 14.7%. The rate was at a 50-year low of 3.5% in February. The labor force increased another NOK 1,705,000 after the previous gain of 1,746,000, with household employment up 4,940,000 against 3,839,000. The labor force participation rate rose to 61.5% against 60.8%.
I found the reaction from the understanders after these reports were announced quite interesting and absurdly unpleasant. There was plenty of unbelief. Most traders were somewhat skeptical of any payroll data and felt that the sharp reopens and then reopened returns have distorted the data. To say the numbers was not to be trusted. The comment was followed by more stuttering about COVID. While the results that signaled the rebound were neglected, no one seemed to remember that the entire economy was CLOSED.
Funny how they thought the 20+ million loss, but the recovery numbers are in doubt.
Restoration will take time, no one is suggesting 4% GDP anytime soon, but if anyone is in doubt that an improvement has started, they must transfer their money to someone else to manage, or lose the closed one the idea of investing.
Pending the home sales index, the record jumped 44.3% to 99.6 in May. This follows the -21.8% April fall (second largest on record) to a historic low of 69.0, and -20.8% to 88.2 in March. It is the highest since February 111.4, which was the highest since 111.9 in February 2017. The index was at 105.0 in May last year.
Lawrence Yun, NAR chief economist:
"This has been a spectacular improvement to the contract and goes to show the resilience of American consumers and their evergreen desire for homeowners. This backlash also speaks to how the housing sector can lead to a wider economic improvement. "
" More listings are continually appearing as the economy reopens, helping with stock selection. Still, more housing construction is needed to counteract the persistent under-production of housing over the last decade. "
" The outlook has improved significantly , as new home sales are expected to be higher this year than last, and annual sales of existing homes are now expected to be less than 10% – even after missing the spring shopping season due to the pandemic. "
NAR now expects existing home sales will reach 4.93 million units in 2020 and new home sales to 690,000. All figures light up in 2021 with positive GDP, employment, housing starts and housing sales. By 2021, sales are expected to rise to 5.35 million units for existing homes and 800,000 for new homes.
Final Markit PMI data reported this week shows why global stock markets have remained resilient. "Green shoots" are now part of the picture seen across the globe.
The decline in the global industrial sector eased sharply again in June. JPMorgan Global Manufacturing PMI, a composite index produced by JP Morgan and IHS Markit in association with ISM and IFPSM, rose by a record 5.4 points to 47.8, up from 42.4 in May.
Olya Borichevska, Global Economist at JP Morgan:
"June saw a further momentum shift in the global production sector after the economy started on the extraction road in May. Production PMI increased for the second consecutive month in June, increasing a total of 14.5 We are looking for PMI to continue to move higher as growth companies, which of course is expected to continue easing activity restrictions. and shorter than expected. "
The seasonally adjusted IHS Markit Eurozone Manufacturing PMI strengthened to a four-month high of 47.4, up from 39.4 in May and an improvement on the previous flash reading. All countries registered a relative improvement in their PMI readings during June, while the majority registered their best number since February.
Chris Williamson, Chief Business Economist at IHS Markit:
"The final PMI figures for June further indicate that the factories in the euro area are experiencing a strong upturn as the economy lifts from COVID-19. The decline in the June survey is an indication that production is falling at an annual rate of just 2%, which is close to a 30% contraction seen at the height of the shutdowns in April, which is a remarkable month-to-month turnaround in official production figures over the past two years. "
" Expectations for the year ahead have also fallen sharply as hopes grow as the economy continues to find its feet again in the coming months. "Even with these gains, however, production and sentiment are below peak pandemic peaks, and sustained weak demand combined with ongoing ecological distance measures will probably act as a drag on recovery. The focus is therefore on whether one can build on gains over the past two months, or whether momentum fades again after this first rebound. "
China's National Statistics Agency said China's industrial enterprises' profits in May rose 6% year-on-year to $ 582.3 billion ($ 82.28 billion), according to a June 28 statement. The rebound followed a 4.3 % fall in April and is its sharpest monthly gain since March 2019. The purchasing managers' index for China's manufacturing sector ticked up to 50.9 in June from 50.6 in May.
The headline seasonally adjusted China Caixin Purchasing Leaders Index, a Composite indicator designed to give a single figure's snapshot of operating conditions in the production economy, increased from 50.7 in May to 51.2 in June, to signal a second consecutive monthly improvement in the sectors' health. the strongest recorded since December 2019.  Dr. Wang Zhe, senior economist at Caixin Insight Group:
"The PMI for general production of Caixin China stood at 51.2 in June, the highest reading to date to this year. The manufacturing sector continued to expand as most of the country had the epidemic under control and the economy continued to recover.
1) Total production demand recovered with a fast cut, but foreign demand was still a drag. Production expanded for the fourth straight month in June, but the pace was slower than last month. By contrast, demand improved remarkably. The sub-index for total new orders expanded for the first time since January, as gradual lifting of epidemic control measures allowed production to return to normal. foreign was uncertain in many places, and the number of new daily infections remained high.
2) The improvement in demand led to a decline in stocks of finished goods. ks purchased goods grew as the companies increased their purchases. The sub-index for shares of purchased goods and the number of purchases met both the highest levels since the first quarter of 2018, reflecting the increasing willingness of producers to expand production. The suppliers' delivery time extended somewhat, probably due to the flare-up of the epidemic in some places.
3) Employment was still weak. Although the industrial sector as a whole recovered in June in terms of supply and demand, employment did not improve. The employment sub-index remained in negative territory for the sixth consecutive month, and was even weaker than the previous month. Manufacturers remained cautious about increasing hiring. Some companies still had planned layoffs and had no rush to hire new workers to fill vacancies.
4) Input costs and production prices both increased. The entry cost meter returned to an expanding territory, as production recovery and an increase in commodity prices pushed up costs. The meter for production prices rose further into positive territory. The respondents said that the market was recovering and that the sales side had relatively high competition and had limited price power.
The manufacturing sector overall continued to recover during a post-epidemic period, and both supply and demand improved. Around mid-June, the epidemic flared up again in some parts of China, but its impact on the overall economy was limited. The meter for future production expectations continued to rise in June, reflecting producers' confidence that there would be further relaxation of epidemic controls and a normalization of economic activities. In the meantime, we should still pay attention to the pressure on employment. Top decision makers have repeatedly emphasized the importance of expanding employment channels. For some time to come, increasing employment will continue to be a difficult task. "
Japan's industrial output fell 8.4% in May due to the effects of COVID-19. Last month's report showed minimal improvement that indicated the path to normalcy can take a lot of time.
Jibun Bank Japan Manufacturing Purchasing Leads Index – a composite indicator of a single figure for production performance – rose slightly to 40.1 in June from 38.4 in May, despite increasing, the index remained noticeably below 50.0 with no change level, and therefore indicated a further deterioration of the health of the manufacturing sector.
Joe Hayes, economist at IHS Markit:
"We are still waiting for signs of meaningful improvement in Japan's manufacturing sector, with PMI for June failing to significantly increase recovery despite the state of emergency and many important trading partners that peel back locking measures. "
" The c of a V-shaped industry recovery seems slim at this stage, opening the possibility of a two-stage economy if the domestically focused service sector shows more signs of activity. "
" It will be important to monitor the forward-looking components of the survey, such as new orders and export sales, which are likely to drive the direction that the operating rate will take over the coming months. It will probably take a sustained pick up under global demand conditions before factories begin to spend more resources on production volume. "
In June 47.2, the seasonally adjusted IHS Markit India Manufacturing PMI rose from 30.8 in May. Despite the increase, the latest reading pointed to a third consecutive monthly decline in the health sector in the industrial sector, albeit one that was far softer. than recorded in April and May.
Eliot Kerr, IHS Markit economist:
"India's manufacturing sector moved towards stabilization in June, with both production and new orders contracting at much softer prices than seen in April and May. However, the recent rise in new cases of coronavirus and the resulting block extensions has seen demand continue to decline. "If the case number continues to increase at its current pace, further lock extensions could be imposed, which is likely to derail an improvement in financial conditions and prolong the misery of those most hard hit by this crisis."
The headline ASEAN Manufacturing PMI registered a record monthly gain of 8.2 points, rising from 35.5 in May to 43.7 in June. The figure indicated that today's decline eased especially at the end of the second quarter. Nevertheless, the index remained solid in the contraction area, signaling a fourth consecutive monthly deterioration in the health of the ASEAN manufacturing sector. Helping to lift the headline was slower reductions in both output and new orders, but the drops stayed sharper than their respective pre-coronavirus records. While demand was subdued, companies continued to sharply reduce the number of employees.
Lewis Cooper, economist at IHS Markit:
"The decline in the ASEAN industrial sector continued for the fourth consecutive month in June. The deterioration in operating conditions was the softest in the said sequence, but with outbound and order book volumes falling in much slower pace as larger swathes of the sector reopened and production lines restarted. & # 39; However, demand conditions remained particularly weak, and in light of these firms, the labor force declined again. The rate of job decline was softer, but remained sharp. ;
& # 39; Encouraging is the 12-month outlook for fetched production, with sentiment being the highest since February, and the sector still has a way to go after the COVID-19 pandemic. new orders have eased from the unprecedented drops in April and May, as restrictions related to the virus generally have loosened, ASEAN commodity producers are still obeying for weak demand conditions at home and abroad. Until there is a meaningful improvement in customer demand, it is unlikely that the sector will see any significant improvement in conditions in the months ahead. ""
The seasonally adjusted IHS Markit / CIPS UK Purchasing Management Index rose to 50.1 in June, up from 40.7 in May and unchanged from the flash estimate. Although the 9.4 month-on-month increase in PMI hit May's record (8.1), readings were just slightly above the neutral 50.0 level, indicating a stabilization in operating conditions.  Rob Dobson, director at IHS Markit, who compiles the survey:
"June completed a marked turnaround in the UK industry as the sector transitioned from April's record contract back to stabilization over two months. Production increased and domestic Demand was strengthened as restrictions on locks loosened, factories restarted and staff returned to work. Business optimism also rebounded to a 21-month high. "
" The planned solution in COVID-19 restrictions 4 July should contribute to further gains in the coming months, although the trend in new export business remains weak, it should also strengthen as global shutdowns and transport restrictions ease further. "
" The main focus is now shifting to the labor market. about the potential for marked job losses, especially when the phasing out of state aid schemes begins. this photograph is less positive, and June sees a further reduction in staffing levels, and although it has eased sharply since the April record, the rate of job loss remains among the steepest in 29-year survey history. Economic conditions need to improve significantly across the UK, or some support is maintained if the decline in the labor market is to avoid becoming more entrenched throughout the rest of the year. "
The headline seasonally adjusted IHS Markit Mexico Manufacturing PMI registered 38.6 in June, up from 38.3 in May. The latest reading indicated a sharp decline in business conditions encountered by Mexican commodity producers, albeit the deterioration rate eased to the softest for three months. Eliot Kerr, economist at IHS Markit:
"The latest PMI data for the Mexican industrial sector suggests that the country is still struggling in the fight against the coronavirus outbreak. Production continued to decline sharply, while demand conditions were dampened and many factories closed. "
The aforementioned data is broadly in the right direction, with the decline in activity, new orders and employment. Furthermore, the mood improved slightly despite being overall negative." Going forward, demand will be the main driver in any recovery of the new order index in the coming months. Only when demand starts to decline will the Mexican manufacturing sector see a sustained increase in production. "
If a" Blue Wave "sweep is played out, corporate tax rates are likely to increase meaningfully, more than offset potentially more market-friendly immigration Wolfe Research says it doesn't believe investors have even begun to factor in the potential for corporate profits to get a
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The FOMC protocol for the June 9, June 10 meetings showed a long discussion of policy tools, including forward guidance, asset purchases and yield curve caps or targets (YCT), and disadvantages were discussed.
At YCT, all participants agreed that it would be helpful for staff to conduct further analysis of the design and the implementation of YCT policies as well as their likely economic and financial effects, using forward-looking guidance, has long experience with it, as well as large-scale asset purchases. guidance, participants generally supported a "outcome-based" future guidance, while "a number of participants" favored future guidance related to inflation outcomes. And a couple of participants preferred future guidance related to unemployment, and a "few others" enjoyed a calendar-based result. And "a couple" were concerned that whichever method was used could pose a significant risk to financial stability. Remember, Fed Chair Powell didn't seem excited about using the yield curve control in recent comments. "
The 10-year Treasury reached 0.40% relative to the worldwide fear present. To 1.18%. A trading range of less than 1% was then established. After reaching the top of this range earlier this month, the 10-year-old drifted back as COVID fears gripped the market and closed trading at 0.68%, increasing 0.04% for the week.
The 3-month / 10-year Treasury curve inverted 23. May 2019 and remained reversed until mid-October The renewed flight to safety inverted the 3-month / 10-year return curve once again on February 18, and that inversion was completed on March 3. The 2/10 tax curve is not reversed today
Source: US Dept. Of Treasury
The 2-10 spread was 30 basis points at the beginning of 2020; it stands at 52 basis points today.
M malmpenger som sitter rundt og fikk lite eller ingen renter siden den store finanskrisen.
Ukens sent iment fra AAII viser at det ikke er mange okser rundt, da optimisme blant enkeltinvestorer om den kortsiktige retningen til aksjemarkedet er på en ni måneders periode lav. Bullish sentiment, forventninger om at aksjekursene vil stige de neste seks månedene, falt 2,0 prosentpoeng til 22,2%. Det gjør det tre uker under 25%. Bullish sentiment er under det historiske gjennomsnittet på 38,0% for den 17. uken på rad og den 22. uken i år.
Denne ukens bullettsensive lesning er bundet til det 83. laveste nivået som ble registrert av undersøkelsen av mer enn 1700 ukentlige resultater. Mens optimismen forblir på et uvanlig lavt nivå, er pessimismen på et uvanlig høyt nivå. Det nåværende nivået av pessimisme reflekterer bekymring for koronaviruspandemien og økonomien.
WTI remains trapped in a range between ~$35 and ~42.50 and until that range breaks it's difficult to get a fix on where it might head next. Not surprisingly, Energy has been one of the worst-performing sectors over the past month as oil has stalled.
As is the norm for this time of year on account of seasonality, crude oil inventories (including SPR) experienced their largest decline of the year falling by 5.5 million barrels. That was the largest inventory draw since the last week of 2019. Excluding strategic reserves, that was the first inventory draw in three weeks though the actual level of inventories remains in the 99th percentile of all weeks since 1982 at 533.5 million barrels.
That draw came on unchanged production and much weaker imports which fell to 5.97 million barrels/day; the weakest reading since mid-May. As for petroleum products, gasoline demand pulled back slightly. That makes for just the 4th time of the past 13 weeks in which gasoline demand was not higher.
Meanwhile, refinery throughput rose for a seventh straight week though it remains much lower than average just like gasoline demand.
The price of crude oil traded at $40.26 midday on Friday, which represented a gain of $2.00 for the week. Despite the 8+% gain in price during June, WTI is down 72% in 2020.
The Technical Picture
The S&P 500 hit an intraday high of 3165 on Thursday and closed the week at 3,130 just shy of a new "recovery" high.
The trading range remains in place as it appears sideways consolidation of the rally off the lows continues.
No need to guess what may occur; instead it will be important to concentrate on the short-term pivots that are meaningful. However, the Long Term view, the view from 30,000 feet, is the only way to make successful decisions. These details are available in my daily updates to subscribers.
Short-term views are presented to give market participants a feel for the current situation. It should be noted that strategic investment decisions should NOT be based on any short-term view. These views contain a lot of noise and will lead an investor into whipsaw action that tends to detract from the overall performance.
A popular "talking" point these days:
"The Payroll Protection program is ending. Watch out the payroll protection program is ending."
As of the middle of June, there was 130 Billion left in round 2 of the PPP program.
Many are wondering why the stock market isn't overreacting to the COVID flare-up in the "hotspots" that are making the daily headlines.
Bespoke Investment Group reports:
"As of Wednesday, the hospital surge capacity looks to be okay in some of the worst-hit states. Texas is one example: while the state has been adding 349 hospital patients per day over the past week, Texas HHS data has over 13,000 available hospital beds including 1,405 available ICU beds."
"Death rates from this new acceleration in case counts remain very low; total death counts continue to fall."
T he s pike in hospitalizations that took place in mid-May in Florida saw the number of daily cases reported at about 1,000. In early July we hear that 10,000 cases are being reported daily, while the hospitalization numbers have yet to surpass the spike we saw in May.
Charts courtesy of Tallahassee Reports
The U.S. has suffered fewer COVID-19 deaths per 1M of the population (397) than its European counterparts. Italy (576), France (458), Spain (607), and the U.K. (648) all have higher death rates. Germany (108) is the only Euro entity with a lower death rate.
The institutional money managers are looking at the stats posted above (along with others) and dismissing the hysterical ramblings of the "talking heads".
Individual Stocks and Sectors
Here is the perfect example of what has been discussed here for well over two months. Nike (NYSE:NKE) reports earnings and misses "estimates" badly. Not a great surprise as the retail giant had many of its stores closed for most of the quarter. That news made headlines and many analysts point out how bad the economic situation might be.
FedEx (FDX) reported this week and beat estimates handily. One company affected by COVID, the other (FDX), a beneficiary of the new economy.
For those that want to remain entrenched in the idea that this is a stock market that has an "issue" instead of a "market of stocks" that has "opportunities", you will continue to be left wondering what went wrong.
We now hear that some companies are making a "statement" by suspending their ad purchases on Facebook's (FB) social media platform. Some believe that the company should be assigned the task of protecting all of us from bad words or what is deemed a bad "opinion".
I wish all of those companies the best of luck. As far as the notion of investing in Facebook in light of this new "stance" that is being adopted, consider this. FB closed at $233 on Thursday, a stone's throw from its 52-week high of $242. The average FB user isn't leaving nor are they concerned about the various opinions that are overwhelming society these days. It's a free platform where they continue to share information in this "new" digital economy.
Facebook will weather this tempest in a teapot because it has the audience that other companies only wish they could possess. I suspect those that have fled to make a "statement" will be sneaking back to the ad platform in short order.
Full Disclosure: I am long FB and don't plan on selling anytime soon.
I wasn't a seller of equities in May despite the huge gains recorded in April, and I decided to stay on board this equity market in June as well. Some didn't understand my logic because there was a very large contingent that proclaimed the stock market rally had ended in May.
Instead, I was looking for opportunities, and when you shock the economy as profoundly as we did to try to tamp down the contagion of the virus, there were many dislocations. The market is bifurcated now more than ever and the door to finding those opportunities was wide open.
Certain sectors and industries have had the good fortune of being market favorites not only during the shutdown but also during the early stages of the recovery. Why? Because they are part of the bifurcated stock market that is comprised of the "New COVID economy" names versus the Old economy "reopening" stocks.
The virus health scare formed new "macro" trends, and they will change the landscape for both the economy and the investment scene. This will further enhance the prospects of the "winners" that have already been identified. One thing that will become apparent:
Any investor that refuses to follow this sea change and dismiss the companies that are now drivers in macro trends that are new and developing will be left behind. The wind has changed; it's time to adjust your sails.
The environment around investors has been so toxic lately that it adds to the confusion of how to navigate the equity market. Not only do we have a bifurcated stock market, but we also have a tale of two agendas. The one that says all is horrible versus facts showing a rebound in place and back to back employment reports that seem to be confirming that. The bottom line, investors are being told to believe one thing while the data is saying something different. There is no need to pick sides. If you don't want to listen to the narrative or believe the data, you better be watching the price action in the market.
There was plenty of banter this week from the many financial pundits explaining how they believe the bears have thrown in the towel. The recent AAII polling doesn't agree with that conclusion. I have a different view of the situation. The bears have perished by inhaling too many "Greed" berries. They believed the market would remain in freefall and it would be months if not years before it recovered. It was a feeling of euphoria and they simply "overdosed".
At the market lows in March, it was "get prepared, the worst is yet to come". Then they inhaled more of these magic berries and told everyone that they should "get ready for the next leg down". However, it wasn't until they gobbled up the "valuation berries" that they started to choke, and many simply never recovered.
They never saw the big picture. They put the blinders on. After all, they had it all going for them with the doomsday scenarios that humanity was about to be destroyed similar to what occurred with the Spanish flu in 1918. Unbelievable to think that some investors would equate the medical community of 2020 to that of 1918! Week after week, anyone that remained steadfast in their approach stating this virus was not the "'end" for the economy was called foolish.
The 22 new all-time highs that were being registered in the Nasdaq that represents the "new economy" were completely missed because the virus rhetoric overwhelmed the minds of many. The fate of the bears was then sealed and many are no longer with us.
No one is suggesting it is time to go chasing here. The time to act was back in the days when the bears were gorging themselves on berries. I wouldn't be surprised if a cooling-off period ensues. The second half of 2020 could be a tale of two halves. The continuing reopening saga that meets up with a presidential election. Perhaps a difficult period ahead. It will be more difficult for anyone that didn't squirrel away some profits during this rally off the lows.
After a brief pause that felt like an eternity, the Secular bull market reasserted itself. The price action was the data point that told savvy investors to stay invested. There were plenty of market pundits, analysts, and investors that didn't "adjust their sails". They refused to look at all of the data and now find themselves "wrecked, and on the rocks".
With more money than ever before sitting in money market funds, money flows showing a preference to bonds, and bullish sentiment at nine-month lows with only 22% of investors feeling bullish, the bears that remain at sea might want to note that everyone is on one side of their boat. It may take more than a minor "sail adjustment" to right that ship.
The question every investor wants to have answered at the end of every week. Where does the market go next?
The Savvy Investor continues to provide those answers.
Please allow me to take a moment and remind all of the readers of an important issue. I provide investment advice to clients and members of my marketplace service. Each week I strive to provide an investment backdrop that helps investors make their own decisions. In these types of forums, readers bring a host of situations and variables to the table when visiting these articles. Therefore it is impossible to pinpoint what may be right for each situation.
In different circumstances, I can determine each client's situation/requirements and discuss issues with them when needed. That is impossible with readers of these articles. Therefore I will attempt to help form an opinion without crossing the line into specific advice. Please keep that in mind when forming your investment strategy.
to all of the readers that contribute to this forum to make these articles a better experience for everyone.
To all of the Canadiens out there!
And a Happy July 4th to all of located here in the U.S.!
Best of Luck to Everyone!
It's a bifurcated market now, and the difference between the winners and losers widens. New macro trends are here and they affect the market in many different ways. My latest view on the Macro scene is publishedwhich includes individual sector reviews of where the "winners" are today and where they will be tomorrow.
Next week I'll take the first look at the upcoming election as EVERY investor needs to be be prepared for what could be waiting for them in the days /weeks leading up to November 3rd. It is all found at the Savvy Investor Market Place Service.
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Disclosure: I am/we are long EVERY STOCK/ETF IN THE SAVVY PLAYBOOK. I wrote this article myself, and it expresses my own opinions. I do not receive compensation for it (other than Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: My portfolios are ALL positioned to take advantage of the bull market with NO hedges in place.
This article contains my views of the equity market, it reflects the strategy and positioning that is comfortable for me.
IT IS NOT A BUY AND HOLD STRATEGY. Of course, it is not suited for everyone, as each individual situation is unique.
Hopefully, it sparks ideas, adds some common sense to the intricate investing process, and makes investors feel calmer, putting them in control.
The opinions rendered here, are just that – opinions – and along with positions can change at any time.
As always I encourage readers to use common sense when it comes to managing any ideas that I decide to share with the community. Nowhere is it implied that any stock should be bought and put away until you die.
Periodic reviews are mandatory to adjust to changes in the macro backdrop that will take place over time.
The goal of this article is to help you with your thought process based on the lessons I have learned over the last 35+ years. Although it would be nice, we can't expect to capture each and every short-term move.