Good Monday morning everyone.
Before get started…three cheers for Apple TV…which NOBODY expected to be cranking out great content in 2020. My three favorite shows of the year are all on Apple TV – Defending Jacob, Tehran and Ted Lasso.
The markets continue to focus on the only things that matter…stimulus and low interest rates. The President is in the hospital taking the best drugs which is bullish for the markets because it means more stimulus. That sentence makes no sense of course because nothing really matters other than the markets getting more stimulus. More on that right after this weeks video from Ivanhoff and I.
I review some of my favorite ideas and Ivanhoff outlines FOUR themes he continues to see:
1. The discounting of a second Covid wave continues. Most social distancing stocks were on absolute fire last week. Software stocks are building new bases: MDB, OKTA, FIVN, NOW, etc. Online marketplaces are perking up or acting constructively for the most part. Granted, the tech selloff on Friday could put temporary pressure on many momentum stocks. For the most part, the narrative remains in place and pullbacks are likely to be buying opportunities.
2. Anything related to clean energy has been outperforming handily in the past few months. Last week, we saw an acceleration of this trend. Biden has promised to make zero-emission a top spending priority if he wins the elections. The world in general is going it that direction.
3. Homebuilders ETF, XHB closed at new all-time highs on Friday. Record-low interest rates couples with plenty of liquidity have and expectations of serious infrastructure spending and rising inflation have created the perfect environment.
4. Small caps gained 4% last week and outperformed significantly for the first time in a long time. It might be the renewed hopes for a second stimulus package. Sooner or later, it is coming, no matter who wins the elections. Or it might be just another temporary sector rotation. No matter the cause, when small caps rally, there are some excellent trading opportunities.
Back to the macro for a moment…
I liked Northman Trader’s piece (keep in mind, he generally has the same macro angle of attack on all things government and FED), but it rang pretty true to me this week. The gist is the admitted cheerleading from our leaders as it pertains to the stock markets:
Where is the rallying cry for structural solutions? It doesn’t exist. Instead the rallying cry is to cheerlead markets higher at every opportunity, to convince of policy success when there isn’t any, to maintain confidence at all cost. Wall Street wants more Fed stimulus. The Fed wants more fiscal stimulus. Everybody wants more and more so not to risk the great unwind that is staring us all in the face.
We can’t know when and how the unwind will present itself, but at least we know when Larry Kudlow will go on TV. “When we need markets to go up”.
Looks like we will see Larry on TV a lot more, especially if there’s no stimulus deal. But hey, maybe they’ll get one done after all for without there is nothing but hope for another Fed bailout following the December Fed meeting
Back to Howard here…
In the meantime…the dips will get bought barring a page 10 trauma we do not expect rushing up to page 1.
As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.