“I see, ye can not see the wood for trees.” – Thomas More

Market participants have watched the S&P 500 back and fill above and below the 3,000 level for weeks now. After the Q1 crash, and the subsequent Q2 rebound, investors have taken it up a notch going from cautious to “‘extra cautious”. The global resurgence in Covid cases, with new peaks in the U.S., seems to be the primary cause. While that news makes the headlines daily, some are listening and consumed by that rhetoric. Others are getting the subliminal message that is often made to blend into the COVID conversations.

We aren’t going to entertain another total lockdown of the economy in this battle with a virus.

Finally, after three months of a resurgence in equity prices, some of the Johnny-come-lately’s are saying there may be opportunities. I’ve heard the word “opportunity” being mentioned in media circles and other venues after being mentioned here for weeks.

Ned Davis Research:

“With support at 3,030 on the S&P (its 200-day moving average), pullbacks likely will be shallow. Trading at 3 standard deviations below their mean relative to cyclical growth stocks, cyclical value stocks seem particularly oversold. Cyclical sectors consistently have outperformed defensive ones from three months prior to the start of economic expansions to four months after a recovery’s underway-a period we arguably are in now.”

“Technicals are supportive, too, with cyclical stocks near their rising 50-day and/or 200-day moving averages. With huge sums of money on the sidelines, it’s hard to get bearish here.”

Leuthold Group reviewed the rally off the March lows and compares it to the bull markets of 1982 and 2009. Both followed deep recessions and suffered pauses at this same time in their cycles, before going on to return an average 20% in the subsequent 12 months. They go on to say:

“Of the past four bull markets after any recession, the average return was 14% in the first year and 27% over the first two years.”

Whoa, what is going on here? With a few more now getting on board this rally, does that become a troubling sign? It is something to consider. Then again there are boatloads of others that simply do not believe, and that helps tip the scales the other way. That group is led by none other than the CEOs of the world.

The Business Roundtable’s CEO Economic Outlook Index sank 38.4 points in the second quarter, the lowest level in 11 years. Executives said they plan to reduce capital expenditures and hiring, moves that could weigh on the recovery. Most expect business to recover to pre-Covid levels by the end of 2021.

Those that see the glass half full have realized what the stock market has been telling us all along. A synchronized global recovery appears to be in place. The global economic recovery is exceeding the most bullish forecasts. All of this is being accomplished while the economies of the world remain in various stages of re-opening, and none are anywhere near back to where they were before COVID came on the scene.

The stock market has already priced in the initial move that has taken the S&P to present levels. The issue will be whether we see continued improvement in the global economic situation to keep the rally going or is there a pause in the recovery that will translate into weakness in the equity market. No one has the answer, but the glass-half-empty crowd will continue to tell investors everything is about to fall apart.

The S&P entered the week down 3% on the year and just 7.5% from its all-time high. For the third week in a row, the weekend headlines were all about coronavirus cases. Global markets shrugged that news off once again as Fourth of July fireworks continued into the new week. Equities began the week with a bang as the Asian market led the way rising 5.7.% overnight. European markets rallied as well and the stage was set for the U.S. to simply follow along.

The S&P rallied for the fifth straight day gaining 1.6%. Consumer discretionary was the standout, thank you Amazon (AMZN). Financials also had a good day. Another record high for the Nasdaq, closing up 2.2% on the day, that’s three straight days of new highs and number 24 for the year.

“Turnaround Tuesday” ended the S&P’s five-day win streak, as the index gave back about 1% of the 4.1% gain it recorded in the five-day rally. Breadth was weak with one stock rising for every six that fell. It’s not just equities that are attracting attention. Gold is rallying to its highest levels since 2011, and copper isn’t far from 52-week highs.

After a one-day pause, the S&P posted a gain of 0.78%, not quite making up for the prior day’s decline. It’s a broken record, but the Nasdaq Composite rose 1.44% and recorded its 25th record high for the year as Technology stocks led the way higher, Consumer Discretionary (Thank You Amazon) was also strong. The Materials sector on the other hand fell 1.46% with weak breadth. Gold held above $1,800 while Treasury yields moved higher. With this positive reversal, it extended the streak of no back-to-back losing days for the S&P 500 since early June.

Push and pull action with more downside probing for the S&P as it gave back 0.68% on Thursday. No such action in the Nasdaq as the index managed to rise 0.56% recording its 26th record high this year. Another flight to safety opened the trading session on Friday as Treasury yields plummeted. The two-year yield opened at 0.14%, a new low, before reversing. That didn’t spill over to the equity markets as money rotation was the name of the game to close out the week.

The Financial sector led the way with a 3.5% gain on the day, helping the S&P rally 1% for the session bringing the weekly gain to 1.5%. The index now sits at 1.4% from the break-even level for the year. The Dow 30 added 1.5% on the day. With many “old economy” names in that index, it has lagged, off 8.5% in 2020. On the other hand, the “new economy” names posted record-high number 27 on the year as the Nasdaq Composite recorded a weekly gain of 4%. The yearly gain for the index now stands at 18%. The message is so loud and clear it is like someone hitting every investor with a bat, yet many remain in denial of what is occurring. “Ye can not see the wood for trees.”

So let’s try this, the economy was closed down and the Nasdaq is up 18%.

While some global indices took a breather, China was the BIG exception. Even with growing tensions between the U.S. and China over everything from trade, COVID, Hong Kong, etc., Chinese equities have seen some exceptionally strong short-term performance.

The CSI 300 which is the underlying index of the ETF (ASHR) was up close to 5% in the prior week ending July 3rd and was followed by a 5.7% increase this past Monday. The rally continued with the index stretching its winning streak to eight straight days of gains. It was also the eighth straight day where the index has rallied more than 0.5%. That win streak finally ended on Friday.

The CSI300 has now been up for six straight weeks taking the index to its highest levels in more than two years. Chinese equities have and continue to be my primary exposure to the global equity market in 2020.

Economy

Economists have been stuck in the “past is prologue” mindset since the Great Financial Crisis. For the most part, they played by the book calling for a recession just about every year since 2013. Year after year it was the same incessant cries, “This recovery is long in the tooth”.

They did so because the “book” said the “typical” recovery had to end in a designated time frame. What we experienced wasn’t a typical recovery. There was a long period of slow growth and no real “boom” that typically would end an economic cycle. Therefore, as I stated for years, there would be no “bust”. The Goldilocks economy and the stock market rolled on.

Anyone that followed along with the “consensus” view and kept positioning themselves for a recession was completely fooled. The takeaway: following the price action of the Bull market told us NOT to leave the trend despite the warnings. The same mindset applies today.

ISM’s Non-Manufacturing and Composite indices experienced their largest monthly increases on record in June.

The seasonally adjusted final IHS Markit U.S. Services Business Activity Index registered 47.9 at the end of the second quarter, up significantly from 37.5 in May and above the earlier released “flash” figure of 46.7. The marked easing in the rate of output contraction was in part linked to the reopening of service providers and the gradual return of customer demand. The pace of decline was the slowest in the current four-month sequence of decline.

Chris Williamson, Chief Business Economist at IHS Markit:

“June saw a record surge in the PMI’s main gauge of business activity in the US as increasing numbers of companies returned to work and expanded their operations amid the reopening of the economy. The survey points to a strong initial rebound from the low point seen at the height of the pandemic lockdown in April, with indicators of output, demand, exports and employment all showing steep gains. Financial services and technology companies are now reporting improved demand, as are many consumer-facing companies. Many, however, remain constrained by social distancing measures.”

“With business confidence in the outlook picking up again in June, a return to growth for the economy in the third quarter looks likely, though this will very much depend on the extent to which demand continues to strengthen. There remains a strong possibility that growth could tail off after the initial rebound due to weak demand and persistent virus containment measures. The need to reintroduce lockdowns to fight off second waves of coronavirus infections will pose a particular threat to recovery momentum, and could drive a return of the recession.”

ISM-Non Manufacturing Services index surge to 57.1 in June from 45.4 in May, and an 11-year low of 41.8 in April took the measure nearly back to the 57.2 figure in February, and the ISM-adjusted ISM-NMI rose even more sharply to a two-year high of 57.8 from 45.9 in May and an 11-year low of 42.8 in April. The sentiment surveys are showing outsized rebounds into mid-year as analysts recover from the huge April hits with mandatory closures, alongside the nonfarm payroll rebound through June after the plunge through April.

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June PPI report sharply undershot estimates with a -0.2% headline drop and a -0.3% core price decline. That followed a May headline gain of 0.4% despite a -0.1% core price, but big respective April declines of a record -1.3% and -0.3%. June’s weakness reflected a big -5.2% food price drop that offset the expected big 7.7% energy price rise to leave a goods price gain of only 0.2%. The big food price drop reversed May’s record-large 6.0% food price spike.

The latest JOLTS report: Job openings rose 401k in May to 5,397k, after dropping -1,015k to 4,996k in April. And openings are down -1,903k from the 7,300k a year ago (the 7,520 from January 2019 is the record high). The JOLTS rate increased to 3.9% from 3.7% and was at a record high of 4.8% in November 2018. The record low of 1.7% was hit in April 2009. Hirings jumped 2,440k to 6,487k, bouncing from April’s -1,064k decline to 4,047k. The hire rate climbed to 4.9% from 3.1%, a new all-time high, breaking the prior peak of 4.3% in January 2001. Quitters edged up 190k to 2,067k following the prior -912k slide to 1,877k.

Jobless claims remain elevated on a seasonally adjusted basis though they did fall once again this week marking a 14th consecutive week with lower initial claims. The current streak of weekly declines now doubles what was the previous record streak of seven weeks ending in November of 2013 and October of 1980. Claims came in at 1.3 million which were below estimates of 1.375 million, but still were down 99K from last week. This week’s decline was the largest since the first week of June’s 331K drop.

Global Economy

Eurozone.gif

As shown below, both Euro Retail sales and German factory orders are bouncing favorably, with the recovery in retail sales much more robust. That is suggesting that the recovery is, for now, consumer-led amidst relatively weak global trade activity.

Source; Bespoke

The IHS Markit Eurozone PMI Composite Output Index rebounded for a second successive month, and to a considerable extent during June. Rising to 48.5, up nearly 17 points since May’s 31.9, the index was at its best level in four months and also higher than the earlier flash reading of 47.5.

Chris Williamson, Chief Business Economist at IHS Markit:

“The headline eurozone PMI surged some 17 points in June, a rise beaten over the survey’s 22-year history only by the 18-point gain seen in May. The upturn signals a remarkably swift turnaround in the eurozone economy’s plight amid the COVID-19 pandemic. Having sunk to an unprecedented low in April amid widespread business closures to fight the virus outbreak, the PMI has risen to a level indicative of GDP contracting at a quarterly rate of just 0.2%, suggestive of strong monthly GDP gains in both May and June.”

“An improvement in business sentiment meanwhile adds to hopes that GDP growth will resume in the third quarter.”

“However, despite the vigour of the return to work following COVID-19 business closures, we remain cautious as to the strength of any longer-term recovery after the immediate rebound. Companies continued to report weak underlying demand in June. Many remained risk-averse, being reticent to commit to spending and hiring due to persistent uncertainty as to the economic outlook, and in particular the likely sustained weakness of demand for many goods and services due to the need to retain many social distancing measures. While confidence in the future has improved, it remains well below levels seen at the start of the year, reflecting how many businesses are far from back to normal.”

Recent data reported last week from China indicates what I am referring to when I mention the strength of the global economic recovery.

Actual results are exceeding the forecast of what many analysts were expecting.

China’s auto sales may be the first sign that global auto sales are about to rebound.

Another chart with a “V” shape rebound.

The seasonally adjusted headline IHS Markit Hong Kong SAR Purchasing Manager’s Index rose from 43.9 in May to 49.6 in June and registered a marginal deterioration in the health of the private sector. The latest reading was the highest since the downturn began in April 2018 and near the no-change 50.0 level, indicating that private sector conditions are approaching stabilization.

Bernard Aw, Principal Economist at IHS Markit:

“The Hong Kong SAR private sector showed signs of stabilisation in June as restrictions taken to limit the spread of the COVID-19 pandemic ease further.”

“Business activity and new orders both declined at the slowest rates since the first half of 2018 before the escalation of the US-China trade tensions. Private sector employment levels also stabilised while firms raised their purchasing activity for the first time in over two years.”

“However, survey data indicated that external demand, particularly from mainland China, is still weak. Firms also remained concerned about the long-term impact of the COVID-19 pandemic on economic activity. As such, the potential of a robust recovery in the Hong Kong economy relies on the strength of the upturn in the global economy in the coming months.”

Japan.gif

The seasonally adjusted Japan Services Business Activity Index recorded a sizeable month-on-month rise of 18.5 points in June. The headline figure recorded 45.0, up from 26.5 in May. While remaining beneath the 50.0 mark, which separates growth from contraction, the latest survey data signaled a substantial slowing in the downturn as the state of emergency being lifted allowed for a resumption in economic activity. However, where output did rise, panel comments suggest that growth was limited due to below-capacity operations and low customer numbers.

Joe Hayes, Economist at IHS Markit:

“Services PMI data for Japan are certainly moving in the right direction, with the headline output index rising by nearly 20 points on the month as the state of emergency ending has improved social mobility and encouraged a slow resumption in economic activity. However, growth hasn’t come roaring back and a further sub-50.0 reading suggests the downturn is only easing, not ending.”

“We have to remember that Japan’s economy was already in a recession before the second quarter and 2020 was set to be economically challenging, notwithstanding the huge COVID-19 shock. Panel comments suggest that service sector demand conditions remain very fragile and, although the spread of the virus has stabilised in Japan, customer numbers were reportedly still low in June. Until demand rises persistently at a strong rate, we can expect a sluggish recovery.”

Japanese Machine Tool Orders were up an impressive 19.7% in June. Over the last two months, foreign orders are up 11.3% (including a 26% rise in June) while domestic orders are actually down 18.6% despite a June uptick of almost 10%. The implication is that foreign buyers are returning, and China looks like the most likely suspect given the surge in its orders through May.

The IHS Markit India Services Business Activity Index recorded 33.7 in June. This was up sharply from 12.6 in May, but remained below the neutral 50.0 level for a fourth successive month, signaling another decline in service sector output. Although the downturn lost further momentum in June, it remained excessively strong as the COVID-19 pandemic curtailed intakes of new work and disrupted business operations. The slower rate of decline was reflective of some stabilization in activity levels, with around 59% of firms reporting no change in output since May. Meanwhile, only 4% registered growth, while 37% recorded a reduction.

Joe Hayes, Economist at IHS Markit:

“India’s service sector continued to struggle in June as the country’s coronavirus crisis worsened. Simply put, the country is gripped in an unprecedented economic downturn which is certainly going to spill over into the second half of this year unless the infection rate can be brought under control.”

“Some companies have seen activity stabilise, but this is most likely just reflecting closures and temporary suspensions. While this will have contributed to a rise in the PMI figures, this certainly isn’t a promising sign. A large fraction of the survey panel is still reporting falling activity and order book volumes, reflecting an intensely challenging domestic picture in India.”

June data continued to signal a turnaround in business conditions across the UK service sector. The headline seasonally adjusted final IHS Markit/CIPS UK Services PMI Business Activity Index posted 47.1 in June, up sharply from 29.0 in May and the highest for four months. This compared with the earlier “flash” figure of 47.0 in June. As a result, the latest reading was well above April’s survey-record low (13.4), but still under the neutral 50.0 threshold.

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Tim Moore, Economics Director at IHS Markit:

“June data highlights that the worst phase of the service sector downturn has passed as more businesses start to reopen and adapt their operations to meet social distancing requirements. The proportion of service providers reporting a drop in business activity has progressively eased after reaching a peak of 79% in April. Around 33% of the survey panel signalled a reduction in business activity during June, which compared with 54% in May. Encouragingly, more than one-in-four service providers reported an expansion of new business during June, which was commonly attributed to pent up demand and the phased restart of the UK economy. However, lockdown measures continued to hold back travel and leisure, while companies across all main categories of service activity commented on subdued underlying business and consumer spending in the wake of the COVID-19 pandemic. The latest UK Services PMI data highlighted another steep decline in employment numbers, despite a rebound in business expectations for the year ahead. Service providers widely commented on fears of a slow recovery in customer demand and an immediate need to reduce overheads. Moreover, survey respondents often noted the high cost of adapting operations during the COVID-19 pandemic, coupled with constrained business capacity and difficulties passing on rising expenses to clients.”

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index jumped to 55.3 in June from 28.9 in May to signal a strong increase in total construction output. Moreover, the latest reading signaled the steepest pace of expansion since July 2018. Higher levels of business activity were overwhelmingly linked to the reopening of the UK construction supply chain following stoppages and business closures during the early stages of the coronavirus disease 2019 (COVID-19) pandemic.

Tim Moore, Economics Director at IHS Markit:

“June’s survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear. House building led the way with the fastest rise in activity for nearly five years, while commercial and civil engineering also joined in the recovery from the low point seen in April.”

“As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is no clear evidence that a return to growth has been achieved.”

Earnings Observations

The U.S. earnings season unofficially starts with the release of JPM earnings next week on July 14th. C and WFC are also banks reporting that morning, before BK, PNC, USB, GS, BAC, and TFC over the next few days. FAST, UNH, JNJ, SCHW, FIS, CTAS, DPZ, NFLX, UAL, MSFT, HON, and KSU are all expected to report over the balance of the week.

Stay Tuned, it will be interesting reading.

The Political Scene

Joe Biden, the presumptive Democratic nominee, has proposed increasing the rate to 28% or removing half of the 2018 cut. After the 2018 tax cuts, the effective rate fell 6.6% points to 17.7% on 12/31/2019.

Key Takeaways:

  • Biden’s proposed corporate tax hike from 21% to 28% could lower S&P 500 after-tax EPS by 4-13%.

  • Buybacks could suffer under tax hikes, but companies could choose to cut CAPEX, dividends, and M&A first.

The commentary above should not be construed as a political statement. Maybe this information belongs in the “Food for Thought” section for investors to ponder these facts as we get closer to November.

Federal reserve 2.jpg

The Fed

A trading range under 1% for the 10-year Treasury note has been in place for quite some time. After making a run to the top of that range in June, the 10-year drifted back down as COVID fears gripped the market. The 10-year closed trading at 0.65%, falling 0.03% for the week.

The 3-month/10-year Treasury curve inverted on May 23rd, 2019, and remained inverted until mid-October. The renewed flight to safety inverted the 3-month/10-year yield curve once again on February 18th, and that inversion ended on March 3rd. The 2/10 Treasury curve is not inverted today.

Source: U.S. Dept. Of The Treasury

The 2-10 spread was 30 basis points at the start of 2020; it stands at 49 basis points today.

Sentiment negative.jpg

Sentiment

The streak that kept Bullish sentiment under 25% is finally over. I wouldn’t call it a groundbreaking rebound. AAII’s weekly reading on bullish sentiment was lifted as a result, rising from 22.1% to 27.1%. While higher this week, bullish sentiment is still below its historical average of 38% by at least one standard deviation as it has been for four straight weeks now. That is the first such streak since August of last year.

Crude Oil

Crude oil inventories excluding strategic reserves experienced a surprise build of 5.64 million barrels compared to expectations of a 3.25 million barrel draw. That left inventories at 539 million barrels; just off the record high of 540.7 million barrels a couple of weeks ago. That comes on a third consecutive week of domestic production at 11 mm bbls/day and a much higher level of imports which came in at 7.39 mm bbls/day. That is up by 1.43 million barrels/day from last week.

Meanwhile, gasoline data was more bullish. Inventories drew 4.84 million barrels which were the largest draw since mid-March as gasoline demand continued to rebound reaching its strongest level since March 20th; it’s down less than 10% versus the five-year average for this week.

The price of crude oil closed at $40.56 on Friday, which represented a gain of $0.30 for the week. Despite the 8+% gain in price during June, WTI is down 72% in 2020.

The Technical Picture

More downside probing this week before the S&P rallied back to the top of a short-term trading range. The index has traded in a sideways pattern since July 1.

Resistance is always strong around an old high. The same can be said for what would be the break-even level for the year in the S&P. This past week the index came within 1.5% of that break-even point for 2020. It should be no surprise then to see what could be a pause at these formidable resistance zones.

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.

Plenty of investors are still wondering how the stock market can stay so resilient given the latest spike in Coronavirus cases here in the U.S. Every day we hear about the increases in cases in California, Florida, Texas, and Arizona. The average age of those now testing positive is dropping dramatically. So much so that it is now down to the 35-37 range and by some accounts still dropping. That simply suggests more people well below that median age are being infected.

The chart below suggests there is little risk of perishing from COVID-19 If you are in that age bracket.

Chart courtesy of Worldometer – Coronavirus

Another piece of evidence that explains the mortality rate statistics and why they may be stabilizing is crystal clear. The elderly population is being handled differently now. We KNOW the risks to them. Early on in this virus event, COVID patients were being sent back into nursing homes. Depending on what outlet one uses to gather their data, we know that anywhere from 42% to 50% of all COVID deaths occurred in these elder care facilities.

The next argument that is now being ready to launch, the death rate is starting to tick higher. Yes, it’s rising, but adding PERSPECTIVE always helps to understand what is taking place. The death rate per million in the states that were making headlines THEN and NOW during this health scare.

Deaths per 1 million population as of July 7:

  • New York – 1,614
  • New Jersey – 1,661
  • Connecticut – 1,242
  • Massachusetts – 1,234
  • California – 171
  • Florida – 190
  • Texas – 103
  • Arizona – 279

No one is attempting to minimize the impact on society. However, there is something called perspective and balance that has to be accounted for as well. Like it or not, this is simply going to be the way it will be as we all cope and learn to live with the virus. Those that seek and need protection will continue to do so, while the rest of society moves on.

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While some still struggle with that concept, the stock market seems to have already figured that out. The stock market is comprised of many different factions that form many different opinions. The army of people that looks at ALL of the data and puts it in perspective seems to be in control now.

One other issue that is also crystal clear, the pundits, analysts, and investors that continue to use the COVID-19 virus event to explain their negative theories on the investment scene have already made a HUGE mistake. Propagating that notion will only exacerbate that error in judgment.

Perhaps a new trend is developing and it may not be one that the governors of certain states were expecting. It appears that corporations have had it with New Jersey’s decision to keep theaters closed.

Similarly, the “‘rules ” and “restrictions” that are in effect like the travel bans within certain states, are deemed unrealistic, unenforceable, and probably unconstitutional. Looking at the data provided earlier on the mortality statistics, one wonders why anyone would want to listen to some of these self-ordained “experts” also known as governors that have little to be proud of with the way they handled the virus situation.

Market participants remain in a high state of anxiety. They are freaking out over “the second wave”, a second lock-down, and the prospect of America becoming a socialist state all while watching civil unrest take over the American scene.

While there has been plenty of action under the surface, the S&P has gone nowhere, trading sideways since the beginning of June. Unless investors own the stocks that are beneficiaries of the “new economy” they are sitting around scratching their heads wondering what to do next. After the big rally off the lows, the consensus became “the market” is grossly overbought, and hence, the consolidation/correction calls were ramped up. Many have missed the bifurcated market that is on full display lately.

It’s not just the stock market that is so divided. Market participants are separated into two camps these days, and neither group is going to convince the other that they are wrong. The corona crowd continues to monitor, then ponder every virus case that is reported in every state in the United States. There is no vaccine, hospitals are going to be overrun, the situation is ready to spiral out of control, and nothing has been handled correctly. That leads to the conclusion that the economy will remain in dire straits for a LONG time and possibly never recover.

The other side keeps all of the data in perspective, staying balanced and doesn’t have an agenda. They recognize the macro trends that are now in place and are flexible enough to act accordingly.

Overbought stocks in some areas are bordering on silliness, but then again pockets of what appears to be irrational behavior are present at all times. The stock market is made up of millions of people all exhibiting the same thing, emotion. This is nothing new. On the flip side, I continue to believe many opportunities are sitting right there out in the open for all investors to see. With the proper “balance” and the correct mindset, I have found the last two to three months to be one of the easiest markets to navigate in quite some time. It’s all about focusing on macro trends that are changing the landscape.

The media analysts and pundits continue to have the story wrong. They were all talking about the bankruptcies that are being recorded in the “old economy” stocks this past week and telling anyone that would listen, why the stock market should not be rising in this backdrop. If I heard it once I heard it five times this week, “Brooks Brothers files for bankruptcy”. That is followed by analysts telling investors that we have to get the retail sector back in the game for the economy to improve.

That tells me far too many are stuck in the old economy mindset. OK, I get it, we do need some retail to get back in the game, but retail has been booming with the likes of Amazon, Costco (COST), Target (TGT), Walmart (WMT) and others doing a robust business these days. Newsflash: retail is already back.

These winners will only get stronger as the competition mired in the old macro scene falls by the wayside. It then should be no surprise that these survivors who have embraced the new retail macro trends will flourish. Now before anyone gets the idea that I am throwing caution to the wind, please allow me to “cut and paste” what was said here last week:

“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.”

The very last sentence is the key. Those that have used an open mind to assess the market situation since the March lows find themselves in a much better place today. So while investors have plenty to be concerned about, other ingredients need to be added to this recipe. Leaving them out of the mix can create a poisonous brew.

The Fed and other central banks are flooding the system with liquidity in historic proportions. In general, investors, big and small, are grossly underweight in stocks, and sentiment levels remain at or near historic lows. Each can interpret that data any way they choose.

As stated numerous times, in a secular Bull market, the surprises often appear on the upside. Often surprising in terms of magnitude and distance. A key segment of the “new economy” (Nasdaq Composite) has posted 27 new all-time highs in 2020, a year where the economy was completely shut down.

It’s important to recognize the ever-changing investment landscape. Staying with an ill-conceived broken strategy will continue to post poor results.

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.

Thank you #2.jpg to all of the readers that contribute to this forum to make these articles a better experience for everyone.

Best of Luck to Everyone!

If you are managing money, guessing what’s next is not a good strategy.”

No need to keep guessing. Stock positions that were closed in May were up +48%, June +31%, and July is running at a +40% pace. Who knows what the future brings, but anyone that has booked these gains is in a far better place than most.

My first look at “The Election And The Markets” has been published. “Opportunities In Diabetes Technology” was released in June and has already produced double-digit gains.

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Disclosure: I am/we are long EVERY STOCK IN THE SAVVY PLAYBOOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from 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.



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