Hey everyone, as I have been discussing for the past 3 weeks the markets are due for a bit of a rest and we’ve seen over the past 4 weeks, markets have closed lower for 3 of them…get my detailed thoughts in this Weekly Round-Up
Weekly Sound Bites:
• I guess you could say the good news about the economy is that the bad news could not get worst…as said in this weekend addition of Barron’s…this past week we saw Retail Sales suffer their biggest decline on record, down about 16.4% along with a plunge in CPI and Industrial Production data…yet price action is running a rope-a-dope strategy by withstanding these body blows and going on the idea and premise the economy 12 months forward will be much better and a vaccine or a prophylactic drug will be in play…in addition, when you throw in Trillions of Fed stimulus adding much needed liquidity into the credit markets, financial markets are seeing money continue to flow into equities…as various States begin to relax the opening of their respective economies, markets are betting more on the premise of things to come vs the ugliness we’re seeing today…
• Yet, the stock market lost ground for the 3rd week in the past 4, with all US Indexes giving ground to the bears…and despite all the optimism implied by the surge off the March 23rd lows over 28% the US Treasury markets still trades at historically low yields which is more symptomatic of digressionary forces vs recovery…With many Central Banks already using negative interest rates, they have not done any favors or worked out that well so far with countries across Europe stuck in below zero rates; -and don’t forget Japan which has been stuck for decades trying to climb back out of the hole they found themselves…
• An old threat has also come back into the risk equation with the US – China relations given Trumps rhetoric of their handling of the pandemic has heightened the sense that risk has increased on many fronts…this past week kicked off with Trump wanting to prevent the US Fed Gov’s Thrift Saving Plan from allowing savers from investing in Chinese stocks…and by the end of this week we saw the US curtailed Huawei Technologies access to semiconductors used by US technology…this caused comments that China may retaliate against this move against US Companies based in China like AAPL, or CSCO…
• One thing to be aware of is that Hedge Funds and other larger money managers are beginning to take profits in the “stay-at home” stocks like Slack (WORK), Zoom (ZM), Netflix (NFLX) and others while moving money back into those companies that took a beating such as in the travel and restaurant industry like Cruise and Airlines…The travel and tourism industry, which accounted for about 10% of the Global economy last year is now a leading indicator for the recovery from this Pandemic collapse…now over 60% are eager to travel when the Pandemic fears ease and with the industry segment down over 80% we can see where the optimism 12 months out can result in nice returns or stocks that have been pummeled recently…we’ll watch hotel occupancy rates and travel bookings increase to confirm my suspicions…
Enjoy our Weekly Round-Up;
Don’t Be A Rat Brain Trader – Be the Red Strip Zebra !!
Trade Smart !
hpb
