Markets Moving Higher on Expectations for Vaccine Success

November 28, 2020

Markets Moving Higher on Expectations for Vaccine Success By: Mitchell Anthony November 25, 2020   Is the Covid Bounce Sustainable? The distressed areas of the US equity market have rallied hard over the last few weeks pushing the Dow Jones industrial average over 30,000 for the first time. This occurred after three vaccine makers announced that they had achieved over 90% efficacy with their vaccines.  This really exciting news caused investors to scoop up airline stocks, REITs, hotels, casinos, energy, and automakers. Since November 10th the equity market leadership has been dominated by highly distressed cyclicals and industrial names and other so-called re-open names in the equity market.  We also saw strength in Biden industries including environmental stocks and semi-conductors companies that are poised to benefit from new policies that Biden plans to enact once in office.  At the same time we have seen the stay at home names pause after a steady and substantial six month rally.  The FAANG has been flat for the last three months while at the same time these distressed value names have advanced 5 to 10% or more.  Is this three week move in these distressed areas of the market sustainable? How far will distressed areas of the equity market go on the come of substantial vaccine success? These are questions that we have been asking ourselves along with the rest of the Wall Street strategists who have pondered on the change of leadership that has just occurred over the last few weeks. Read more

Markets Climb as Virus Containment Continues

October 9, 2020

Markets Climb as Virus Containment Continues Quarterly Review, October 7, 2020 By Mitchell Anthony   The US equity markets had a terrific quarter despite the fact that little progress was achieved in containing the coronavirus.  US Equities lead all asset classes in the 3rd quarter of 2020 with the S&P 500 advancing 9%, MACM’s Dynamic Growth Portfolio Advancing 12%, and MACM’s Diversified Equity portfolio advancing 13.7%. Foreign Equities lagged badly in the quarter likely due to the fact that the European economy has very little share of the globe’s big cap tech industry.   Gold advanced 5.8% as the Fed adopted a posture of more accommodation and more patience with inflation.  Real estate failed to follow through with further gains in the third quarter after significant gains in the second quarter.  Generally most REITs were flat or up 1-2% in Q3.  High quality fixed income investments were mostly flat for the quarter as prices began the quarter at historical highs with only a few rational reasons why investors might expect yields to decline further.  Distressed debt performed a bit better as credit quality improved during the quarter given the feds intervention and Congress’s willingness to support distressed areas of the economy.Read more

Tech Wins No Matter Who Wins Election?

October 1, 2020

Tech Wins No Matter Who Wins Election? By Mitchell Anthony September 30, 2020   With the election around the corner investors are getting nervous about the impact a Biden victory might have on the equity market and the leadership in the equity market.  Thus far, since Washington, the Congress, and the central bank declared war on the pandemic, the equity market has roared and the leadership has been centered in technology stocks.  The reason is simple - These companies are leveraging the current environment and have a tailwind at their back.  Cyclical stocks like airlines, hotels, and restaurants have begun to recover but the outlook for them is still very uncertain and highly dependent upon the termination of the virus. This group may not win no matter who wins the election or conversely could win with either candidate based upon the virus outcome.  However technology is likely to win no matter what the outcome of the virus is and no matter what the outcome of the election might be.Read more

Recent Volatility and Equity Market Valuations?

September 23, 2020

By Mitchell Anthony September 23, 2020   The Markets Recent Volatility The equity markets have been going through a bit of a correction over the last two weeks. This is the first correction since the February-March 2020 correction that occurred due to the coronavirus outbreak and the shutdown of the global economy. After this correction the markets ran wild to the upside after the central bank and the US Congress essentially stated that they would monetize their way out of this economic problem. Valuations soared in industries and names that were highly leveraged to the stay at home environment that ensued and continues today.  Cyclical names have also rebounded but the performance has been far different as these cyclical names are not leveraging the current environment but in fact impacted by the current environment. The rally in both has now paused as investors assess the likelihood of a second stimulus package from the US Congress. The stimulus package has stalled because of a few areas within the Democratic demands that the Republicans have not been able to stomach.  Most notably bailouts for states and local governments that acted irresponsibly for many many years.  The Republicans just want less stimulus for consumers and small businesses than the Democrats want.  The Republicans are hung up on principle for the time being but likely will fold when they realize that maintaining control of the presidency and the Senate are more important than blocking stimulus now that will just happen later if they lose control. Investors obviously worry and as a result stocks have corrected 10% or more from their highs recently.  This correction will likely end soon if it hasn’t already as the economy continues to stay on a path of recovery and interest rates remain at zero and the fact is there is nowhere else to put your money besides risk oriented investment areas like stocks or real estate.Read more

New Fed Posture Justifies Higher Valuations For Assets.

September 23, 2020

By Mitchell Anthony September 1, 2020   The Feds New Posture Chairman Powell spoke at the Jackson Hole Economic Pow Wow last week about the Fed’s role in controlling inflation and made it clear to investors and financial markets that the Fed is prepared to let inflation rise over the intermediate term in order to achieve a full and complete economic recovery.  The Fed believes inflation has been down and out for too long and in fact now recognizes that it acted in error in 2017 by raising rates aggressively when inflation began to ebb higher.  The Fed’s actions slowed the economy then and now Covid 19 has slowed the economy even further causing historically low levels of inflation that the Fed is unhappy with currently.  The Fed believes higher levels of inflation are consistent with a strong economy.  The Fed believes that the last few years of ultra-low inflation must be accounted for when assessing inflation that is on the horizon.  The Fed has been to vigilant in fighting inflation and so have other central banks around the world and as a result the globe has been mirrored in a period of ultra-slow growth with deflation in some areas. Just how serious is the Fed about letting inflation rise and to what extent will the Fed let inflation rise?  This statement is a bit unusual from the central bank chairman we have grown to know.   Comments about letting inflation rise would normally spark a rally in gold and other inflation hedges, however gold did not react significantly to the Fed statements nor did other commodity assets. Investors are becoming astute at reading the Fed and this time recognized that the Fed is not acting in a reckless manner and really just see him more aware of the need to allow this economy to progress.   Stocks however did react and have pushed higher with comfort of a continuation of the current accommodative rate environment.Read more