It’s really a sight to behold… we know for a FACT that a second round of stimulus funding isn’t happening until after the November 3rd presidential election. And there is increasing uncertainty around contesting the election results.
But apparently this doesn’t faze the stock market at all, which is projected to continue rallying. At least according to Wall Street investors and analysts.
From the folks at Barclays:
“The market is assigning a lower probability of an uncertain outcome. In other words, the market appears to be most concerned about an ambiguous scenario and, at least in the short term, would prefer a clean outcome even if that were a Biden win.”
And the analysts at Rabobank:
“The most convincing explanation in our view isn’t so much the likely outcome of the election itself, but rather speculation as to the increasing clarity of the result.”
Oppenheimer’s technical analyst Ari Wald chimed in with his own perspective:
“The Russell 2000 has really been springing higher in the last couple of weeks and has reversed its Q3 consolidation. I think that reflects improving breadth in small caps… [As October progresses], seasonals turn better as well, so you have a lot lining up for a year end rally.”
Even though Trump is the market favorite due to his pro-business policies, the poll numbers show better odds for a Biden win. There is an unspoken bet that despite Biden’s clear plans to raise taxes, those increases would be offset by unprecedented stimulus funding to accelerate economic recovery.
It’s a confusing picture to understand, but all you need to know is the end conclusion: Regardless of who wins, the stock market will continue to rise and remain in good health.
What do YOU think about these analysts and their opinions? Do you agree with what they have to say, or are they too optimistic about an uncertain future? Reply to this newsletter with your thoughts!
One Hedge Fund Manager Predicts “Generational” Stock Market Opportunity
You’ve probably heard the line “This is the investment opportunity that only comes once a generation” in every single finance-related ad you’ve come across. Sounds interesting the first time you hear it, but then it becomes boring and dull. Nothing more than a statement that overpromises and under-delivers.
But according to Great Hill Capital’s Thomas Hayes, he believes that he’s onto something. And his secret sauce doesn’t involve the technology sector. What he’s focused on are stocks known as “cyclicals.”
(According to Investopedia: “A cyclical stock is a stock that’s price is affected by macroeconomic or systematic changes in the overall economy. Cyclical stocks are known for following the cycles of an economy through expansion, peak, recession, and recovery.”)
Hayes’s army of cyclicals include companies in materials, transports, industrials, energy, and financials. All of which he claims have done better than technology during the current stock market rally.
He predicts that cyclicals will outperform the S&P 500 due to faster growth. And on top of buying up banks in anticipation of credit expansion to aid economic recovery, he’s bullish on home-building companies:
“This recovery will be led by housing/cyclicals (as 85M millennials are at the age of housing formation and COVID has accelerated the pace)… On top of that, low rates are helping with financing and urban exodus is accelerating the trend. This trend is just beginning.”
I’m not saying you should necessarily follow his advice. But it’s food for thought if you’re looking to build a portfolio that isn’t heavily reliant on tech stocks.
TIPS: The New Generation of FAANG Stocks?
Sean Williams, a young contributor to The Motley Fool, just posted an extremely brave assertion in his most recent article.
The FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) have returned 1263% over the past 10 years, compared to 200% for the S&P 500. But Williams argues that four new stocks – falling under the acronym “TIPS” – are poised to become the next stock market heroes.
They are as follows…
T for Teladoc Health: The rise of telemedicine and virtual healthcare due to COVID-19 has greatly benefitted this company, looking to achieve $1 billion in sales for this year alone. Customized treatment plans, better convenience for patients and physicians, and all from the comfort of your own home.
I for Intuitive Surgical: Their signature da Vinci surgical system, costing $0.5-2.5 million a piece, has revolutionized soft tissue surgeries for hospitals. They have more units installed that all of the competitors in their space combined, sitting pretty at 5,764 working da Vinci systems. The 2020s will see their profit margins shoot up and there’s no stopping them.
P for Pinterest: The first pure-tech stock of this 4-stock collection. While Q2 2019 had 116 million monthly active users on this photo-dominant social media app, Q2 2020 saw that number nearly triple to 416 million. As small businesses are using them, Pinterest seeks to make its long-awaited entry into the e-commerce space.
S for Square: Targeted primarily at small businesses, they’ve expanded their clientele to much larger businesses. They’ve handled $106 billion worth of gross payment volume in 2019. And thanks to CashApp, their peer-to-peer payment system with 30 million monthly active users, the sky is the limit for them.
What do YOU think about Williams’ TIPS recommendation? Is he on the money, or could he have picked much better stocks? Reply to this newsletter with your opinion on what the next generation of FAANG stocks will be!
700 Workers Laid Off from Wells Fargo… and That’s Just the Beginning
The commercial banking department at Wells Fargo just let go of 700 employees, a division that helps businesses doing $5 million in annual sales or more. But this is apparently not the end of it, as rumor on the street is that tens of thousands of jobs are also going to be eliminated from this too-big-to-fail bank.
This is a bank where their Q2 earnings were so bad that dividends were slashed by 80%. Wells Fargo is desperately cutting costs where possible, so much so that they were the FIRST big bank in America to officially declare their plans to resume laying off thousands of people.
And considering they are the largest employer in all of US-based banking, you know that things will get worse from here. The job-eliminating bloodbath stems from a desire to focus more on consumers instead of companies. Things like mortgages and loans will become their priority.
As much as I had to say it, things will get much worse for the banking industry around the world. HSBC wants to shed $100 billion in assets and fire 35,000 employees, while Deutsche wants 18,000 fewer people in their workforce.
It’s literally 2007-2008 all over again, but much worse this time…
Every Single Mall in America Has Officially Re-Opened!
Shopping malls, once considered “dead for good” due to the COVID-19 pandemic, have officially re-opened for business.
Thanks to the Beverly Center in Los Angeles resuming operations, this makes them the final major mall in the United States of America to allow indoor shopping once again. Other smaller malls in the city have opened, but a mall located directed in Los Angeles County needs all the lights to shine green (if you know what I mean) before they can re-open.
And just to be clear: Re-opening refers to EVERY store in the mall being open, even if the total capacity is reduced significantly. While Beverly Center did attempt to restart its activity in early June, another rise in COVID-19 combined with higher-than-allowed occupancy limits shut them down quite quickly.
But hey, better to re-open late than never. Considering the $500 million renovation they recently went through, it would have been a damn shame to never see these new upgrades (better parking, more restaurants, etc.) go to waste.
Hollywood: NOT Coming to a Cinema Near You
Cinemas rely very heavily on the big blockbuster movies coming out of Hollywood. Those movies are the money-makers, as they attract enough ticket-buyers and popcorn-eaters to keep the cinemas and their razor-thin profit margins live long enough to fight another day.
But the ultimate death blow has been dealt by Hollywood studios to the largest cinema operators in the world: Big titles like Jurassic World, Batman, Wonder Woman, Black Widow, and James Bond flick No Time to Die have all had their release dates pushed back by a minimum of one year.
This is not an easy decision for Hollywood, which now only has two options in light of the current COVID-19 pandemic:
- Release the films at their original date, risking empty cinemas and low viewings
- Delay the films, betting on the world returning to pre-2020 “normal” in 2021
- Sell the movies online on streaming services, taking on huge financial losses
With either option they choose, cinema owners suffer and so do every single employee underneath their wings. Either they don’t get paid as much, get paid later, or not at all.
And with only a few months of liquidity under their belts, foreclosures and bankruptcies are looking like the norm for the cinema industry…