A Comment -- General Comments From an Expert (A Commentary)
COMMENT
This week has been quite crazy. He has come at it from a quantitative perspective where he wants to buy stocks that are cheap, stable and rising. This week, we saw rotation into anything that was in a downtrend. More levered companies in financial and energy saw rotation. This was due to the vaccine news.
Jason MannUnknown
COMMENT
Coronavirus vaccine. Looking to Q1 and Q2 of next year, it is positive. However, the market is trying to pull-forward this timeline. This bull market has been very odd, since normal beneficiaries coming out of a recession, such as financials, materials and industrials have not recovered yet. It has been an asset price recovery and not an economic recovery. The market is very expensive. There are expensive growth stocks and reasonably priced cyclical stocks.
Jason MannUnknown
COMMENT
The broader index is dominated by big tech right now. Looking into next year, we could see the index stay relatively flat, but could see good returns from financials, materials and industrials. Parts of the market will probably be up but not necessarily the absolute market.
Jason MannUnknown
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The vaccine will take time to be distributed. Investors are probably comfortable going forward, especially with the vaccine coming in time. Markets did alright even with the world completely closed. With bond returns low, bond-to-stock asset allocation shift will continue to be a big driver. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
The market has no memory. It plummeted yesterday because of fears that the US has lost control of Covid, yet markets gained today. Any time stocks get hammered it triggers a vaccine reaction in that good news will bail us out. In truth, a vaccine won't reach the masses until the spring probably. We're dealing with cross-currents. Rising cases spells a rough winter, though earnings are up (i.e. Cisco, Disney), a vaccine looks likely to come, and there remains a (rocky) transition to Biden. He expects positive retail company results next week.
COMMENT
He's often asked how stock markets can rally so high as the number of Covid rises so high. He answers that business responds to the danger of Covid, like investing in PPP for employees or closing down operations. CEOs don't have the luxury of pretending that Covid exists, like Trump does. Trump is tweeting about the election instead of tackling the current pandemic. History will show that business stepped up in this crisis.
COMMENT
For now, markets and economies depend on cheap money and fiscal spending? Yes, US election and Covid vaccine were overhangs on the market, and now we have more clarity. But even with Pfizer's announcement, it's going to take a long time to manufacture and distribute. Virus will continue well into next year. We need, and have, global central banks being accommodative. In the face of a virus resurgence, a fiscal package is very important, especially to get small businesses, travel, and leisure through the next few months.
COMMENT
With the vaccine progress, do we now have a visible path to normality? You're right. Historically, vaccines take years. So the current fast track is unprecedented. Hopefully, by mid to late next year, the vaccine will be out in the general population. So the economy can start opening up and return to a sense of normalcy mid to late next year.
COMMENT
Will the valuations for big tech end in tears? Not sure of that, but we wanted to see tech take a breather and to see the rally broaden out to other sectors. Heavy lifting to year end won't be in the Shopifys. They'll be fine in the next couple of years, and you'll probably have an opportunity to pick away at them a bit lower. But when the value complex like banks and lifecos have a 10-15% move, and if you assume the economy will recover 2021-22, there's still a lot more for these value names to go.
COMMENT
Are you avoiding certain sectors? It's still a balance sheet issue. Vaccine won't be widely distributed for quite some time. Some sectors are in dire need of assistance right now, and even if they get it, balance sheets could still be worse off 6-9 months out. You could pick away a tiny bit at a Carnival Cruise Lines. But there's so much upside in names with great balance sheets, like banks, Enbridges, and Manulifes, that you really don't need to take on the extra risk to do well in this rally.
COMMENT
Time to switch from tech to value? The script for a recovery centres on financials, industrials, and cyclical tech. Tech is expensive, financials are inexpensive, with industrials in between. Lots more to go in financials and industrials. Likes Magna, Finning and Methanex in industrials. Likes banks, insurance companies and US banks. Good to see some consolidation in tech. Amazon, Tesla, and Google still make sense on price to growth, and he's waiting for those to get cheaper.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Another meltdown like we saw in March is very unlikely. There is stability in the presidency, more stimulus coming, low rates and earnings have been good. Many companies have prospered even in a pandemic. A split congress is also good for markets. Volatility is expected to a certain degree as investors adjust positions, take profits and rotate sectors. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
It's a win-win situation: you can buy the Covid as well as the recovery stocks. Both classes have seen pullbacks recently. Stay long on everything. HOWEVER, U.S. Covid cases are rising alarmingly; we're in the middle of a contested election; and there's no stimulus package yet. Too many Americans refuse to wear masks. Investors and Americans are being cavalier. These are potential dark clouds that investors must be aware of. Wouldn't hurt to raise cash.
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