Market Briefing For Thursday, Nov. 12

Storm warnings are hoisted - over much of Central Florida right now, as the stronger hurricane aims at the Coast, and as experts note, retains strength at least awhile longer, as it pushes inland, due to climate change influences.

Concurrently, the controversy over the Election results persists also, with new affidavits and claims leading to recounts and delayed certification of results in at least a couple states, hence at least a couple media sources might yet be compelled to recognize these challenges are not resolved, as least as of yet.

As it's something that should be cleared-up next week, we're taking a posture that much of the market's 'after-the-fact' of a breakout optimism relates not so much to politics, but to the prospect of a viable vaccine (or treatments) during 2021, that will take COVID-19 off-the-table as a meaningful economic concern.

However, we're not there yet, and that matters a whole lot. Today we got one of the most bullish outlooks yet from Goldman Sachs (GS) (calling for S&P 4600 in the coming year). And they switched from dire Great Depression warnings of the past (which I decried consistently, given the Fed Put and faith science would advance faster than historically given DNA sequencing and so on), and still it's been a challenge in almost every aspect, and still is.

So sure, a tailwind to risk assets appears, but a sobering new correction also is feasible now that everyone sees the breakout, gets excited, and tends very dangerously, to engage in more-normal day-to-day living activities, 'as if' this important set of progressive moves to treat, cure or prevent COVID were here, or they think political resolution (either way) is somehow a market panacea.

A cure or treatment for the majority for sure is not here yet, an so hence the understandable need and difficulty curtailing what is a perfectly normal human tendency to want to congregate as holidays near. So as we all cherish well-being and the urge to return to a less constrained pace of activity, just like the market, optimism may be getting ahead of itself.

That premature ebullience is reflected by alternating value vs. growth shifts as to what moves the S&P daily, and like today, it switched a couple times in the spate of a couple hours, such as big-cap swapping leadership roles so more than once you had S&P down (Dow both up and down) and Nasdaq up, as it got the rebound we expected in those stay-home/work-home leaders. So as I'd noted those rebounds may not last long or get far, because ideally we'll get through the COVID waves, and look for other focus areas as 2021 evolves.

Executive Summary:

A reversal of the reversal, repeatedly in sectors, was the probability as a narrative about rotation into value stocks, encountered a sobering about COVID, as stocks alternated with an uncomfortable awareness of illness.

The return to normal stocks are fine, but will retreat periodically while the future does indeed look bright, but stock are only going to anticipate later 2021 and 2022 'to a degree' at this point.

Some do not have finances yet to easily migrate that far, and many have incredible debt (like the airlines do, much less the horrid cruising stocks),

Nevertheless that let such stocks recover somewhat, but comparisons to pre-COVID levels aren't logical, as COVID will be around for some time, as well as a reticent to venture too far afield for most travelers or business.

One particular product may actually help (if FDA approves), and that was the Treatment IND filed today by Sorrento (SRNE) for a 'nasal spray' to kill COVID, 'if' this is effective, that becomes a very 'portable' way bring defenses with oneself on any trip where a person might become exposed along the way.

Now I don't know if Sorrento (which seems to be gelling their FDA or Trial pending 'solutions' will be successful with any or all, but makes sense in a few ways and it's welcome to see them progressing without hype which of course got people excited prematurely, and interestingly another entry for the shares 'if' indeed they now come-forth with 'approved' solutions.

In the interim the vaccines can help protect the medical staff, and crucial first-responders, while it's really therapeutics that will help daily life (and that's where Sorrento's low-dose treatments are 'potentially' still a game changer when it comes to convenience, efficacy without asking the body to produce antibodies, and with sprays or pills that simplify everything.

It is the combination of vaccines 'and' available antiviral treatments like these that can embolden people to have confidence to go about living, whereas the others (Lilly, Regeneron etc.) help too, they are so far not in the simple form that can be administered without anything very invasive (LLY, REGN).

As I'm not a doctor I can't be entirely sure how this will all go (they're not sure either if we're to be candid), and as I'm also not a lawyer, I can't be entirely sure how the Election controversy will get resolved, but both will matter to the stock market, and perhaps social order and progress in this Country (as perceptions if not reality, vary with personal political views).

I brought this prospect up before, as relates to having news viewed by almost everyone favorable as relates to improving the pandemic outlook (even if it's actually moving to the worst-case prospects nearer-term and that's difficult), while we position for recovery, but it gets ahead of itself.

On the political side, which in this case can impact international relations, trade, military alliances, and a sense of order and direction domestically, well it's very fluid, as even global leaders see unprecedented uncertainty in the United States.

This struggle to explore a diplomatically-acceptable way to navigate this American dilemma is not only a State Dept. issue, but one markets too of course are concerned about, although not as much as it is about COVID.

If you look back, other than the 'relief rally' on the Election, or yet-another 'relief rally' on the Pfizer vaccine, one can ask whether these really reflect enthusiasm (they do in different ways, as no sane person is against COVID ending, and most wanted the Election out of the way one way or another), OR to what extent were both of these giant short-covering rallies.

I suspect the answer is a bit of both, and the short-covering reflects not so much limited liquidity, but the congested concentration of money manager funds in the same groups of leadership stocks or ETF's as I've noted.

So they are having more trouble adjusting to individual (olden days style) stock picking, and we have warned about the mix of ETF's before and a desire by many to simplify investments in Indexes, which can get them in trouble due to mass movements which invite countermove pressures.

Again: my point about COVID's clearly 'exponential not sequential' rise for now continues to matter, which (for now) tempers premature euphoria.

Meanwhile the near-term 'known unknowns' have to be sorted-out and unfortunately there is insufficient focus on getting stimulus to bridge the gap for many people and insufficient leadership focused on assisting our communities across the nation in fighting COVID, due to political focus.