Market Briefing For Wednesday, Oct. 7

Multiple headlines: Stimulus talks halted, and monopoly challenges arise to a bipartisan level, possibly meaning more to markets than the politics of the moment, whether we try climbing another worry-wall soon or not. Now this will be most significant for Amazon (AMZN) and Google (GOOGL), as long speculated (the private label goods will be the obvious implications of targeted segments). But at the moment the focus is on Trump's stimulus-killing 'tweet', and .. why?

(Just a thought: perhaps 'neither' extreme markets tanked on is probable.)

Triumphant breakouts are reduced prospects, though a better small-cap posturing on-balance has been (and remains) favorable for the market now, of course with realization this 'rocktober' and lots can and will probably happen. I can't help but ponder whether a President, upbeat but anxious in recovery, is having second thoughts about everything. He must know he'd tank stocks in a New York minute with that tweet, shifting the House's focus back to SCOTUS. So what could possibly be his motive, unless knowing where the polls are and that 'his' IS the stock market, he actually either plans to recant OR possibly he has had enough, and subtly plans to throw the Election? Just a thought.

Now I realize this and other comments sound political, but they reference the S&P (SPX), and hence politics matter. That's why in recent days I said this primarily was about Trump, COVID and Stimulus. And the Election. While I don't assume it's super-bearish if Harris/Biden wins (short-term perhaps, long-term either in fact would embrace stimulus and growth), while the market worries a lot about a Biden Presidency, hence this near-voting evolution does matter. The clock's ticking and many Trump supporters close to him are dumbfounded by this.

Discounting growth earning has implications, but now the darlings (or super-caps) need to see consistency of profitability, as well as two key perspectives to avoid a more contentious situation. It's oversimplification to just prescribe a benign outcome (though of course just like the President is seduced by his quick recovery on the surface, the market too shouldn't be overly calmed just because we've had this move.

Executive summary:

• Market breaks as Trump instructs Reps not to negotiate Stimulus until after the Election, governing 'by Tweet' has it's pitfalls, even if we sort of get why they didn't want to go with the proposed Stimulus Bill so far.

• From the Republican perspective, a viewpoint might be: people missing what Trump did today, he told Pelosi and Chuck to go scratch, that they bankrupted their states, so don’t expect a COVID stimulus bill bail-out, is it possible it's just as shared publicly, I suspect there's more to the story.

• Privately Speaker Pelosi is said to have questioned what 'meds' Trump is on (do we really know), then she issued her political public statement.

• Well, 'state & local' funding is an apparent sticking point, as the President was not happy with funding going to what he calls 'Democrat-run cities', it doesn't make lots of sense, even if you want to deny what Dems want.

• Stimulus is a 'bridge' to the vaccine (or antibody therapeutic drug), just as we described it as such last Spring, there is pressure to engage with this 'bridge to normalcy', and this kind of 'tweet' (as if irreconcilable) is curious if the idea is to stabilize the Nation until others get antibody drug access.

• Note that technically the S&P dropped to and bounced off the rising trend pattern, and just a hair above the 'standard deviation mean', that actually leaves it in a good spot to rally, should Trump re-engage (or recant, if he just wanted to convey that he's back, everyone got that message).

• It is more than political theater, so it's hard to say if the S&P will merely pivot around in this range, but note that yields sold-off and you don't see a durable economic recovery for the moment, so that's disheartening unless you believe we're really recovering smoothly and don't need stimulus.

• This will slow, not abort, the recovery, and business prospects will soften as it coincides with a rise in COVID cases, along with loosening by a few states, which often has been shown to be premature when occurring, at the same time Trump is correct that case levels and serious illness vary in different states and most young kids don't get very sick (but..relatives).

• The Jobs momentum is already losing steam, so industries, especially like Airlines, won't be able to muddle through unless they carve-out some sort of standalone bill, though that puts pressure to revive a standalone or similar bill in-absence of a comprehensive bill.

• How far the S&P has to unwind is hard to assess just as the tenacity of the President and Congress as to how they hunker-down in their bunkers, regardless of views Pelosi wanted monies to bailout cities not help people survive related to COVID (we don't know, so let media debate all of this).

• A surprise I expect on Wednesday may well be an S&P / market rebound in the wake of some lower opening action, then the whipsaw prospect.

• It was never clear that stimulus would immediately flow to the bottom-line of anyone, but in this case the Fed just warned of a deeper Recession, with risks of the pace of recovery slowing (not my opinion, it was what Chairman Powell said this morning, again makes this strange theater).

• If politicians recant and a deal does get revived from these tatters, it may not come in-time to help a lot of people that need it, not related to votes, and that should be a bipartisan concern as it was in earlier tranches, but I knew then there would be a political & fiscal limit to funding such moves.

• However, while trying to avoid political chatter, one must question how avoiding this and just focusing on the SCOTUS approval, somehow helps people, or for that matter the economy or stock market, unless as I just speculatively ask: does Trump actually prefer 'not' winning again (if we agree the markets and capitalism need him, then what is this about?).

• Keep in mind earlier Stimulus helped our projected rise from the ashes from late March forward, as the economy responded better than most of the analysts expected, the economy may be too fragile in many areas to make it from now until Spring without additional fiscal stimulus.

• Airlines or others cannot continue without actions taken to conserve cash if this 'approach' persists, they simply won't be able to cover payrolls, so big decisions get made.. essentially immediately, barring a 'carve-out'.

• Rates are firming with a decent business backdrop, including the Jolts Jobs data today, stronger than the Street expected, then caved fast as stimulus delay slows recovery at best, and unwinds revival optimism.

• Will we get more stimulus, yes, one way or another, even with a Biden victory it is presumed that it becomes a ying & yang situation beyond initial freakouts, but this seem unnecessary and counterproductive.

• Biden would be the idea of a massive infrastructure program on one hand, and higher taxes reducing corporate profits on the other hand, so eventually the market would adjust to that, but after a severe drubbing.

• Hence I doubt that Trump is setting-up the market 'to' crash, though he's said it would if he isn't President, and obviously watches it, so again what is this all about 'if' he intends remotely to have a shot at re-election.

• Apple (AAPL) will have their 'high speed' (iPhone 12) Presentation at 1 pm ET on Tuesday October 13, just as our rumors last week suggested.

• That's a busy day, given Sorrento's (SRNE) R&D Presentation is occurring too, plus I'm scheduled to visit LightPath (LPTH) for a socially-distanced meeting with new Executive Team leaders, updated tour of facilities, or understanding perhaps a bit of their 'new direction' vision.

• Speaking of LightPath, it's stabilized, perhaps related to accumulation plus thinking about a coming 'new direction', plus a solid presentation by Luminar today, going public later in this Quarter, may remind investors of their 'collegial' relationship, that isn't specified, but may involve infrared lenses or modules related to new (LiDar) 'autonomous driving' systems.

• Revisiting Sorrento, noted an upgrade today from one analyst (he gave them a 21 target just based on COVID efforts), while noting it's speculative of course, but could move rapidly through the FDA's review process.

• Vaccine trial nightmares (trial participants having reactions), so it plagues speedy progress by Moderna (MRNA​​​​​​​), Pfizer (PFE), AstraZeneca/Oxford (AZNCF), Inovio (INO) or a couple others.

• Presumably that's why the FDA today clearly repeated they wish to see at least 2 months of 'safety data' before approving anything more, that's the topic the President's pushing-back against, as he wants approval now.

• So, the President just got SAVED by antibody therapeutics and the cause of his positivity was likely Abbott's (ABT​​​​​​​) ( somewhat inaccurate rapid test (it's a bit known for a large percentage of 'false negatives').

• All this bodes well as words sprinkle-out about the Sorrento 'Cure' (it will be awhile until we see if it all progresses to the 2030 'Pill', hence we've designated SRNE as speculative pick of the year 2021, to allow time for the portfolio of solutions to pan-out, with STI-1499 the near-term key).

• So yes, near-term Judgement Day is Oct 13, as most COVID products are based on STI-1499, if perhaps preliminary results (ideally) are revealed near SRNE's Annual shareholders Meeting 3 days later.

• Now, the follow-on drug, STI-2020, increases potency 50 times they say, while the eventual STI-2030 may prove to be the miracle cure supposedly (again Dr. Ji's speculation ruminated) able to stop the entire coronavirus.

• Note Sorrento's website stated STI-2030 would also be "orally available".

Meanwhile, let's review the basic scene:

• Overall under Biden you can envision higher taxes, more regulation, and a more cautious approach to emerging from COVID, although on that I'm in the camp believing (for months) that 'antibody' therapeutics will rapidly be able to change the mood out there with regard to mingling and openness.

• The risk trade will return for the longer-term, and that conforms to my idea of the 'Roaring 20's' period of prosperity following this incredible ordeal for which we're also dealing with an unprecedented divisive political scene.

• Hence the coming of a vaccine is very important (and will boost moods no matter who is elected), but the fear of economic shifts either way matter, and of course we ultimately need both therapeutic antibodies & vaccines.

• Now, should Trump surge beyond his victorious proclamation of infallibility (or something like that), that's fine for markets, but who knows with mass propaganda views (many of which are distorted) about society's future, at the same time, 'eccentricities' aside, the campaign needs re-evaluating.

• In that regard the S&P should move back to the 200-Day Moving Average 'if' nothing gets done before the Election to help, and makes it harder to get the so-called V bottom which we had in the S&P but not broadly, but again on a daily basis I suspect some sort of turnaround Wednesday.

• We expected S&P 3400 and little more, fine, but the point is we required a stimulus package at least to sustain the morale of most people.

• Late today the House announced (timing is interesting) recommendations to 'reform' technology by concluding anti-competitive monopoly powers of 4 leading giants must be throttled, those request structural separations (a sort of Glass-Steagall of tech) within Apple, Amazon, Facebook (FB) as well as Google, this is not unexpected, but pursuing it now is..well.. pressure.

• "Partial, uneven and uncertain" .. that is how IMF Director Georgieva describes economic recovery for most countries over coming months.

• Does this set-up another worry-wall for the market to climb, perhaps so, whip down and up, that's what happened last time, but at a much lower level for the S&P (at best a choppy range), so we'll be flexible about it.

• What is evident is that we'll get stimulus (monetary 'and' fiscal), but the timing is impossible to ascertain at this point, if its next Spring that's too late to lift the morale of those who will be struggling, even if the markets shrug it off (more or less).

• For now the 'regulatory spotlight' on big-tech matters, because there is a degree of 'bipartisan' support for regulation on the biggest super-caps, it may handicap acquisitions, but eventual breakups might be bullish.

In-sum: S&P had made it back to almost challenge the prior record highs, and I do think the set-up for next year is not catastrophic but opportunistic. At the same time since President Trump views the S&P as his 'poll', I find it hard to imagine he's pleased with the market reaction to 'not negotiating stimulus', unless of course it's a tactic that lasts a day and then the headlines change.

This has been a rangebound overall S&P market for months, primarily led by super-cap stocks, and ongoing speculation amid COVID-19 plays of course. As you have more recovery next year, I suspect the technology focus will slacken a little on the major tech stocks (which are generally very expensive), in favor of value plays, which is why I'm more comfortable in lower-priced stocks, but of course they must be ones with decent prospects for 'actual' growth. This is therefore not 'simply' a value vs. growth scenario, but it's partially that.