When In Doubt, Return To The COVID-19 Playbook

The Covid Playbook

It is simple … sell the old economy (cyclical), value and anything considered risky (small cap). buy large cap, dependable growth (tech), i.e. the bulletproof, the innovators. Valuation doesn’t matter, you just need to be somewhere with immunity to the economic ravages of the renewed pandemic.

We just saw this occur over the last month

It came about due to the new lockdowns in Europe and the emergence of more contagious strains of the virus. It continues, reinforced by the huge new wave of Covid 19 in India. A general market-wide correction of the tremendous run that began in November took hold in February …  with the Nasdaq and S&P 500 both peaking February 15.

The Media has done its best to accentuate the negative

“‘A devastating blow’ — doctor says pausing J&J Covid vaccine will have far-reaching effects” (cnbc- 4/13/21)

man in black crew neck t-shirt

The Russell 2K peaked a month later at about 2350 (a new all-time high) then fell over 10% the next nine days. As news of the lockdowns and new variants subsided the R2K attempted to rally, but that rally failed with news of the pulling of the Johnson and Johnson vaccine off the market (this looks to be very temporary). Meanwhile both the S& P 500 and Dow posted  new all-time highs last week with the Nasdaq knocking on the door of new highs … a flight to the safety of large cap growth.

Corrections are normal

This one is no exception. It was certainly needed. What I take exception to is the return to the Covid play book when the facts on the ground would argue that we move on.

  • The vaccines work. U.S. daily cases peaked January 7th, 2021 at 275,678. Today April 19, 2021, U.S. cases were, according to worldometers.info, 50,359 (18% of peak). Half of all US adults have had at least one dose of vaccine. 10% of the population have been diagnosed with the virus. If these diagnosed case numbers are correct, 4 or 5 times the diagnosed number may have had the asymptomatic versions of the disease. This leads me to believe the virus should be in the rear view mirror soon. It was in the market’s rear view mirror a year ago.

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Disclaimer: The information presented here represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain ...

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