E Market Briefing For Thursday, Oct. 29

A dramatic departure - from headline risk might be needed to justify lowering caution flags that we've flow for several weeks now. Risk exposure by many in big-tech especially (FANG / super-caps) was far too excessive for the times. It is pretty clear to us that this is more COVID-than-politically related, though sure aspects of both play roles. Those roles could even interfere with each other.

It actually doesn't matter if most of us view COVID-19 as 'The Plague' or not, it is being treated that way globally. There is a view of letting younger healthier people go about their lives as they wish, while protecting those at-riskier. First blush glance seems that makes a bit of sense.

However, that ignores that nowadays the average American has something like 2.6 comorbidities, which means there really are more unhealthy people in the United States, perhaps than most of us ever imagined. So, since obesity, diabetes, asthma and a myriad of conditions suffice to increase odds of 'not doing well' if contracting COVID, well I guess that's the reason it's taken much more seriously (or should be) in Europe and the U.S., versus Asia, where the story is (and not entirely accurate) that they eat and live healthier (inaccurate in countries where they smoke). Australia did horrible, now doing better, after going through the kind of tough-love lock-downs US citizens disdain.

As to the market, the S&P is responding to all this with a calamitous decline, in response partially to lack of stimulus, partially to lack of National policies on containing (or trying to) the virus (and therein are political debates), or simply as far as Wall Street is concerned, awareness of a public cash deficit and the growing Federal one, that is worse than anything since the Great Depression. This IS the Anniversary, and brains not ignorance, needs to avoid another.

I noted months ago, if not for leveraging stimulus trances, an actual economic depression beyond the lowest rungs of now-unemployed society, is a risk. So it's been like a rock hitting a windshield for stocks, but hard to understand why they didn't see this coming, given it was crucial to get interim stimulus again.

While we anticipated the last couple bounces to falter and drive below the 50 Day Moving Average, with near-term risk to the 200-Day Moving Average, it's not easy to divine given the extraneous influences impacting the market. This is not, and has not been, a time in our view to ignore COVID 'globally', while it's mistaken for pundits or analysts to hinge their market hopes on the Election.

There has already been a broadening of interest (sector diversification) from a focus on super-caps to less-extended securities that actually reflect value, or of course are in fields that will likely recover with a small business focus next year, away from just concentration in the tech stocks that do benefit during of course a spike in COVID, which re-invigorates the 'stay-home/work' plays.

Big cap techs do have room to come down near-term and then the bounce in general, but we're not oversold enough (or the VIX high enough) to proclaim a washout low. We can get an 'it's never going to end' mentality, but that's still a pending consideration, and of course can be swayed by any major news.

The world we live in will lead to a time when analysts say value outperforms, or so on. But aside a 'really clear' election result (which could coil the market for a move) OR a surprised positive development regarding vaccines or better 'antibody therapeutics', this remains the defensive market we're discussed.

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