Authoritarianism pulling China out of WuFlu's depth; the U.S. needs wiser-than-ox power.

Pandemic, protests, politics, pandering - persistently peppered prices prior to limited range-bound swings that retained high level stability into year-end.

As we go into 2021, our view that the Fed Put underpinned everything; Covid and consumer sentiment included; while the future now remains in the hands of how satisfactorily Covid is coped-with going forward. The way people seem to respond is 'as if' vaccines are a one-and-done cycle; as of course isn't the case at all. And the Fed isn't going to back-off until we see solid recovery; not merely the 'relative' improvements you see versus preceding Quarters.

You want confidence to return but that's going to require not only adherence it seems to vaccines; but within a few months the reality it requires an antidote or 'antibody therapeutic' that is low-dose and easily administered; to really be able to 'open society'. Yes people are going out now who have recovered, and many 'think' they can't catch it again, or ignore that they may be carriers (they believe they're not; but for how long or in all cases, isn't established) so hence there they were at the heart of New Years celebrations sometimes.

Let me take a moment to express my appreciation for your many reflections in the year past, especially as related not just to forecasts, but to the tribulations of dealing with the pandemic, and trying to stay ahead of the trends. This will be the 51st year since I launched The Inger Letter on Channel 22 financial TV in Los Angeles, and it is with your inspiration that I plan to continue to year 52.

And that takes us to the Covid-challenge yet again; because it's not clear that we'll get the desired universal benefit from vaccines; although it is clear that's not occurring as rapidly as many desire; especially those triggering near-panic (such as we're seeing here in Florida) among those eligible to get inoculated. I am stunned at how disorganized it is; and that there's not a basic structure in this era (such as an 'App') not only to track health 'status' but timing vaccines. I know this is being rolled-out locally in some instances; but really; this slow?

Recognizing that, despite relatively few investors interested in blended market analysis (technicals and fundamentals); I've continued what I can to adjust to the messages from the market (not tell the market what to do); as I assess the overall picture for the S&P or more. I evolved to look at a few more individual stocks, as the debate swung back to active investing a bit.

If in 2021 the economy outperforms stocks; that's for later in the year and for sure the market is anticipating 'post-Covid' behavior and (hopefully) not really too euphoric about the impact of vaccines on suppressing the pandemic. The smaller stocks 'should' do better for now; if one considers the 'January Effect', which of course is traditional and not precise to contemplate in this backdrop.

That makes sense because 2021 may well see limited potential from what I've called technology 'Grand Dames' of this era (beyond FANG stocks); and back into more stocks that will do well depending on 'making it' to ultimate recovery. Of course that's already been anticipated by many; often prematurely.

Where things go in 2021 won't simply continue what dominated 2020; so it's a bit clear already; even though the duration of 'Covid' restraint will matter as far as persisting good earnings for some that uniquely benefited from pandemic.

In certain sectors such as clothing including shoes, an obvious advantage for in-person shopping exists, as most buyers want to touch and try-on products. Alas, this past year some consumers reallocated portions of what typically is spent for dining out, clubs, travel or outdoors excursions, toward shopping or virtual experiences online. This does nothing for a community's businesses.

A reversal in 2020, as vaccines become widely deployed, will occur. I know it because the few people I know already vaccinated are running around before even their 2nd shot, and while I think that's a bit cavalier, I get the pent-up sort of mood. And these are not only 20-somethings; and they could be carriers as this virus is a beast. It's all part of why I thought 'vaccine euphoria' excessive. Plus none of them contemplate getting only a few months protective benefit.

As to e-commerce growth rates, it probably peaked already. According to the credit-card spending data, online sales have materially slowed over these last few weeks regardless of Amazon's stock price continuing to amaze. So what if continuation of this pattern poses a challenge for players such as Amazon, Shopify, Peloton or similar. E-commerce would keep growing, but disappoint relative to elevated expectations next year.

How can I tell? Tired of online (not surprising as on the computer all day so it seems), I tended to hit A&F, Express, Macy's physical stores; even Apple's. And I don't like buying clothes online, unless an exact match to what I already know I like (repeat buying when a bit worn .. ladies, it's sort of a guy thing; if we find an item we like, we buy 5 of them or replace it with the identical item fairly often). And I have friends carefully booking 2022 cruises (my caution as 2021 doesn't look so promising for global traveling; though hope I'm wrong).

The inescapable conclusion: herd immunity is wishful thinking for now at least and perhaps for years. Rapid test diagnostics plus easily administered lower dose (than the President got) effective therapeutics are likely solutions plus of course vaccines for those who get them; but it won't near universal adoption.

Once realistic (low dose or nasal drops/spray) therapeutics become available and vaccine shortcomings are grasped (especially lack of durable protection), the scientific community and the public will demand the efficient prophylactic or early-symptom responses we're talking about, and Sorrento claims (among others) to be working-on (hence that dreaded term: pending). Wait a couple of months when or if thousands of vaccine recipients catch covid 'anyway', and it may be that it triggers a stampede to mAB therapeutics (like STI-2020 etc.).

Will these low-dose outpatient monoclonal antibodies be available in quantity then? Hopefully. Perhaps officials 'know this' or that's why they grudingly offer the Regeneron IV treatment and know what is needed but isn't here yet; and that's the Sorrento IM shot (or they want one from Merck or Pfizer or others; they are all scrambling). Sorrento either has had 'inertia', or something else is going on. All we know is that 'if' they have it; this needs to be known; and it's a long time since they proclaimed recruiting for trials; with no logical explanation of the delay having been forthcoming; even though DARPA funding for Phase 2 tests suggests that more is going on than we know of yet. Surprise ahead?

So, the last two overly enthusiastic periods ending in the dot.com 2000 bubble I warned of at the time or the 'Epic Debacle' I called for ahead of Bear Sterns and Lehman in early 2007, were followed by the heaviest S&P bear markets in decades; with both basically halved from their peaks. While a replay surely is reasonable to occur one day; this is not that day.

While there has to be lots of rotation to hold the S&P up in 2021; the values in stocks already historically at highs are often very limited (not all). Growth will have to occur in post-covid stocks; but many are also not exactly bargains. So the prospect of extension; or a sharp break (but not catastrophe) is out there, 'in-theory', while it really depends to a great degree on results not propaganda about the success (and embrace) of vaccines, or later therapeutic drugs, that will really take serious Covid concerns off the table as I've noted quite often.

Executive summary:

• S&P and small-caps rebound a bit after annual tax/trade deadline passed;
• Mandatory negative test proof for all air travelers in Canada now ordered;
• AstraZeneca vaccine approved in the U.K.; and that's a conventional as well as easily transported and stored approach (speculative efficacy and that's why it's debated with different assessments by physicians);
• This is what some call risk/benefit profile of the patient; hence you'll have markets (hate to use that term, but accurate) for several varying types of vaccines; and need for antibody therapeutics for many people or where it (the virus) rebounds or infects 'anyway', even if one has been vacinated;
• The market for antibody therapeutics and also rapid tests is incredibly huge; ideally Sorrento's 'test' EUA will be approved within 10 days;
• The mutant variants (whether new strains or not) will be more challenging to the vaccine makers than to the testing sector, for which it's no problem;
• How we coordinate and navigate Covid 'is' still key to the market ahead;
• Ironically the economy eventually may do better than the S&P, should we really (miraculously some think) emerge quickly from the pandemic; with so much having been discounted;
• Despite the Fed remaining 'friendly'; they can eventually get stuck with a policy requiring inflation; and unable to dampen excesses without major disruptions to markets being risked;
• They know this; and are more focused on getting through (bridging) this, than they are dealing with the ramifications; but it's there.. just not yet;
• Be cautious about the push-up by Bitcoin; as promoters hawk ideas of a double or triple 'after' it already did just that; might again but like chasing a FANG type after they ran big-time;
• Also the weak Dollar helps Oil prices stay high; and is avoided in-favor of Bitcoin (or even Gold) by contrary-opinion players; but these can shift;
• Reversal could occur if 'any' major central bank comes forth with a digital coinage plan, it would diverge from a 'risk-on' view of Bitcoin as an asset;
• By the way Bitcoin could retrench anyway if we get an equity shake 'soon' although I'm not seeing evidence that such is immediately forthcoming;
• I do suspect many economic assumptions about (at least) early 2021 are indeed excessive for many sectors that would 'do better' post-Covid; and they will, just much of the early stages of that are priced-in (discounted);
• Nevertheless the backdrop will be 'Roaring 20's' ultimately, even though it is already reflected by what the market has already done; almost cult-like;
• Speaking of frenzied-like cultist behavior; they just put Tesla in the S&P; so there may be risk of a shakeout there impacting broader markets; but to overwork the term; after that Musk followers will 'religiously' rebound it;
• By the way I don't dispute that Tesla has the best charging network over the USA; but I also don't dismiss some independent networks cutting one or more deals with OEM (original equipment mfg's.);
• That's all part of the looming competitive landscape Tesla fans religiously deny will ever exist; but like Henry Ford and his 'model T'; that wasn't the only game in-town eventually (speaking of Ford they will be a player);
• In automotive, assistive even more so than autonomous driving, will grow over the next few years; and rather than debate Luminar vs. Velodyne, I have tended to follow both; and suggest for now both will be interesting;
• Banks (allowed to do buybacks helps) & Oils continue viewed favorably here; and very pleased we were bullish on Oil from the mid-30's forward;
• The long-term damage to the purchasing-power of the Dollar is already a factor; as I've noted; while some politicians throw care-to-wind about this, as they focus on getting (crumbs?) to poorer folks who will pay the price in high food and other costs as inflation does rear it's post-stimulus head;
• The Fed will never be able (in our lifetimes) to reverse this; so it tends to drive up prices; as nominally stocks may actually rise beyond this crisis; at the same time trying to play how this impacts S&P risk is still premature and I'm glad we were able to urge 'not' fighting the Fed this year;
• The Fed is basically underpinning this market in 'surviving' sectors; that is the underpinning of our bullishness from March 23rd forward; but also it is stretched in 'some' sectors that benefited, so open to eventual shake-out;
• Again many smaller caps already shook out and bigger caps generally not so much; hence a different bifurcated prospect 'may' loom in 2021;
• People often act 'as if' a single vaccine shot will give them back their lives immediately; and I wish it were so; rather it's a couple weeks for immunity to even begin; and even when protected; one can still catch the virus;
• Not just because 'antibody therapeutics' mostly work right away, they both protect individuals 'from' getting infected; as well as not spreading virus to others, if they're given as preventative rather than after symptoms start);
• That means (unlike vaccines) the immune system isn't being tasked to mount a response only after cells have been penetrated by virus; my bias is to kill the virus, stop it in its tracks before or during earliest symptoms;
• 'Growth matters' and to get that the US especially must emerge from this pandemic; and lead the world in distribution of 'useful' reliable tests plus treatments (antibody therapeutics more key than just vaccines; a problem that has been politicized by the funding priorities seen so far);
• So, while conditions for some sort of pullback exist, with greater odds for overworked big-caps than small-caps or specialized stocks suppressed and ripe for rebounds soon; the January Effect may hold this a bit longer;
• The biggest prospective destabilizing action remains Covid-19 itself; as a lot of value and growth projections 'presume' a modicum of true revival as well as likely pinning too much hope on vaccines alone.