Market Briefing For Monday, Nov. 16
Invigorated equities - amidst what seems a frustrating, if not depressive, sort of backdrop (in many ways), might reflect a perception about politics, vaccine developments (amid controversy), or even short-covering. The latter would for sure support why, despite a defensive attitude as we fool around S&P highs, I am unwilling to join the cabal of bears constantly calling for big catastrophes.
Yes, the Fed Chairman reiterates that the recovered economy won't actually be the same economy as before (well of course not; less bling and more real substance to economic growth); although he means portions of society will be struggling and suffering for some time. I get that; and realize he's saying one thing overtly and another slightly covertly.
The overt means he knows stimulative monetary policies will have to persist a very long time, and incidentally that's the 'Fed Put', hence bullish 'not' bearish for markets by definition (as I have contended since the March 'Inger Bottom'; a lot of which was based on the Fed's declaration one day before that low). In terms of the 'covert, a suspect he's indicating that the Fed can' do it alone and that we absolutely must have fiscal and other policy moves to assist (perhaps he is thinking about social harmony; not merely putting food on people's table as there are areas with unemployment and struggle already in Depression).
Executive Summary:
- S&P shirks-off the calls from numerous American bears (or just analysts who totally missed the move off our March lows); and extreme skeptics of course; like Jeremy Grantham in the U.K who sees a calamitous bubble;
- As I've noted I concur about this risk (credit-market based) except see it as a concern 'way down the road' as we recover and the Fed overstays a super-dovish monetary policy;
- For now I remain a bit defensive; but unwilling to actually short stocks as I have said all week; even though I am open-minded for shakeouts;
- Yes we had a blow-off in S&P and NDX and yes there's an unfilled gap I pointed-to (and will again); however even with an island reversal as I'd identified early in the week; any favorable vaccine or drug news following can reverse the dour mood again, and hence scramble short-sellers;
- Elon Musk made a great point yesterday, by noting his personal one-guy test of 'antigen' tests; same test; same machine; same nurse; and totally different results (two positive and two negative on the same day);
- That's about right; sort of like Congress or the White House; much faith in mediocre tests, rather than the Gold Standard PCR tests (Sorrento has a rapid version of that pending with FDA for months; inexplicable as yet not either approved or denied; one way or another given a ridiculous delay);
- Concern with inactivated virus vaccines whose benefits might be modest; but if reported diminished Covid in the Chinese military are believed; it appears that vaccine exceeds skeptics expectations;
- The fear with adenovirus vaccines is that they’ll work once, then a patient develops immunity so it won’t work a second time;
- That's the basis for greater optimism surrounding the mRNA vaccine from Pfizer and similarly from Moderna; with J&J a differing approach;
- One of two of these should see 'limited availability' within weeks; so that's also an impediment for being too negative in the face of these dynamics; of course the focus will be on first-responders, and the elderly;
- No vaccine will substitute for antiviral treatments, so we need those even more; especially when we get to 'pill or nasal' form, which liberates people with respect to being able to test and treat (anywhere) if turning positive;
It seems like the market is focus on holding together through the months of dreary dealing with Covid, tragic loss of life, not to mention enduring side-effects that many recovering patients may not notice for years;
- That alone is reason to encourage youngsters believing they're infallible to observe Covid guidelines, basically discouraging doing much at all;
- The political situation remains dicey; and despite Saturday's pro-Trump march in-front of the White House (the President drove by as a courtesy, on his way to play a round of golf in Virginia); there's no change we know of regarding the Election;
- For now the S&P pattern of alternating swings at high levels persists.
Bottom line: the mass S&P indecision pattern resolved to the upside; but this seems more like pre-weekend short-covering than a particular celebration. So I suspect a) not shorting and b) reasonably defensive was indeed appropriate as we approach a week likely filled with election politics and vaccine news. I'm of course eager to see resolution for new 'tests' and treatments too.