E Market Briefing For Thursday, Dec. 31

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 (AZN) 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 vaccinated.
  • 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 (SPX), 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 (BITCOMP), 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.
  • A few pundits got excited about yesterday's Russell shakeout and all that primarily reflected tax-related sales (now all regular trades settle in 2021).
  • 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 (TSLA) 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 (F) 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.
  • At the same time either or both are likely customers for LightPath (LPTH) visible or infrared lenses, perhaps even modules, optimistically expecting to see LPTH in double-digits during the course of 2021, if they execute well.
  • Banks (allowed to do buybacks helps) and 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.
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