Equities Rise Ignoring the Media

Market Update 2020-08-10: Equities ignored the media and rose last week, as the economic recovery continues against the almost non-stop drone on TV of dire warnings and outcomes.  Earnings results beat low expectations. Yes, that still counts.  On the earnings front, more than 80% have topped Q2 expectations. What is hot? On-line video games, Apple technology hardware sold through Amazon and Best Buy, streaming services such as Netflix and Disney and bleach, snacks, and fast food such as Chipotle and McDonalds.

The S&P 500 rose 2.5%, led by cyclical groups industrials and banks.  This pushed the S&P 500 index to within just 2% of an all-time high. The Nasdaq continues to lead the markets supported by ultra-low long-term interest rates. Can you say “V-bottom”?  The team at OHFG has said so for months.  Review our old weekly podcasts on our website, here.

Covid cases are collapsing, so equities ignored the media and rose

On the virus front, as our friends at Fundstrat continue to point out in advance of the national press, “the 7-day rate-of-change is negative, daily cases are trending lower, and as a proxy for R0, it is saying that R0 is less than 1.0….the 7-day delta is falling faster than it was in April/May.  So, this means we are seeing an even faster collapse in daily case trends.”  Translation?… Cases are collapsing.  They are collapsing because of mitigation steps that were taken with about a four-week lag of the virus uptick after the large-gatherings that occurred in several major American cities. These steps were to close bars, mandate masks, and enforced social distance.

On the political front, what this means is that the “betting odds” and the November Presidential election outcome is likely to narrow considerably over the coming 4-6 weeks as there has been an almost perfect correlation between the President Trump’s re-election chances and the rate of change of virus cases.  Why? As goes the virus so goes our economy.

Resources

• Recommended Reading For a very lengthy and detailed explanation of what Oak Harvest has been arguing since late March, we recommend the following article. It is lengthy and has an excess of industry jargon, but the topics discussed are among the things in the “macro-investing” world that can actually matter to markets. Read it here.
• Our complete second half outlook has been also posted and can be found by clicking here.
• Find more information and help on our YouTube Channel.

 

Weekly market updates contain general information and expresses views of Oak Harvest Investment Services. Data, Articles, and information cited are believed to be reliable at the time of creation, but are not guaranteed. Nothing in this content is intended as, nor should it be regarded as, personalized investment advice. Strategies and ideas discussed may not be right for you.  Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Indexes are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.