Of Chicken Little, Bubbles and Crashes

January 25, 2021

2021-01-25 Market Update.

Equity markets were mixed last week, starting strong but wobbling into the weekend. Concerns about COVID-related lockdowns and the effectiveness of vaccines against new strains of the virus slowed overall gains. The S&P 500 rose 1.9%, led by telecom and technology, while banks slumped. The Nasdaq led the week with a 4.2% gain and hit another record high after struggling through the latter part of 2020.  Large-cap technology stocks have been leaders when interest rates peak, as they did two weeks ago.

Big-cap stocks

The almost continual talk about a mass rotation out of big-cap technology stocks late in Q4, ended abruptly with lower interest rates and Netflix’s obscenely good earnings report. The names that led through the pandemic began leading again starting about 2 weeks ago at the height of the drumbeat of increased regulation and emotional selling.

Economy

As the Q4 2020 earnings season gets underway, several banks reported mixed results last week, while a few big “old technology” names disappointed. The sector growth rates are diverging widely, with consumer discretionary (+77% y/y) and financials (+54% y/y) at the top end, while energy (-51%) sits at the low end. Modest negatives are also expected in industrials and real estate.

Gloom and doom — we disagree

Many investment managers are out with their forecasts of bubbles and crashes. The investment team remains steadfastly opposite this camp. While short term we continue to expect an increasingly turbulent February, we see any pullback from here (S&P500 3850), or “correction” from higher levels (S&P500 4000+) as presenting buying opportunities.

Resources

 

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 like the S&P 500 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.