31 Jul THE WALL OF WORRY, COVID AND EARNINGS
Second quarter GDP declined by a record 32.9%. Analysts had predicted a 35% decline. My thoughts on this nominal positive surprise…big deal. What is the difference between the two?
Equities traded lower for a myriad of reasons. Even though weekly jobless claims were lower than expected, continuing claims rose thus offering real time evidence efforts to control the virus is negatively impacting the rebound.
Markets were also spooked by the stimulus impasse, an impasse that is now making gargantuan and misleading headlines in the blogosphere.
And then there was the President’s tweet about delaying the election. I place the idea of such equivalent to banning the electoral college and packing the Supreme Court.
Speaking of November, I am certain the vitriol will rise to epic proportions. Truth will be lacking in almost every dimension.
Commenting about mail in votes, in 2005 James Baker and Jimmy Carter led a study to determine whether or not mail in ballots are conducive to fraud. Their study declaratively stated yes, a study that was adopted almost unanimously by both Houses of Congress.
However, with the above written, mail in votes are only counted if the ballots can impact the outcome of the election. For example, if the margin of victory is 1% and 2% of all ballots have been mailed in, the ballots then will then be counted.
I believe the outcome in November will be definitive. Whoever wins will win by a substantial margin. Wow! This is radical.
Historically speaking the extreme presidential candidate loses by a wide margin utilizing the 1960, 1972 and 1984 elections as examples. Is today different? Today one candidate is viewed as having a toxic personality but whose polices are more mainstreamed. The other candidate is “likeable” but whose proposals are viewed as radical.
Which tenant will overcome the other?
Radically changing topics, markets ignored positive vaccine news from Johnson and Johnson focusing instead on the negatives building the proverbial Wall of Worry.
All were focused on the after-hour release of four mega sized technology/social media companies, the four companies that comprise a record 22% of the S & P 500 capitalization. (Note: 5 companies comprise 26% of the S & P 500 capitalization—the greatest concentration in the S & P 500 since at least 1980 according to Goldman).
All four exceeded expectations and three of the four in after-hours trading are at all-time highs. This is a day that will live market infamy. Three of the five largest capitalized companies trading at their all-time highs, worth collectively over $5 trillion. Wow! There is a lot money in a few issues, mega sized issues that are still considered growth companies. Thirty-five years ago when I came into the industry a growth company was viewed a smaller capitalized entity not the biggest in the world.
As noted many times, life is indeed stranger than fiction’
Last night the foreign markets were mixed. London was up 0.01%, Paris up 0.25%, and Frankfurt up 0.61%. China was up 0.71%, Japan down 2.82% and Hang Sang down 0.47%.
The Dow should open unchanged but the NASDAQ 100 should open about 1% higher on mega cap earnings. Gold is at an all-time high. The 10-year is up 3/32 to yield 0.54%.