The market strolled into 2021. It looked as if it might seamlessly ride the 2020 momentum wave - but it derailed early into the session. Market breadth was ugly, as selling triggered fresh selling in a domino-like swoon that quickly had folks pulling the record books out. After all, the first day of the year wasn’t supposed to be down and certainly not a drub.
52 Week High
52 Week Low
Yesterday was an interesting session. The message of the market didn’t dovetail with the media narrative for the pullback. If stocks were down because of the chance for Democrats to sweep the state, Utilities should have been the big winner of the session, and Energy the big loser.
It was the other way around.
To see the chart, click here.
Georgia On My Mind
There is no doubt today’s election has investors on edge. However, in many ways, we could see this coming a mile away – or at least three weeks away when polls began to flash Democrats with the edge. As for the better markets yesterday, Senator Perdue bounced back a little, and election betters still see Republicans controlling the Senate.
Although many investors had written off Covid-19 as a potential economic or stock market rally issue, there is no doubt a series of headlines triggered some selling and some buying.
The first headline came out of Scotland, and soon the UK began issuing a string of headlines, and finally, California announced the discovery of a new strain found in the south of the state.
SCOTLAND ORDERS PEOPLE TO STAY AT HOME UNTIL END OF MONTH
STURGEON SAYS NUMBER OF PEOPLE IN HOSPITAL CLOSE TO APRIL PEAK
NEW UK RESTRICTIONS TO SAY TIER 4 RESTRICTIONS WILL BE IMPOSED EVERYWHERE, SCHOOLS CLOSED, NO TEAM GAMES IN PARKS - ITV
Chief Medical Officers warn NHS risks being overwhelmed within 3 weeks: "We are not confident that the NHS can handle a further sustained rise in cases and without further action there is a material risk of the NHS in several areas being overwhelmed over the next 21 days"
JOHNSON SAYS HE IS ASKING PEOPLE TO STAY AT HOME
SCHOOLS IN ENGLAND WILL BE CLOSED, EXAMS WILL BE DISRUPTED
UK'S JOHNSON: EXAMS WILL NOT GO AHEAD AS NORMAL THIS SUMMER
CA GOV. SAYS 6 CASES OF NEW COVID STRAIN FOUND IN SOUTH OF STATE
New York finds first case of more contagious, 'UK' strain of coronavirus
AIRLINES URGED TRUMP ADMINISTRATION TO LIFT ENTRY RESTRICTIONS ON TRAVELERS FROM EUROPE, UK, AND BRAZIL 'AS SOON AS POSSIBLE' - LETTER TO PENCE
All of a sudden, those so-called stay at home stocks took off like rockets after ending 2020 with a whimper. Beyond that niche of stocks, a lot of my investment themes held up well:
- Data rocked, especially semiconductors, which saw the iShares PHLX Semiconductor (SOXX) hit an all-time high.
- Environmental Social Governance (ESG) rocked with both Electric Vehicles (EV) and solar names on fire.
- Industrial metals had a strong session.
- Farm Economy saw John Deere & Co (DE) make one of the first intraday reversals higher.
Economic Data & Trends
The IHS Markit U.S. Manufacturing Purchasing Managers Index (PMI) was revised higher to 57.1 in December from the preliminary read of 56.5, and 56.7 in November.
The Street was looking for 56.3.
To see the chart, click here.
The U.S. Dollar(DXY) continues to weaken and seems to be on an unstoppable date with the 2018 low. The move helps multinational stocks.
We are fully vested in our Hotline Model Portfolio.
We are not going to force the issue; it may take a few days to know the outcome of the Georgia election. I agree with many that the most radical parts of the Biden agenda, where he would bow more to the Green New Deal faction, would still be tough with a Democrat sweep. Make no mistake such an outcome means adjustments to portfolios, but not getting completely out of the stock market.
I think this betting site has the outcome correct. Although Senator Loeffler threw in with several colleagues to challenge the Electoral College, it was a hail Mary that was too little too late. The fact is Governor Kemp should have picked Congressman Collins from the very beginning. A lot of Georgia voters on both sides of the aisle feel she bought her seat and, in this day, and age that is widely frowned upon.