Equity markets struggled this week with the S&P 500 opening at 3,803.14 on Monday morning and closing 3,768.25 on Friday afternoon. The doldrums may partially reflect the fact that Initial Jobless Claims posted their biggest weekly gain since the pandemic hit markets in March. For those of you with short positions, we wouldn’t get too excited. While a healthy pullback and chop are expected by all three of our research departments, we also expect that this will be shallow and short. For long-term investors, the predicted pullback can be a good opportunity to lower your cost basis. Coincidentally, our research team also looked into the performance of the market by day of the week. The general message we found is that it can be a bad idea to over-react to Monday’s market action, which has been anomalously bad as of late.

Stocks Down 1.5% on Week; Light at End of Tunnel on Virus

We’ll address the chatter this week that came up about the Fed tightening earlier than expected. Hint, we still don’t think you’ll see a rate rise or the tapering of asset purchases anytime soon. There are signals all over the economy of an impending economic boom the likes of which may not have been seen in the twenty-first century. Semi-conductor producers, which are usually considered an ultra-cyclical indicator, are having trouble keeping up with demand. Our Head of Research, Tom Lee, will also discuss some alternative economic data, amongst other bullish harbingers, that seem to suggest GDP growth is accelerating and not peaking. The newly introduced $1.9 trillion stimulus package should also help with that!

It is certainly an interesting time to be alive. We take no pleasure in our prediction of heightened violence in US cities coming to fruition so early in the year. Our thoughts and prayers go out to all those affected and we are of course very much hoping and praying that no further violence occurs. That being said, history would suggest that recent elevation of crime rates is unlikely to be a temporary aberration. Please peruse some of Tom Lee’s blasts from the week to get acquainted with some of the stocks we suspect may benefit from this trend.

The Capitol Riot was undoubtedly a tragic and deplorable event. However, subsequent activities of social media giants have become a major story in the wake of some considerable de-platforming activity, including of President Trump. Some in the financial media are wondering whether a chink in the armor of some of the years’ best performing stocks has permanently developed. Certainly, it doesn’t help some of these firms to have detractors on both sides of the aisle on Capitol Hill. Scrutiny over the practices of some of these firms is heightened. Our Vice President of Digital Strategy, Leeor Shimron wrote a piece on how this trend ties directly in with some of the trends occurring in the digital assets and cryptocurrency space. You can find his piece here.

Stocks Down 1.5% on Week; Light at End of Tunnel on Virus

Additionally, we released a Signal From Noise on Ford Motor Company. We consider this a flagship Epicenter that will likely benefit from its successful investment in Electric Vehicles, its massive financial services arm and impressive new management. We think this is a good way to get exposure to ascent of Electric Vehicles without valuations that can make even the strong queasy. Hopefully you caught our Head of Technical Analysis, Rob Sluymer’s, webinar this week. If you did not please see the homepage where you can find a replay. We’re also excited about our Head of Global Portfolio Strategy, Brian Rauscher’s presentation on January 20th, be sure to reserve a seat!

One thing that we want to urge our subscribers to remember over the coming months is that the stock market is a giant discounting machine. If you own a stock that is worth fifteen times earnings then you own SIXTY quarters of future growth. Since the vaccine progress is now picking up there is less and less chance that the majority of those quarters earnings will be effected at all by COVID-19. So, as we continue through a dark and unsettling winter remember that stocks can go up in the midst of bad news as long as it is better than the original worst-case scenario. Remember, when COVID-19 first roiled markets in March many forecasts predicted millions of US deaths. As awful as this pandemic has been, it does seem that the initial worst-case scenario has been taken off the table. By the way, if you have a chance to get a vaccine please get it!

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