COVID-19 UPDATE: 4 states daily COVID-19 case growth > testing - UT, AK, AZ and AL. 17 "early in barbell recovery" stocks from our team.
COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage ("restart economy"), so feel free to share our commentary to anyone who has interest.
The S&P 500 managed to 2.2% gain week to date in a week where mass protests have taken place across >350 communities. This is incongruous and we understand anyone who thinks the equity market is indeed ignoring massive social unrest. These protests are the most widespread and resonating with the public so strongly, that one has to go back 50 years to find a similar time in history - 1968. In fact, I am not sure there was ever a time in history where the President had to "check out" the fortified bunker, as this happened in this past week.
But the fact is, the equity market is not a moral compass. It is not choosing sides. And it is not known for its sympathetic traits. We did get incremental economic news that was "half-full" especially on the cyclical components of the economy. American airlines increasing capacity this week is highlighting perhaps that Americans may be moving more quickly to a pre-COVID normal than we expect. The big number is the May payrolls report on Friday, but that is expected to be another horrific and dejecting figure of major job losses.
The "epicenter" surged >10% in the past 4 days... that is the real story
But the 2.2% rise in equities is not the real story. Look at the daily increases at the "social distance victim" stocks and the "epicenter" groups.
- Airlines posted 4 days of spectacular gains and up 13% on Thursday
- Casinos surged this week and up 13% in past two days
- Even hopeless Energy is up 8% in the past 4 days
The huge amounts of "dry powder" seem to be finding their way into cyclical stocks. This is the reason we think the "fresh money" strategy needs to be "less barbell" and pretty much outright buy the epicenter.
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