The S&P 500 closed last Friday at 3,841.94 and closed at new high of 3,943.23 this afternoon. This is a gain of 2.5% from last Friday, but it’s significantly higher than the bottom experienced in the wake of the mini-tantrum associated with Fed Chairman Powell’s comments last week. Encouragingly, vaccine progress has been increasing and President Biden suggested a return to normalcy by the 4th of July is possible. Re-opening is the word of the day. Epicenter stocks and sectors did more than just hold their battlements in the recent turmoil, they gained.
Look, it may sound like touting are own horn which is unbecoming, but we’d like to as humbly as possible point out that our Head of Research Tom Lee once again called a bottom in the height of market-fear within hours. Re-check your email from last Friday and you’ll see that our intraday flashes are pure gold! Oops, that’s pretty passe’, we meant pure Bitcoin, which was north of $57k at close!
It seems that prices and markets and data are saying ‘risk-on’ and many investors are nonetheless skeptical and skittish. This is actually a great opportunity and it’s why despite what you may think we are enamored with top-callers and permabears. We love those who doubt cryptocurrency too. Investing ahead of the crowd is how you get returns and if you can spot something that everyone else will think is pretty, but may not yet, then that’s when the great returns some in. In that vein, we think you should start paying more attention to crypto because the rest of Wall Street certainly is starting to. Check what our own Dave Grider’s proprietary valuation indicator implies. Get ahead of them.
Bitcoin getting to 100K before the end of 2021 is looking very doable! So, if you’re impressed with Tom Lee’s calls, I can personally tell you that our staff is as well. Voodoo and Santeria might be alleged by some, but we can assure you that it’s analytical discipline, hard work, and also course correcting when we make wrong calls, which we, like everyone else, do make as well. We want you to remember that we’re never predicting the future and never claim to be; we diligently and through multiple lenses look at what the market and relevant data is saying. We try to teach our subscribers to listen as well. One thing that we really take pride in about our research is that it is a lot more than stock lists; we try to impart the framework that guides our analysis and macro price targets. Excitingly, in light of the recent ‘upside breakout’ our base case is now that the S&P 500 will likely rally about 10% in the first half of 2021. My colleague Tom Lee will expand upon this below.
Well the ‘rate-mageddon’ or mini-tantrum that occurred last week definitely shook the faith of many investors. In what could have been a significant reignition of those fears, the 10-YR auction on Wednesday was rather met with sufficient demand to appease markets. The market enjoyed an incredible recovery from the lows of last week. Importantly, Technology which comprises so much of the market regained its legs much to the glee of the many fund managers who were sweating bullets over the last few weeks. There appears to be a mismatch in the level of bearishness and pessimism out there and what we see occurring in the healthcare and economic data. We’ll give you a brief summary of the Fed’s Beige Bookin our FedWatch section below. All and all, we think the bearishness is a bit peculiar given the fact that businesses, economists and now national political leadership all appear laser focused on a re-opening that occurs to be beginning in earnest whether people want to believe it or not. Be sure to keep an eye on the newly added point #3 in our daily updates which keep track of re-opening at the state level across the United States. It’s an interesting new perspective to analyze and will likely gain importance in the coming months.
A $1.9 trillion stimulus was passed which will result in large amounts of money getting to consumers who need it in relatively short order. Also, a neat little fact is that the Federal Reserve reported the highest recorded reading for US household wealth ever. A not inconsequential source that contributed to that record was the nearly 5 trillion added to consumer balance sheets by equity gains, significantly higher than less than a trillion added by the appreciation of Real Estate assets. So remember, over time Equities have been one of the best possible stores of wealth. There’s a company trading that hasn’t missed a dividend payment since the War of 1812, so stocks can handle all the adversity and turmoil that we as human beings can muster—if you pick the right ones.
We’d also like to point out that some investors do not appear to be hearing us about Energy. Again, we would point to the fact that the more cyclical the stock, given this environment the better. Performance has so far shown this to be the case. As the twitter of a great market mind I spotted once recently said; Epicenter = Good, Energy = Gooder!
