Your Money - December 11th 2020
Posted by Steve Bokor
Well the record streak has ended…for now. We expect the FDA to grant emergency approval for Pfizer’s vaccine in the next couple of days and if the big heads in DC can get off their high horses and actually pass another stimulus bill before Christmas, then another rally might start in earnest. But I would also throw out a word or two of caution given the performance since the Presidential election. February is right around the corner and with it a change in the Oval Office that may also see rapid reforms to economic policies that could hamper growth in 2021.
Meanwhile, this week saw the return to normal stocks edging out the stay at home stocks but once you eliminate the 14% jump in Disney, the rest of the dozen or so Dow stocks barely made a 1% return on the week. And we are hoping the Lulu Lemon’s stock drop will not foreshadow a broader based sell off when the rest of the retailers start reporting. Lulu plunged $25 dollars despite putting out some impressive numbers and guiding estimates higher into 2021. They have been really successful at converting customers to their online website. But sadly, investors chose to hit the sell key (and while my partners may not agree), the fact is the company is trading at 80 times earnings. A bit rich for my blood.
Of course the other elephant in the room has been the hot IPO market as both Door Dash and Air BNB went public this week. Lucky investors and insiders have to question whether the doubling of the stock price the first day out of the gates means that Wall Street executives mispriced the underwriting or, and this is the more likely scenario, day traders wanted to own these companies at any price. Then again every time I drive through a fast food place, there are at least 4 drivers from food delivery companies standing by to pick up and drop off. It’s crazy. I can understand if restaurants like Café Brio have customers that can’t make it into the restaurant due to space constraints and want a gourmet meal delivered to their doorstep, but who does that for MCD of KFC? Apparently a boat load.
Still I cannot help but think that last time I saw a feeding frenzy for high flying companies was 1999 and we all know how that turned out. Call me crazy but that is not investing it is speculating. And probably from the whole class of covid trapped newbies. Can’t go on vacation. Can’t go to casinos or ball games. Heck might as well put on the new Disney streaming service for the kids, and start day trading. Markets keep rallying after every dip. What can go wrong? If history repeats… A lot!
We would therefore look to a few themes for next year as a guiding light for our investment portfolios. The bucket loads of cash being spun out by central banks will in our opinion, result in inflation. Historically gold investors benefit from inflationary spikes. Look at the 2009 to 2011 experience.
Five G providers will shift into high gear as components become available and everyone will want the latest tablets and phones in order to benefit from the increased band width. We also see the major cell phone players benefitting because with increased speeds and new products, the tab goes up with it.
Healthcare will also be front and center. We should have at least three vaccines on the market place next year so there will be a mad dash for market share. Then again there will be the anti-vaccine crowd that will refuse to get inoculated leaving them vulnerable to the virus which means more trips to the hospital, more tests to confirm the virus and more medicines including hand soaps and mask to treat the non-believers.
We will also look to a continuation of a trend to escape inner cities and move to the suburbs. The housing sector should continue to do well too. and if you have to drive a longer distance, your gas costs will likely rise but that may be offset by more people working from home. That means more furniture and fixtures. For example my lovely wife, assistant and she who must be obeyed is taking our vacation pool of funds and upgrading to a gas fire place which probably also means new upholstery too.
Well that is my view in a nutshell.
Happy trading and stay safe.
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