Your Money - January 22nd 2021

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Well it was another week for the record books as the Nasdaq and S&P set new highs ahead and after the Presidential inauguration. Of course earnings might have played a role along with improving employment stats, rising housing starts and 14 year high in PMI data. I should also point out that Janet Yellen’s approval as Treasury Secretary was a coup for the new Biden Administration. If only they could get Congressional members senators to agree on a stimulus package, we might see a real rally in 2021. Right now the focus is on, in shall we say, on the previous administration. Too bad.

Investors therefore need to tread carefully as there is only so much the Federal Reserve can do while politicians bicker. Unfortunately, the average American continues to be caught in the cross fire which could lead to a sharp drop in consumer sentiment and lower stock prices. Speaking of cross fire and lower stock prices, two blue chip Dow bell weathers (Intel and IBM) suffered near 10% drops today after their earnings failed to excite buyers. Then again, the last six months has seen the rise of short term traders driving certain sectors to extreme valuations while the aforementioned bell weathers trade at less than 15 times earnings plus pay sizeable dividends. Meanwhile Netflix jumped 13% this week after an earnings beat. It is now trading at 57 times earnings and does not pay a dividend. I don’t even want to get into Tesla or Quantumscape (think solid state battery technology that hopefully will be in production by 2025).

Turning to next week, on the economic front we get a sneak under the economic hood (GDP), plus consumer confidence and the latest minutes from the Federal Reserve. On the corporate front, there will be over 450 US companies reporting in the US and 15 in Canada (watch for CP and CNR). The biggest names in the US include Apple, Facebook, Microsoft on the tech side and JNJ, Abbott Labs and Eli Lily in healthcare plus Tesla, Boeing, Caterpillar and McDonalds. Under normal market conditions I would hazard a guess as to how investors might react to the numbers but things are far from normal. The short term traders could ignore misses from their favorite plays driving them ever higher and punish blue chips with a miss on just one metric.  Bottom line, things could get choppy next week.

Stay safe.

Happy trading.

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Steve Bokor

Steve Bokor

Portfolio Manager