Your Money - November 13th 2020

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They say truth is stranger than fiction and judging from the performance of markets this week, I have to say it is true. We have a President in the White House who refuses to concede, out of control covid cases around the world, rising interest rates coupled with record setting stock market rallies. Sure earnings continue to beat street estimates for the quarter, but for many, the numbers are below 2019 numbers and yet the stocks are going through the roof.

On Monday, Pfizer announced very good results for its Coronavirus vaccine, (it’s trading at a respectable 13 times earnings but removed from the Dow Jones Industrial Average index two months ago) which immediately sent US markets into record territory led by the laggards year to date. Financials, industrials, cyclical stocks were being snapped up no doubt due to short covering but still it provided a tail wind for the broader markets. the best performing Dow stocks were American Express now trading at 33 times earnings, Boeing trading at lord knows what because the street still expects them to lose money in 2021 and Walgreen Boots Alliance (that’s a mouthful) at under 9 times earnings.

No, it seems investors prefer to buy Chinese electric car makers like NIO which traded 578 million shares today. The stock has doubled in the last two months and hit $54 today after closing at $48 yesterday. However… a short sell report hit the street mid-morning sending the stock plummeting to $40 before recovering to $44.50 at the close. It has a market cap of $65 billion dollars basically double that of Ford.

Bottom line, expect more volatility in the coming days and keep an eye on bond yields. Central bankers reiterated their support for the economy pledging to provide whatever monetary support needed, but they also stated that without government fiscal aid, there is only so much they can do. We are not holding our breath for another bailout package although we do think the two sides of the US government will come together for an extension of the US debt ceiling which is expected to max out in the next month. The last thing either party needs is to have government shutdowns in the midst of a pandemic.

Having said that, if we look at the Canadian economy, it’s not exactly humming and our governments are throwing money at the system. It may take a more draconian response with mandated shut downs to keep a lid on the virus. Of course, it would be easier if we observed basic protocols of washing hands, wearing masks and limiting interactions.

Happy trading and please stay safe.

Information contained herein represents the views of the writer and not those of PI Financial Corp., and based on assumptions which the writer believes to be reasonable. The material contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This information is intended for distribution in those jurisdictions where PI Financial is registered as an advisor or a dealer in securities. Any distribution or dissemination of this article in any other jurisdiction is strictly prohibited. PI Financial and/or its’ officers, directors, employees and affiliates may, from time to time, acquire, hold or sell a position in the securities mentioned herein.

Steve Bokor

Steve Bokor

Portfolio Manager