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Things you need to know:

  • Stocks fell from recent record highs as the sun set on November
  • Gold ended the day lower at $1782 – but this morning is attempting to challenge $1817
  • Bitcoin continues to surge – the media dragging everyone and their brother to sing its praises – enter the Winklevoss twins, and their call for $500,000/coin
  • Cyber Monday expected to see more than $11 billion in one day spending
  • Oil churning during the OPEC meeting.
  • Try the Chicken Breast in a Mustard/Mascarpone Sauce.

Stocks took a breather yesterday and ended the day lower as November came to a close. And this should not be a surprise… Look – let’s be honest… the recent surge up to all-time highs is a bit ahead of itself… or was a bit ahead of itself… All this talk of a vaccine – igniting the excitement as investors, algos and traders go all in, the investor psyche now firmly in place that stocks can never go down! (Oh boy… that’s usually a sign of a market top) … and while the day ended lower – the Dow gave back 272 pts or 0.9%, the S&P lost 16 pts or 0.46%, the Nasdaq gave back 7 pts or 0.06% and the Russell lost 35 pts or 1.6%… the month ended higher… with the Dow gaining 12%, the S&P gained 10%, the Nasdaq added 13% and the Russell was the star performer – surging 22%! It was an incredible performance for sure… and just think – we got nothing from Washington in terms of more help for all of those people that have been put out on the street by the virus.

But – according to all of the macro data – the US economy is doing just fine – no matter that major cities around the world have gone dark and more than 13 million people are out of work. Recent commentary by Fed Chair Jay Powell only reiterating his concern… (but the macro data of late runs completely counter to this thought…)

“Even the best case, widespread vaccination is months in the future, and there is a risk that people will lose confidence and pull back from economic activity in the near-term as the virus spreads and they try to avoid infection. The rise in new Covid – 19 cases, both here and abroad, is concerning and could prove challenging for the next few months….”

While Jay may be right about when the vaccination actually gets here – My gut tells me that he is clearly wrong about the economic activity… Many of the most recent data points stronger than the expectations… CPI, PPI, Avg Hourly Earnings, Avg Weekly Earnings, Retail Sales, Industrial Production, Capacity Utilization, Housing Starts, Building Permits, Existing Home Sales, Regional Fed Surveys, Manufacturing PMI’s and Service PMI’s and the list goes on… and the weekend spending spree confirms that the consumer is not dead by any stretch of the imagination…

Did I tell you that Black Friday produced online sales in excess of $9 billion and that yesterday’s Cyber Monday is estimated to have produced another $11 billion in online sales… and remember – Cyber Monday is now Cyber Week and in reality, what the virus has shown us is that not only can we work remotely, but we can shop remotely… and shopping and working remotely is what the world is doing. Americans are not being held back and while they may not be going out to shop -they ARE shopping, which means they must have money to spend…

The work from home names and the tech names that have changed the world have gotten bid up – as investors scramble for new ideas… Zoom – which is now a verb and a noun – is up 612% –down a bit from being up 722% in mid-October… trading at what can only be described as ridiculous valuations. But remember – a stock like everything is worth what someone is willing to pay… Yesterday – they reported another quarter of record sales and raised its outlook as the virus causes more remote working and learning… but with this comes higher expenses that the market was not expecting and this morning the stock is down 5% as investors and traders take money off the table – leaving some to ask – What happened?  How come its going down?

Now – if you bought this stock in October when it was trading at $590… then yes, you are NOT happy right now… but in retrospect – you got caught up in the mania… fundamental analysis be damned! But if you are a longer term investor and you liked it at $590 – and you still believe it’s in the right space – then you gotta love it at $450… and if you wait a bit longer – you may even be able to pick some up at the trendline… $390. And if you bought this back in March at $115 then maybe you should consider peeling some off – keeping a core position (if you still like it) and re-investing that found money in something else.

Yesterday’s action does tell us is that the latest rally is not immune from any setbacks… and while yesterday’s setback was honestly nothing… it does remind us that the tone can change on a dime. Is the market fully pricing in a widely available vaccine? I think yes. Is the market pricing in a new stimulus package? I think mostly, but maybe not fully yet. (Because you know it’s coming – which is why futures are surging this morning). The question is just how big? And again that depends on Georgia…

And that brings up the next political issue… What does Joey really want? Does he want a Democratically controlled executive branch? Does he want to have to deal with the far-left mindset in that case? Would he rather have a GOP Senate that would actually help him control the socialist agenda being pushed by Sanders and Warren? Because you know – if the DEMS take Georgia, then it will ignite the far left and Joey will have to address how he handles this wing of the party. If he doesn’t support them, then there will be hell to pay… and if he does support them – then the market will have hell to pay… which is why I say – slow down… if you are invested in the market – then sit back… enjoy the ride… and if you are just getting started – ease in… begin to build the plan and talk to your mentor/advisor.

Now this morning – US futures are acting like they have amnesia… any of the issues that concerned the market yesterday once again only a memory. Futures are surging this morning – talk of congress coming together on a stimulus bill, news that Pfizer/BioNTech are seeking regulatory approval from the EU and if they get it – BioNTech says that the first doses are only ‘hours away’, strong eco data out of Asia is also helping the global mood and it is December 1st… and many are still saying that Santa hasn’t even come down the chimney yet… (a point I would clearly argue – as I think not only has he come down, but he has already put the toys out…) At 7 am – the Dow is pointing up by 350 pts, the S&P looking to add 40 pts, the Nasdasq is up 125 pts and the Russell is ahead by 30 pts… and while this is great… it still leaves us below last week’s exciting high… and a level that I think will prove to be the 2020 highs. Investors are now looking forward to the spring of 2021… and they expect earnings to be strong… and prices today reflect that assumption… what the market will need is for 3rd and 4th qtr earnings of 2021 to be strong as well, if this rally is going to continue on pace… What is also needs is for inflation to remain low so that the FED is not forced to move rates… and while I don’t see that being an issue in the next 6 months, I am concerned that that story will change by next summer… I am still not a believer that current rates can or will remain this low through 2022… I just don’t see it – have you seen commodity prices? Lumber, Cocoa, Sugar, Corn, Palm Oil, Hogs, Wheat, Soybeans, etc… My fear is that once inflation takes root – it will spread like wildfire… (and in fact – I would argue that underlying inflation is already alive and well…)

Eco data today includes Markit Manufacturing PMI – exp of 56.7 (already a strong number so anything greater than that will suggest an even stronger expansion… which will lead to… higher prices… which equals… inflation), ISM Manufacturing PMI – exp of 58! Construction Spending of +0.8%.

Treasury Secretary Mnuchin and Fed Chair Jay Powell – due to appear on the hill today… both detailing what they view as the state of the union… Expect Mnuchin to paint a more robust outlook while Powell will express his concern.

European markets are all higher… buoyed by the stronger Asia macro data (China’s Caixin PMI index at 54.9 – the highest reading in 10 years) and the fact that Eurozone inflation data remains in negative territory for the 4thmonth… only strengthening the case for more stimulus from the ECB (European Central Bank).   At 7 am – FTSE +2.02%, CAC 40 +1.03%, DAX +1%, EUROSTOXX +1.04%, SPAIN +1.08% and ITALY +0.39%.

Oil continues to get tossed around as we wait for more news out of OPEC +. Talks of production cuts have been put off until Thursday as the infighting continues over who gets to pump what at what pace and will demand come roaring back as many expect.  Oil is trading at $45.42 and remains well within the $40/$50 range. Patience is a virtue. Sit tight.

Gold has rallied back – now trading above $1800/oz… as it attempts to retake the trendline at $1817… I suspect that $1817 will represent resistance now… as gold tries to build a base. My guess is that we are now in the $1750/$1817 range.

And Bitcoin continues its surge to $20,000… as the media is now parading every bitcoin investor across the platforms suggesting that this is it… Some calling for $100,000 by year end 2021 while others – Winklevoss twins suggesting it will be a $500,000/coin asset at some point…

The S&P closed at 3621 yesterday and this morning it appears as if it is going to challenge its all-time high of 3645… and if US markets follow European markets – we can expect moves of +1%-ish today. That being said – investors are excited about what 2021 will bring for the markets and for earnings and eco data… all analysis suggests that there are better days ahead and for the long-term investor – taking advantage of any pullback would be advisable… Again – in my opinion – Santa has already come… it would not surprise me to see the markets churn into year end…

Take good care.

Kenneth Polcari
Consultant, Market Strategist

Chicken Breasts in a Mustard/Mascarpone Sauce 

For this you need: 1 1/2 pounds boneless skinless chicken breasts, s&p, olive oil, butter, 1 chopped onion, 1 container of sliced button mushrooms, sliced garlic, 1 cup dry Marsala wine, 8 ounces mascarpone cheese, 2 tablespoons Dijon mustard (not grainy), fresh chopped Italian parsley leaves for garnish.

Sprinkle the chicken with s&p. Heat the oil in a large heavy skillet over high heat. Add the chicken and cook just until brown, about 4 minutes per side. Transfer the chicken to a plate and cool slightly.

While the chicken cools, melt the butter in the same skillet over medium-high heat, then add the onion and sauté until tender, add the mushrooms and garlic and sauté until the mushrooms are tender and the juices evaporate, about 10 -15 minutes. Add the wine and simmer until it is reduced by half, about 4 minutes. Stir in the mascarpone and mustard. Cut the chicken breasts crosswise into 1/3-inch-thick slices. Return the chicken and any accumulated juices to the skillet. Simmer, uncovered, over medium-low heat until the chicken is just cooked through and the sauce thickens slightly, about 2 minutes. Stir in the chopped parsley. Season the sauce, to taste, with salt and pepper.

Serve this with a large mixed salad dressed in fresh lemon juice, olive oil, seasoned with s&p, and some dried oregano.