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Things you need to know:

  • It was not a virus ‘sell’ day – just fyi…
  • Yes, the UK goes into lockdown – but that is no surprise
  • A new strain – a 3rd one… but science tells us ‘not to worry’
  • Georgia – what happens next after Trump throws the GOP into disarray
  • Patience is a virtue – No need to ‘rush in’
  • Try the Alaskan King Salmon

Stocks slide to begin the new year… which was in contrast to what the futures and the European markets were doing yesterday in the early morning… European markets were up nearly 1.5% across the board and US futures were pointing higher… as it appeared that the ‘feel good mood’ of 2020 wasn’t about to stop… and then soon after the opening – stocks began to come under pressure… the media blaming the surging virus cases as the cause… citing another NEW strain of Covid 19 that appeared in Asia, (separate from the UK version). Scotland goes into total lockdown demanding that UK PM Bojo do the same… as the crisis was defined as ‘critical’.

These second waves now forcing gov’t back into lockdown mode inflicting new wounds across the region. The excitement of the summer has been replaced by the doom of the winter – and all this as the vaccine begins its rollout around the world. Italy and Belgium which got hit hard the first time are getting clobbered again… Ok – I get it, but I am not  in the camp that this news is what caused the ‘minor’ selloff – because 1.4% is by no means ANYTHING to get all worked up about… Look, cases have been rising for 6 months now and the markets have done nothing but go UP… seemingly unfazed by all of the negative talk as investors went into ‘buy’ mode… Recall – Dr. Fauci was screaming about the ‘deadly, dark winter’ that was to come back in September… so this is NOT new news at all… Everyone that has been paying attention heard this warning – that was repeated over and over… yet the market and stocks continued to push forward – making new high after new high… So, slow down big boy… you can’t suddenly say “OMG – we are getting another surge so we have to sell stocks”.

Concerns continue to rise here at home as we brace ourselves for what is expected to be the onslaught of new cases post the holiday season. (Again, not NEW news). California is now the epicenter of the virus here in America, (we know this). Governor Newsome – who shut down the state 2 weeks ago is screaming about how the hospitals are overwhelmed – which leads me to ask, how come CA is not converting major arenas or conference centers into ‘military style’ hospitals the way NYC did with the Javitz center back in April? I mean – let’s go… What are you waiting for? Call 911 and get it done… Stop the insanity… Show some leadership!

In fact – I am taking the virus argument and putting it aside – because I am not convinced that the latest news is the cause of why stocks gave back a bit… and I say a bit, because while the Dow was off by 700 pts mid-day – it rallied back by 350 pts to end the day down 383 pts or 1.25%. The S&P off by 55 pt or 1.487%, the Nasdaq down by 190 pts or 1.47% and the Russell off by 29 pts or 1.47%.

In my humble opinion – year end buying (Santa Claus rally) only further stretched valuations, taking indexes and stocks another couple of standard deviations away from the longer term trendline. Reminding us that ‘trees don’t grow to the sky’ – which btw is a German proverb (Baume wachsen nicht in den Himmel”) suggesting that while trees will grow quickly (think stocks advance) when conditions are right (think zero interest rates and unprecedented stimulus) BUT – as it matures the growth slows… until it no longer ‘advances’ – no matter what the conditions (are you following me here?). At some point it has to take a breather (thinks stocks re-price lower, churn, build a stronger root system and then begin the advance once again – or not).

So, what was it?  HELLO – Can you say GEORGIA? And if you aren’t aware – the infamous Boz Scaggs – Silk Degree’s album  (am I dating myself?) says it best… “Georgia” (Such a great song – Just fyi – I was in high school when this song hit the ‘pop charts’…)

“Georgia, I swear I’ve never seen such a smile.  Gorgeous enough To make an angels heart run wild….Georgia, Your daddy was high The night he dreamed of you.   Georgia the stars were flying The night that you came through… Christmas in your eyes Oh what a nice surprise,  oh-oh-oh…..” 

So will we see Georgia ‘smile today’?  Will she make the angels (think Dems) hearts run wild? Or is ‘daddy high the night he dreamed of you’?

All good questions and ones that we will have the answers to in about 18 hrs or so… unless of course it is so close that they can’t call it… Can you imagine?

Today – is the day… the polls are open and a dear friend of mine – who is an Atlanta resident and has his finger on the pulse is convinced that Georgia is going ‘Blue’ citing the fact that Donny has completely ‘lost his mind’ in his latest attempt to overturn the vote angering many on the right… in what they view is long term damage to the party… (but that’s a different story…)

And this is what caused the angst – (recall the issues… Higher taxes, fed, cap gains and corp, new regulations in tech, and financials, an assault on energy etc just to name a few…) but as we saw – stocks rallied back in the afternoon (which leads me to ask – what happened to the virus hysteria?)  – suggesting maybe two things… 1. that maybe the GOP will hold onto the majority bringing calm to the markets… and 2. A Dem sweep will surely bring a massive new stimulus package that many believe will offset the negatives listed in point 1.  Last night’s rallies by both sides were as expected – the Dems slamming the GOP and the GOP slamming the Dems (it’s exhausting, and many Americans are disgusted with the state of play across the political spectrum) … only today will tell what the Georgian’s will do and how the gov’t will set up for the next two years… and if the state turns Blue – you can be sure that much of the credit goes to Stacey Abrams… Who is clearly setting herself up for 2024!  But will she really challenge Kamala? – and that is a question that is sure to be debated ad nauseum over the next 4 years!

Ok – this morning US futures were UP and now they are down! Go figure! Again – only more negative news surrounding the virus, and uncertainty over the election… causing the angst…..but it is the election that is more problematic… Look, everyone is waiting for a pullback, because the economy is expected to outperform in this new year… there is plenty of money that wants to be put to work, but many (myself included) are being patient – not avoiding, just being methodical – look – if you are invested, you won’t miss out and if you’re not invested – I have to ask – What the heck have you been waiting for?  Jump in, go slow, be smart, don’t’ blow it all in one purchase, but JUMP IN already!

Many analysts/strategists – myself included – have been warning of a coming correction – because of what will happen today….a 5% – 7% move would not be surprising, in fact it would be healthy,  but look what happened yesterday, the Dow was down nearly 3% at one point and BOOM! – buyers were chomping at the bit… so don’t get hysterical… unless we get hit be an event that NO ONE sees coming –(known as a ‘Black Swan’)  it’s ok… and like the lotto says – “You have to be in it to win it…”

At 6:25 am – Dow futures are down 67 pts, the S&P’s off 10 pts, the Nasdaq lower by 25 pts and the Russell is flat. With Cleveland Fed President Loretta Mester telling us that the economy needs MORE support and that the FED will stand pat – where else will you go? And like I said yesterday – (see yesterday’s note) Atlanta’s FED President Raffi Bostic floated the idea that maybe the FED will begin to ‘slow it down’ – do you see what’s going on here?  You have two FED representatives telling us two different stories – Go figure!  This way – the FED can monitor the reaction and then re-iterate policy… (or not…) Capisce? And all this just creates ‘uncertainty’ and the uncertainty creates angst and nervousness…

The VIX – fear index surged by 20% yesterday after falling 49% from the October highs all while the virus was spiking (again there is that disconnect)  – which again only confirms that the angst is not about the virus as much as it’s about politics (right now – and this too will change once this is over) and the focus will return to the macro data points and 4th qtr earnings which start on Friday – January 15th with the usual suspects – JPM, C, PNC, SCHW, & WFC….kicking it off…

So, who got beat up yesterday? Industrials, Tech, Communications, Real Estate, Basic Materials, Airlines, Cruise Ships, etc. All sectors that surged going into year-end – so it makes sense that they will come under fire when the trader types try to ring the cash register… And look who won – T (American Telephone & Telegraph) +2.4% in a down market – Boring?  Yes, Sexy? No. but it yields more than 7%! Hello??? Think VALUE.

Eco data today includes: ISM Manufacturing – exp of 56.7 (bullish), and solidly in EXPANSION territory.

European markets – which were up yesterday are down today… the media defining today’s move by suggesting the virus spread, the national lockdowns, the speed at which they are deploying the vaccine AND the Georgia run off… Don’t you love how the Europeans are sitting on the edge of their seats over what happens in GA? With the UK in its national 3rd lockdown and Germany expected to extend its current state of lockdown along with the other countries – it is true that anxiety is up… but again – I think the move is more centered around traders ringing the cash register a bit after the year-end rally. Remember – as of yesterday the slate was wiped clean… so everyone gets to start all over again… Don’t read too much into it… As of 7 am – the FTSE flat, CAC 40 -0.39%, DAX -0.37%, EUROSTOXX -0.40%, SPAIN -0.30% and ITALY -0.22%.

The S&P closed at 3700 – down 55 pts – after testing as high as 3769 and then as low as 3662. Futures which had been up in the pre-mkt and then in early trading – seemingly unfazed by the rising rates of the ‘newest’ strain of the virus… suddenly nosedived when Scotland came out and shut the country down thru the end of January… insisting that the UK do the same… sending BoJo an urgent message to stop the insanity… and so it went… but buyers waiting on the edge jumped in to push stocks up in the final hour… Today will keep the markets in check as we await the Georgia outcome… a sell off (if we get one) that takes us to trendline support at 3590 is only a 3% move lower from here and 4.3% move from the high of 3755 – again – well within a normal trading band… I would remain patient – as patience is a virtue in cases like this… Keep your eyes on the ball… listen to what is happening… adjust your portfolio IF the story fundamentally changes… if not – then take advantage of any sell off the same way you do when Bloomies has a sale!

And yes, we all know about the political landscape, so that is not new news…what will be new news is how it all turns out today, while the speculation runs both ways, the answer will be evident on Wednesday morning January 6thand that could be the day the investors suffer from the hangover…

In any event – stocks remain a bit pricey and a move lower could be swift….and while I do not suggest you chase the markets, I do suggest that you continue the plan, re-balance as appropriate and focus on the long term. Find the value plays as the growth names will get clocked on the first negative headline.  Remember – stocks remain vulnerable to any headline that suggests uncertainty ahead… the market can function on bad news – and will reprice accordingly, just as it does on good news… it’s the uncertain news that causes the angst…

Take good care

Kenneth Polcari
Consultant, Market Strategist


Alaskan King Salmon 

For this you need – Reynolds wrap foil, honey, Dijon mustard, butter, Worcestershire sauce, cornstarch, s&p, asparagus spears, the King Salmon, lemon and crushed walnuts.

You can make this two ways… in the oven or on the grill – both ways use the foil to create a packet to cook this simple meal.

Begin by preheating the oven to 450 degrees or the grill to med high.  In a bowl mix ½ cup of honey, 3 tbls of the mustard, 3 tbls of butter, 2 tsp of Worcestershire sauce, 1 ½ tbls of cornstarch, s&p – taste and adjust then put aside.

Make individual foil packets for each person.  You should have a sheet that is about 16 x 12 inches.

Place the sheet shiny side down.  Place 4 or 5 raw asparagus spears on foil, next place a piece of the King Salmon on top, – squeeze a bit of lemon over the salmon then spoon the honey/Dijon mix over the fish and sprinkle some crushed walnuts.

Now – seal it nicely by bringing up the sides and folding over – you want to leave room inside so that the heat circulates.   Place on a cookie sheet and bake in the oven for about 20 mins… (depending on thickness) or place the packets directly on the grill for 8 to 10 mins.

When ready – remove from the oven or grill – let set… Carefully open the packet and present nicely on a plate.  Serve with a large mixed salad in a champagne vinaigrette dressing.   Enjoy with your favorite chilled white wine – not a chardonnay – too fruity… you want something crisp and clean…my favorite – Hello???   Pinot Grigio – Santa Margherita. Simple, clean, crisp.

Buon Appetito.